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Objective's Near-Term Margins to Face Pressure After Defense Contract Loss, Says Jefferies

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Objective (ASX:OCL) is expected to face near-term margin pressure after losing a highly profitable subscription contract with the Defence Digital Group of the Australian Department of Defence, Jefferies said in a note on Wednesday.

Fiscal 2026 is expected to be unaffected, but fiscal 2027 growth is projected to be impacted as annual recurring revenue is now seen to reset to fiscal 2025 levels, the investment firm said.

Jefferies lowered its fiscal 2027 to 2028 revenue estimates by 9% to 13% and sees fiscal 2026 to 2028 EPS to decline by 28% to 31%.

The expected margin compression reflects both the quality of the lost revenue and the limited ability for the company to replace it with contracts of similar margin in the near term, it added.

The brokerage maintained its hold rating but cut its price target to AU$7 from AU$14.

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