AI infrastructure re-engineers Saudi tech business as hosting contracts lift revenue and test profit margins

Digital transformation across regional markets is no longer a matter of upgrading legacy systems or acquiring software licenses, but has entered a new phase driven by the infrastructure demands of computing, data processing, and artificial intelligence workloads. Financial results for applications and technology services companies listed on the Saudi Exchange (Tadawul) in the first half of 2026 reveal a clear structural shift in institutional and government demand. Sector revenues rose 14.7 percent to 12.99 billion riyals (3.46 billion dollars) compared to the same period last year, while total net profit grew 4.73 percent to 2.14 billion riyals (around 570 million dollars). This divergence between revenue momentum and earnings growth reflects a transition requiring heavy capital and operational investments to scale data centers and managed services.

Data from listed companies showed diverging growth models between major market leaders and specialized firmsSolutions by stc retained the revenue lead with 6.24 billion riyals, up 9 percent year on year, and net profit of 824 million riyals, an increase of 2.1 percent, supported by a 19.6 percent rise in core ICT service revenues. Elm ranked second with revenues of 4.99 billion riyals, up 21.1 percent, with profits exceeding 1.17 billion riyals, a 7.7 percent gain, driven by a 22.31 percent jump in digital business revenue. Elm is also executing inorganic expansion plans, aiming for acquisitions to contribute around 20 percent of its income over the next five years, following its full acquisition of business services firm Thiqah for 3.4 billion riyals in April 2025.

Among mid-sized and infrastructure-focused firms, Al Moammar Information Systems (MIS) posted the sector's third-highest revenue with notable growth of 28.2 percent to 910 million riyals, though its net profit fell 15.85 percent to 55.6 million riyals. This margin pressure stems from expansion costs and new projects, most notably a data center hosting contract with AI venture HuMaIn valued at over 30 percent of MIS's total 2025 revenue. Five of the sector's seven listed firms turned a half-year profit, including 2P Perfect Presentation and DBS, while Arabian Sea Information Systems shifted to profitability in the second quarter despite a minor loss across the full first half.

The shift in technology spending is moving the market from off-the-shelf software purchases to reserving advanced hosting and computing capacitySector analysis, in line with the Saudi ICT market reaching 199 billion riyals by the end of 2025 at an 8 percent compound annual growth rate, indicates that revenues rest on three primary drivers: sustained government and institutional spending on digital platforms and cybersecurity, expanding recurring revenue from pervasive digital adoption, and rising direct investment in data centers and AI computing capacity. Although second-quarter sector revenue rose 15.98 percent to 6.77 billion riyals, quarterly net profit dropped 4.77 percent to 1.058 billion riyals, highlighting the importance of operational discipline in managing large-scale contracts.

This development carries direct executive implications for chief technology officers and business leaders across the Gulf, Egypt, and the wider region. Deploying AI systems is no longer confined to importing models or integrating APIs, but increasingly requires long-term commitments for data center hosting and local infrastructure. Regional service providers and systems integrators face the imperative of restructuring business models toward hosting and managed cloud services, while monitoring margin erosion from financing expenses, working capital requirements, and competition for specialized engineering talent. Moving from software licensing to infrastructure operations requires organizations to reassess operating costs for AI deployments and establish clear operational returns before entering large computing commitments.