3 Australian AI Stocks With Recurring Revenue Retail Investors Should Watch

AI is no longer just a story about mega caps like Nvidia and Microsoft. With inflation, interest rates and energy costs all in focus, many investors are looking for earlier stage growth where smaller AI stocks can respond quickly to new demand in machine learning, automation and data intelligence. The AI Small Caps screener is designed to surface these focused companies so you can spend less time sorting headlines and more time comparing real business models. In this article you will see three of the best stocks from that screener and the reasons they may deserve a place on your watchlist.

ImExHS (ASX:IME)

Overview: ImExHS is a Sydney based company that provides cloud based medical imaging software and outsourced radiology services, helping hospitals and clinics manage radiology, cardiology and pathology images and reports through its AQUILA, ALULA and ANTEROS platforms. It also supports teleradiology and AI assisted reporting so customers can access remote specialists and digital workflows across multiple countries.

Operations: ImExHS generates about A$10.0 million from Software and A$19.2 million from Radiology, with almost all of its roughly A$29.0 million of revenue coming from Latin America.

Market Cap: A$18.9 million

ImExHS sits in a niche that many investors overlook. It combines cloud native hospital software with on the ground radiology services that can generate real world data for AI tools. Analysts expect a sharp improvement in earnings, backed by recurring software contracts and a focus on using AI agents to cut support costs and speed up reporting. The stock trades on a low P/S multiple compared with healthcare peers, which may appeal if you are looking for smaller AI exposure rather than mega caps. The trade off is concentration in Latin American healthcare systems and higher reliance on external borrowing, so liquidity and policy settings matter a lot. The real question is how this balance of AI upside and regional risk stacks up against other AI Small Caps in the screener.

ImExHS appears to be an AI healthtech story that many investors may not have fully priced in yet, with recurring software revenue layering on top of radiology services. Get the full picture in the 2 key rewards and 1 important warning sign

Dicker Data (ASX:DDR)

Overview: Dicker Data is an IT distributor that connects global technology vendors with corporate and commercial customers across Australia and New Zealand, supplying everything from PCs and servers to cybersecurity, cloud, AI infrastructure and IoT solutions. The company also sells software licenses, logistics and configuration services and acts as an agent for telecommunications data and other virtual services.

Operations: Dicker Data generates about A$2.6b in revenue, almost entirely from wholesale computer peripherals, with around A$2.2b from Australia and A$398.3 million from New Zealand.

Market Cap: A$2.27b

Dicker Data provides exposure to the build out of AI infrastructure, cybersecurity and AI ready PCs, while still being anchored by a broad A$2.6b distribution business. Recurring software and security revenue, high reported ROE of 33.3% and long tenured leadership point to a business that is trying to shift toward higher value services. At the same time, tight net margins around 3.3% and meaningful debt keep the pressure on execution. The stock has not kept pace with the wider Electronic industry, and analysts currently expect only modest earnings growth. AI projects such as the Dell AI factory and partnerships including CrowdStrike suggest a potentially different future mix of earnings that may not be fully reflected in the headline P/E and dividend yield.

Dicker Data’s AI and security story sits inside a tight margin distributor that many investors might be misreading. See how the 3 key rewards and 2 important warning signs could shift your view on where the real pressure points sit

Data#3 (ASX:DTL)

Overview: Data#3 is an Australian IT solutions company that helps businesses, government and education customers run cloud, security, data and AI, and modern workplace technology, backed by consulting, managed services and recruitment support. It works closely with vendors such as Microsoft, HP and Cisco so customers can roll out and manage everything from Azure and Copilot to devices, networking and security monitoring.

Operations: Data#3 generates A$551.4 million from Infrastructure Solutions, A$262.2 million from Services, A$70.7 million from Software Solutions and a small A$0.3 million from Unallocated Other.

Market Cap: A$1.5b

Data#3 provides exposure to cloud, cybersecurity and AI projects through a business that already earns most of its revenue from recurring subscriptions and services, supported by long standing ties to vendors like Microsoft and HP. The company reports that earnings and revenue have grown over several years and that ROE is above 50%, which indicates efficient use of capital. However, the stock screens as expensive on both P/E and a discounted cash flow view, and the dividend is not fully backed by earnings or free cash flow. In addition, funding leans fully on external borrowing. As a result, this is a high quality IT stock where concentration risks and valuation considerations are important alongside the potential benefits from AI and security exposure.

Data#3’s high ROE and recurring revenue can mask where the real pressure sits for this premium priced IT stock. Get the full story in the 3 key rewards and 1 important major warning sign

The three AI Small Caps in this article are only a starting point. The full AI Small Caps screener surfaces three more companies that carry similarly compelling AI narratives and risk reward trade offs. Use Simply Wall St to identify and analyze the specific catalysts, balance sheet strength and earnings narratives that matter to you so you can focus on the highest conviction AI opportunities for your watchlist.

Take Control of Your Investment Journey

If ImExHS or any of these companies have caught your attention, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value and track any new developments as they happen. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

Seeking Fresh Alternatives Beyond AI?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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