Iress (ASX:IRE) says its still on the road to recovery in 2026, so is the decline investor denial or fear over Iran?

The last time we wrote about Iress (ASX:IRE), it was in the aftermath of its 2025 results. The company had been struggling for a while but there had been optimism that better times are ahead. A year on, and the share price is 14% lower, albeit with a decline mostly as a result of the last few weeks. Now of course, the market has been turbulant, but the company also released its results so can it really be said it was ‘all Iran’?

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Introduction to Iress (ASX:IRE)

Iress provides software to the financial services industry, including investment management and trading tools. This includes services to analysts like ourselves, it has software competing with Bloomberg enabling live data on stocks. There is also software for superannuation, mortgages, life insurance and pensions.

For several years, beginning with the pandemic, it witnessed a continuing decline in profitability due to poor performances in certain divisions, some of which it acquired in an attempt to be ‘all things to all people’. It ultimately ended up being ‘the Jack of all trades, but the Master of none’, or in the Chairman’s words ‘collecting too many businesses doing too many things in too many locations to scale effectively. You get the idea. It could have bitten the dust and accepted a takeover from EQT in late 2021, but the talks failed.

The company undertook a restructuring, but the results didn’t show a turnaround right away with a near 30% fall in its profit in CY22. In 1HY23, its profit ended up in the red to the tune of $139.8m. This led to the company suspending dividends. Luckily, Iress had seen the light and reached agreements to sell some of its assets. At the time, it promised $47m in annualised gross cost-savings. This did not prevent shares from falling by more than 35% on that fateful day in August 2023.

Taking action

You cannot accuse the company of not acting. Although it made a $137.5m net loss in 2023, it upgraded its EBITDA guidance then met the higher end of that range. It parted with several assets to help it retire debt, selling its UK Mortgages business to Bain Capital for A$164m, it sold the Managed Fund Administration Business in August of the Previous year and its Platform business to Praemium for $1m up front and up to an additional $20m over an 18-month period.

IRESS closed 2024 with a 3% smaller to-line, but the bottom-line improved. Adjusted EBITDA was $132.8m, up 25% year on year and ahead of guidance. Its NPAT swung from a $137.5m loss to an $88.7m profit, while its NPATA was $10.3m, up 192% – the latter being a metric that attempted to exclude the impact of impairments and asset revaluations. The company resumed paying dividends, opting to pay out 10cps.

CEO Marcus Price labelled the year ‘outstanding’. He told investors to expect adjusted EBITDA of $127-135m and an ‘NPATA’ of $54-62m. The company would more than deliver on the first note with $136.2m adjusted EBITDA figure. Its underlying profit came in 34% higher, at $72.8m although its statutory profit was down 10% to $79.3m.

For 2026 it guided to $520-528m revenue (3-5% higher), $116-123m ‘Cash EBITDA’ (up 15-23%), $84-90m underlying profit (15-24% higher) and an ‘FY26 Cash EBITDA margin exit run-rate of 25%’.

Running the company now is Andrew Russell and he declared the momentum would continue. He did not forget the golden rule that a company has to mention AI in declaring,’ We are sharpening our client-first execution through targeted reinvestment to modernise our technology stacks, embed AI across our core platforms and align pricing more closely with the value we create for our clients’.

Is it ‘all hype’ on AI?

In our view, it is certainly acting on AI, but we aren’t so sure it is a core differentiator between competitors. We acknowledge its belief that deep trusted client relationships could be considered a moat as could be being embedded in client ecosystems, but of course anything is possible in this world. What we’re trying to say is, even though relationships could be an advantages, companies do have the option of asking ‘What if there was a better or cheaper way’.

The company is using AI internally to automate workflows, improve development efficiency, and reduce “stranded costs.” This ties directly into their margin expansion target (as we noted a ~25% EBITDA in FY26). It is being integrated into client-facing tools as well. In wealth and trading platforms, AI is being layered into analytics, advice workflows, and potentially client insights (think portfolio recommendations, risk flags, automation of compliance tasks). This aligns with their positioning as infrastructure for advisers and brokers rather than a front-end disruptor. Data monetisation is also being used too; Iress sits on a lot of market and portfolio data, and AI is a natural extension of that. But importantly this isn’t a Bloomberg-style AI moat – yet.

Long story short, it appears that AI is an incremental enhancer for this company, not a step-change driver (yet). Iress is using it to improve margins and stickiness, not reinvent the business. Time will tell whether or not this will be good enough, we reckon investors are sceptical judging by the share price decline. Now, yes, Middle East tensions happened and they can move markets, but IRESS is not a macro-sensitive stock in the same way as energy stocks are. If it drops >10% over several weeks, including a period of time when the market receives and digests the results, the driver is usually company-specific or structural concerns.

Analysts are more nuanced

There are 7 analysts covering Iress and there’s a mean target price of $10.05 per share, up >40% on average from the current share price. These estimates vary between $12.08 and $7.80 per share. Analysts expect continued revenue growth with $522.3m for 2026, $544.9m for 2027 and $568.1m by 2028. The bottom line is expected to grow slower with $0.42 EPS or a $78m profit for 2026. 2027 is expected to be faster with $0.47 EPS or an $87.4m profit. The company’s multiples are 15.8x P/E, 9.4x EV/EBITDA and 1.2x PEG.

A better future lies ahead of IRESS, but is it a BUY?

Iress may not be the best growth opportunity on ASX, but there’s no doubt it is in better shape than a couple of years ago and still has more to show from the efforts management has undertaken to turnaround the business. Its multiples look reasonable too. That’s all the good news.

The bad news is that it’ll be slower bottom line growth this year and there is uncertainty as to whether or not its AI efforts will be good enough, and even if they are, how long it’ll take until investors buy it? Until these questions are answered, we’d answer the above question in the negative.