Tietoevry Q2 2025 slides: Challenging quarter prompts €115M cost-cutting plan

Introduction & Market Context

Tietoevry (HEL:TIETOS) presented its Q2 2025 results on July 22, revealing a challenging quarter marked by declining revenue and profitability amid soft market conditions across the Nordic region. The company's stock closed at 168.8, up 1.6% on the day, suggesting investors may be cautiously optimistic about the company's turnaround plans despite current headwinds.

New CEO Endre Rangnes, who was recently appointed to lead the company, emphasized the need for immediate action to address performance issues while maintaining Tietoevry's strong market position in the Nordics.

As shown in the following slide, the company acknowledges its solid foundation despite current challenges:

Quarterly Performance Highlights

Tietoevry reported organic revenue decline of 4% year-over-year in Q2 2025, with adjusted EBITA margin falling to 9.4% from 10.7% in the same period last year. The company noted that profitability was negatively impacted by 1.3 percentage points due to IFRS 5-related temporary cost burden.

The following chart illustrates the company's financial performance over the past five quarters, showing the declining trend in both revenue and profitability:

All business segments experienced organic revenue decline and margin compression:

• Tietoevry Create: Revenue declined by 7% with adjusted EBITA margin falling to 9.6% from 11.4%
• Tietoevry Banking: Revenue declined by 2% with adjusted EBITA margin falling to 10.7% from 11.9%
• Tietoevry Care: Revenue declined by 3% with adjusted EBITA margin falling to 24.4% from 28.2%
• Tietoevry Industry: Revenue declined by 1% with adjusted EBITA margin falling to 10.9% from 16.3%

Despite these challenges, the company reported a healthy cash flow from operations of €51 million and an increased order backlog of €2,222 million, up 14% year-over-year and 9% quarter-over-quarter.

The company also recorded a significant non-cash impairment of €80 million related to capitalized development costs, primarily for the Banking Platform in Norway, further impacting quarterly results.

Strategic Initiatives

In response to the challenging quarter, Tietoevry has outlined three immediate focus areas to drive performance improvement:

The most significant initiative is a comprehensive cost optimization program targeting €115 million in run-rate savings by the end of 2026. This includes workforce reductions and external cost cutting measures as detailed in the following slide:

The company has already initiated actions in H1 2025 that will reduce headcount by approximately 800 employees, primarily in the Create and Industry segments, with one-time costs of around €20 million. An additional cost optimization program could reduce headcount by up to 450 more employees, with external costs accounting for about 60% of the targeted savings.

Tietoevry has also assembled a new management team focused on execution, with several new members joining to drive the turnaround:

Despite the challenges, the company continues to win new customers and receive industry recognition, including being named one of Europe's Climate Leaders 2025 and among the World's Greenest Companies:

Forward-Looking Statements

For Q3 2025, Tietoevry expects mixed performance across its business segments. The following slide outlines the profitability outlook by segment:

Tietoevry Create is expected to continue facing weak demand across all markets, while Banking will be impacted by the Sparebank1 Court of Appeals ruling. However, Care is seeing expansion opportunities in Sweden, which could support growth.

For the second half of 2025, the company anticipates performance improvements driven by:

The company also announced its upcoming Capital Markets Day, scheduled for November 25, 2025, in London, where it will likely provide more details on its long-term strategy and financial targets:

Conclusion

Tietoevry faces significant challenges in the current market environment, with declining revenue and profitability across all business segments. However, the company is taking decisive action through its €115 million cost optimization program and new management team to improve performance.

The company's strong order backlog, healthy cash flow, and leading market position in the Nordics provide a foundation for recovery. Investors will be watching closely to see if the new leadership team can execute on their strategic priorities of customer focus, restored growth, and cost competitiveness to drive improved performance in the coming quarters.

As Tietoevry works to navigate these challenges, the upcoming Capital Markets Day in November will be a critical opportunity for the company to articulate its path forward and rebuild investor confidence.

Full presentation:

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