Saudi Arabia’s listed technology companies posted strong first-quarter earnings for 2026, reflecting a structural shift in the sector as digital revenue growth converged with tighter control over operating and administrative costs. Combined net profits for companies in the Kingdom’s applications and technology services sector rose 16% year-on-year to SAR1.07 billion ($285 million), up from SAR920 million ($245 million) in the same period last year. The performance underscores the sector’s growing ability to diversify revenue streams across cybersecurity, digital identity, managed services and cloud computing. Analysts said the gains were fueled by the continued expansion of Saudi Arabia’s digital transformation programs, the rapid maturation of the fintech industry, infrastructure development and rising investment in cloud computing. Strong corporate demand is also pushing the Kingdom’s information and communications technology market toward what analysts expect will exceed $100 billion in spending by 2031. The sector includes five listed companies, four of which reported profits during the quarter: Elm Co., Solutions by stc, 2P Perfect Presentation and Al Moammar Information Systems Co. Bahr Al Arab Systems Information Technology continued to post quarterly losses through the end of the first quarter. Elm accounted for roughly 61% of total sector profits, recording the highest net income at SAR656 million in the first three months of the year, up 32% from SAR495 million a year earlier. The company benefited from a 31% rise in revenue to SAR2.47 billion, in addition to lower research and development expenses. Solutions by stc ranked second, posting profits of SAR370 million, up 2.5% from SAR361 million in the same quarter last year. The increase was supported by lower operating costs, reduced selling and administrative expenses, and a 6.3% rise in revenue to SAR3 billion. 2P Perfect Presentation came third in sector profitability, reporting net income of SAR33.06 million, up 2.4% from SAR32.28 million a year earlier. The company cited strong performance across most operating segments, particularly call center services, while revenue climbed 14% to SAR330.08 million. The Saudi Data and AI Authority's (SDAIA) "Hexagon" data center, the largest government data center in the world. (SPA) Five drivers behind the growth Financial analyst Nasser Al-Rashid told Asharq Al-Awsat that the strong earnings growth reflects the intersection of several operational and strategic factors centered on five main pillars. The first is sustained government and private-sector spending on digital transformation, which remains the sector’s largest growth engine, he explained. As government agencies and major corporations expand automation and strengthen digital infrastructure, demand has increased for technology solutions, data management, cybersecurity and cloud services, creating stable long-term revenue streams for companies with major public-sector contracts. The second pillar is the rapid development of the fintech sector, which has accelerated adoption of digital payments, e-services, digital identity tools and smart business platforms. This has directly boosted recurring revenues and profit margins for technology and applications companies, Al-Rashid said. Third, companies have improved operational efficiency, as reflected in lower operating and administrative costs and reduced sales and distribution expenses. This demonstrates that firms are not relying solely on revenue growth but are also improving profitability through tighter cost controls, he added. The fourth driver is the expansion of cloud computing and data center services, among the industry’s most profitable activities, he continued. Rising demand from businesses for cloud hosting, data analytics and managed services has increased returns on technology contracts as institutions reduce reliance on traditional infrastructure. The fifth pillar is the diversification and quality of revenue streams, said Al-Rashid. Major companies are no longer dependent on a single source of income but now generate returns from digital operations, cloud solutions, business platforms, call center services and systems management, reducing exposure to operational volatility and improving earnings sustainability, he went on to say. Market analyst Tariq Al-Ateeq told Asharq Al-Awsat that Elm’s contribution of more than 60% of sector profits highlights the strength of its innovation-driven model built around government digital services, data and specialized solutions. He added that the Saudi technology sector has formally entered a phase of “sustainable operational growth,” supported by Vision 2030, rapid digitalization and rising spending on technology infrastructure. Al-Ateeq expects technology and applications companies to maintain solid earnings and revenue growth in coming quarters, albeit at a more balanced pace than in previous years. The sector’s long-term expansion will continue to be driven by government digital transformation spending, the rapid growth of cloud and artificial intelligence services, and rising private-sector demand for automation, he remarked.
