Temenos Q2 2025 presentation: Strong growth drives raised full-year guidance

Introduction & Market Context

Temenos Group AG (SIX:TEMN) reported strong second-quarter results on July 22, 2025, exceeding guidance and prompting management to raise its full-year outlook. The banking software provider demonstrated robust performance across key metrics, with significant growth in both revenue and profitability, while continuing its strategic shift toward subscription and Software-as-a-Service (SaaS) business models.

The company completed the sale of its Multifonds business on May 31, 2025, as planned, strengthening its balance sheet while maintaining focus on its core banking technology offerings. All financial figures presented are on a proforma basis, excluding Multifonds, unless otherwise stated.

Quarterly Performance Highlights

Temenos delivered impressive Q2 2025 results, with total revenue reaching $277.6 million, representing a 16% increase in constant currency compared to the same period last year. Subscription and SaaS revenue, a key focus area for the company, grew by 24% to $124.9 million.

As shown in the following chart of quarterly revenue growth:

Profitability metrics showed even stronger improvement, with non-IFRS EBIT increasing by 28% to $111.6 million and EBIT margin expanding by 4 percentage points to 40.2%. Non-IFRS earnings per share grew by 36% to $1.22.

The company’s profit growth is illustrated in this chart:

Free cash flow continued to show healthy growth, increasing by 8% in Q2 to $65 million and by 10% in the first half of the year to $114 million.

The company’s Annual Recurring Revenue (ARR) reached $790.6 million, up 11% in constant currency from Q2 2024, and now represents 89% of last twelve months’ product revenue, compared to 85% a year ago. This reflects Temenos’ successful transition to a more predictable revenue model.

Strategic Initiatives

Temenos continues to execute on its strategic priorities, with targeted investments across the business including new senior hires in sales, product development, and technology. The company reported hiring over 50 new developers and architects for its US innovation hub and more than 25 new sales personnel in key regions globally.

At the Temenos Community Forum 2025, which attracted nearly 2,000 attendees from over 90 countries, the company launched new AI-integrated products, including Temenos Product Manager Copilot, a generative AI assistant integrated with Microsoft (NASDAQ:MSFT) Azure OpenAI Service, and Temenos Financial Crime Mitigation AI agent for detecting and preventing sanctions violations.

The company’s balance sheet was significantly strengthened following the completion of the Multifonds sale, with cash on the balance sheet increasing to $305 million by the end of Q2. Temenos also received an investment grade rating of BBB- with a stable outlook from S&P Global Ratings and signed a new revolving credit facility for $500 million.

Competitive Industry Position

Temenos continues to strengthen its market position, winning significant industry recognition. The company was ranked #1 in 13 categories by IBS Intelligence, including Universal Core Banking for the 20th consecutive year. It was also named Best Core Banking System by Banking Tech Awards USA and World’s Best Core Banking Solution by Euromoney Awards for Excellence 2025.

The company’s global recognition is illustrated in the following image:

Temenos reported new customer wins including Banco da Amazonia, a Brazilian regional development bank, and EastWest Bank, a leading universal bank in the Philippines. Both selected Temenos for core banking, payments, and digital solutions to support their digital transformation initiatives. The company also reported 81 customer go-lives in Q2 and a total of 151 in the first half of 2025.

Regional performance showed particular strength in Europe and the Americas, which together accounted for 68% of total software licensing revenue in Q2.

Forward-Looking Statements

Based on the strong performance in the first half of the year, Temenos raised its full-year 2025 guidance. The company now expects subscription and SaaS revenue growth of at least 6% (up from 5-7% previously), EBIT growth of at least 9% (up from at least 5%), and EPS growth of 10-12% (up from 7-9%). ARR growth guidance of at least 12% and free cash flow growth of at least 12% remain unchanged.

Looking further ahead, Temenos confirmed its FY 2028 targets, which include ARR exceeding $1.2 billion (implying a 13% CAGR from FY 2024), EBIT of approximately $450 million (10% CAGR), and free cash flow of approximately $400 million (16% CAGR).

The company’s strong performance in the first half of 2025, coupled with its strategic investments in AI and cloud technologies, positions Temenos well to capitalize on the ongoing digital transformation in the banking sector. With a strengthened balance sheet following the Multifonds sale and a clear focus on growing its subscription and SaaS business, Temenos appears well-positioned to deliver on its raised guidance for 2025 and longer-term targets for 2028.

Full presentation:

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