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Investing.com -- Sinch AB (ST:SINCH) stock leaped 16% Tuesday after the Swedish cloud computing services provider reported modest top-line growth in the second quarter, with organic net sales up 2% and organic gross profit (GP) rising 6%, with the latter outperforming consensus estimates by 2%.
The gross margin improved to 35%, up 1.2 percentage points year-on-year, driven by a favorable product mix and stronger profitability at the product level.
Segment-wise, organic growth reached 6% in the API Platform, 5% in Network Connectivity, and 7% in Applications. The API Platform also led margin improvement, with gross margin rising 1.6 percentage points from a year earlier, while margins in the other segments declined.
Adjusted EBITDA came in ahead of expectations, with a margin of 13%—up around 80 basis points year-on-year—representing an 8% beat versus consensus.
"We believe the market will want to better understand what drove the organic gross profit growth acceleration this quarter and whether it is sustainable," Morgan Stanley (NYSE:MS) analyst Laura C. Metayer commented in a post-earnings note.
Free cash flow to equity was positive at SEK 498 million, and net debt stood at SEK 5.24 billion.
While Sinch said it continues to progress toward its mid-term financial targets of 7–9% organic growth in net sales and gross profit, and an adjusted EBITDA margin of 12–14% by 2027, the company remains cautious in the face of macro uncertainty and emphasized ongoing cost discipline.
In a separate move, Sinch announced its first share buyback program. The board approved repurchases of up to 10% of the company’s shares, with purchases set to begin on July 23 and run through the 2026 Annual General Meeting.
"We expect the shares to be up today on the back of 1) strong 2Q and 2) announcement of a share buyback programme," Metayer added.