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Introduction & Market Context
NOS SGPS SA (LISBON:NOS) reported strong second-quarter 2025 results on July 22, with growth across all key financial metrics, marking a significant improvement from its mixed first-quarter performance. Despite the positive results, the company’s stock declined 3.87% to €3.61 during trading following the presentation.
The telecommunications provider demonstrated operational recovery while advancing its strategic expansion into Portugal’s IT market through the Claranet Portugal acquisition. This move positions NOS to tap into a market four times larger than its traditional telecom business.
Quarterly Performance Highlights
NOS delivered robust financial results for Q2 2025, with consolidated revenue growing 3.2% year-over-year to €458.2 million and EBITDA increasing at a faster rate of 5.9% to €202.9 million. Net income rose 16.0% to €57.4 million, representing a significant recovery from the 13% decline reported in the previous quarter.
The company’s operational metrics also showed strong improvement, with total Revenue Generating Units (RGUs) increasing by 57.8k to reach 10,739k. This growth was driven by gains across fixed access customers (+8.3k) and mobile subscribers (+46.4k).
As shown in the following comprehensive overview of key performance indicators:
Capital expenditure decreased by 1.9% to €91.7 million, while free cash flow grew 8.8% to €57.4 million, reflecting improved operational efficiency and working capital management. The company maintained a comfortable financial leverage ratio of 1.7x, despite the Claranet Portugal acquisition and dividend payments.
Strategic Initiatives
The acquisition of Claranet Portugal represents a strategic pivot for NOS, expanding its exposure to Portugal’s larger and faster-growing IT market. According to the presentation, the Portuguese IT market is valued at €4.6 billion, compared to the telecom market’s €1.1 billion.
The following chart illustrates how this acquisition positions NOS in a substantially larger addressable market:
Through Claranet Portugal, NOS has strengthened its IT practices across six key areas: Cloud & Infrastructure, Applications, Security, Workplace, Data & AI, and 3P Software (ETR:SOWGn). The company has established partnerships with major technology providers including Microsoft (NASDAQ:MSFT), AWS, HP (NYSE:HPQ), Dell (NYSE:DELL), Adobe (NASDAQ:ADBE), and Google (NASDAQ:GOOGL), positioning itself as a comprehensive IT services provider.
NOS identified three growth levers for its expanded IT business: increasing sales footprint in enterprise and mid-market segments, scaling high-potential practices (Cloud, Cybersecurity, Data/AI), and leveraging its strategic cooperation agreement with Claranet Group to access multinational opportunities.
Detailed Financial Analysis
Breaking down NOS’s revenue performance reveals growth across all business segments. Telco revenue increased by 2.3% to €392.3 million, while IT revenue grew 10.4% to €34.2 million. The Audio & Cinema segment showed the strongest growth at 31.0%, reaching €25.8 million, driven by a 43.8% increase in cinema attendance.
The following chart details the consolidated revenue growth by segment:
Profitability improved significantly, with EBITDA margins expanding across all business units. The consolidated EBITDA margin increased by 1.2 percentage points to 44.3%, while the Telco segment’s margin improved by 0.8 percentage points to 47.1%. The IT segment showed the largest margin improvement, gaining 2.2 percentage points to reach 13.2%.
This margin expansion is illustrated in the following chart:
The combination of growing EBITDA and reduced capital expenditure resulted in a 22.1% increase in EBITDA After Leases (AL) minus CAPEX, reaching €77.4 million. This metric highlights the company’s improved operational efficiency and cash generation capability.
Net income growth was robust at 16.0% year-over-year, reaching €57.4 million. This represents a significant turnaround from the 13% decline reported in Q1 2025, suggesting that NOS’s operational improvements and strategic initiatives are beginning to yield results.
Free cash flow generation remained strong at €57.4 million, an 8.8% increase from the previous year. This was driven by improved EBITDA performance, lower capital expenditure, and positive contributions from working capital management.
Forward-Looking Statements
NOS maintained a comfortable financial position with a leverage ratio of 1.7x, slightly higher than the 1.5x reported in Q1 2025, likely reflecting the impact of the Claranet Portugal acquisition. The company’s cost of debt remained below 3%, and it reported a strong liquidity position of €278 million.
Looking ahead, NOS appears well-positioned to continue its growth trajectory, leveraging its expanded IT capabilities and operational improvements. The company’s focus on high-potential IT practices like Cloud, Cybersecurity, and Data/AI aligns with market trends toward digital transformation.
The fixed network expansion continues, with NOS reaching 5,879.7k households with its gigabit network, adding 78.3k households in Q2 alone. The percentage of fixed network coverage using FttH technology increased to 86.3%, up 8.3 percentage points year-over-year.
While NOS faces competitive challenges in its traditional telecom business, the Q2 results suggest the company is successfully navigating these pressures while positioning itself for growth in the larger IT services market. The recovery in net income from Q1’s decline is particularly encouraging, though investors appear to be taking a cautious approach as reflected in the stock’s decline following the presentation.
Full presentation:
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