WithSecure Q2 2025 slides: Software growth offset by managed services decline

WithSecure Oyj (HEL:WITH) shares fell 7.12% on Wednesday as the company presented its Q2 2025 half-year report, revealing mixed performance across business segments. While software products showed promising growth, a significant decline in managed services weighed on overall results.

Quarterly Performance Highlights

WithSecure reported modest revenue growth of 3% year-over-year, reaching €29.4 million for Q2 2025. The company achieved an Adjusted EBITDA of €0.2 million, which included approximately €750,000 in costs related to its SPHERE event.

"Elements Cloud ARR growth of 3% year-on-year and Elements Cloud Net Revenue Retention (NRR) was 99%," noted the company in its presentation, showing a slowdown from the 8% growth reported in Q1 2025.

As shown in the following chart of quarterly financial performance:

The company’s on-premise revenue decline was in line with expectations, while cloud revenue remained relatively stable. Operating expenses decreased by 3% year-over-year, with the company highlighting improved efficiency in R&D cloud usage and well-controlled G&A costs.

Segment Analysis

WithSecure’s performance showed stark contrasts between business segments. The Elements Cloud software and Co-security services ARR grew by 13% year-over-year, driven by new products such as Exposure Management and Elements MDR. However, Managed Services ARR declined by 22%, primarily due to a large enterprise customer churn in the UK.

The following chart clearly illustrates this divergence in performance:

The Cloud Protection for Salesforce (NYSE:CRM) (CPSF) segment continued to be a bright spot, with ARR growing 54% year-over-year to €14.0 million. The segment maintained a strong Net Revenue Retention (NRR) of 122%, though results were partially offset by currency impacts of approximately €0.4 million due to EUR vs. USD/AUD exchange rate fluctuations.

As shown in the CPSF performance chart:

The company reported that CPSF had approximately 298 customers at quarter-end and is being developed as an independent entity within WithSecure, with strategic review options remaining open.

Strategic Initiatives

WithSecure highlighted several strategic developments during Q2 2025, including the completion of its Consulting (now Reversec) divestment on June 1, 2025, and the divestment of its Malaysian entity in May. The Asian business has been transferred to a buyer who becomes a preferred distributor for WithSecure.

The company also announced several product launches, including Elements Exposure Management 2.0, Elements XDR Cloud Security, and Elements Infinite. A notable technological breakthrough combines exposure management with behavioral data from EDR for zero-day vulnerability detection.

The company’s segment reporting structure provides insight into how WithSecure is organizing its business units:

WithSecure also mentioned that digital sovereignty discussions are accelerating in Europe, aligning with the company’s strategic focus on becoming a European flagship in cybersecurity. This continues the trend noted in Q1 2025, where CEO Antti Gorskell emphasized, "We approach being European from the position of responsibility."

Forward-Looking Statements

Despite the challenges in Managed Services, WithSecure maintained its outlook for 2025, projecting that Elements Cloud products and services ARR will grow by 10-20% from the end of 2024 (when it was €83.3 million). The Elements Company segment’s Adjusted EBITDA is expected to be 3-7% of revenue.

For Cloud Protection for Salesforce, the company forecasts ARR growth of 20-35% from the end of 2024, when CPSF ARR was €12.8 million.

The company’s medium-term financial target remains becoming a "Rule of 30+" company over the next three years (2025-2027), where the sum of annual revenue growth percentage and adjusted EBITDA as a percentage of revenue exceeds 30.

WithSecure also announced a reorganization of partner and customer-facing activities to accelerate its strategy and align cost structure in Managed Services. The expected impact of ongoing restructuring is approximately €6.5 million in annual cost savings.

The Q2 results suggest WithSecure faces significant challenges in its Managed Services segment, which may explain the negative market reaction despite growth in other areas. Investors will likely watch closely to see if the company’s strategic initiatives and cost-saving measures can offset these challenges in the coming quarters.

Full presentation:

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