Tietoevry shares sink 11% after Q2 miss, margin pressure across segments

Published 22/07/2025, 10:32

Investing.com -- Tietoevry Oyj  (HE:TIETO)shares tumbled more than 11% on Tuesday after the company reported second-quarter results that missed market expectations on both revenue and profitability, while maintaining its full-year outlook.

Revenue for the quarter stood at €463.1 million, 1% below consensus. Organic growth declined 4% year over year, with softness across most business segments. 

Tietoevry Create posted a 7% organic revenue decline, while Banking and Care fell 2% and 3%, respectively. Industry declined 1% as customer decision-making delays persisted.

Adjusted EBITA came in at €43.7 million, 7% below consensus estimates. The adjusted EBITA margin was 9.4%, short of the 10.1% expected. 

The company cited around 1.3 percentage points of margin drag from Tech Services-related group costs that cannot be allocated to discontinued operations under IFRS 5. A negative working day impact of 0.6 percentage points also weighed on results.

By segment, Create reported EBIT of €19 million, 11% below consensus, with a margin of 9.6%. 

Banking EBIT was in line at €15.5 million, with a 10.7% margin. Care exceeded EBIT expectations by 7% at €14.1 million, but its 24.4% margin was slightly below the 25% forecast. 

Industry underperformed, with EBIT of €7.4 million, 24% below consensus, and a margin of 10.9%.

Adjusted diluted earnings per share was €0.19, down from estimates of €0.24 by Morgan Stanley (NYSE:MS) and €0.25 by consensus. 

Stated EBIT was -€66.1 million, driven by an €80 million non-cash impairment related to a legacy Norwegian banking platform.

Despite the earnings shortfall, Tietoevry reiterated its fiscal 2025 guidance for organic growth of -2% to +1% and adjusted EBITA margin of 12% to 13%. 

“We note that growth would have to be at least flat in 2H in order for TIETO to hit the bottom end of its guidance range, which would likely require a strong 4Q acceleration,” said analysts at Morgan Stanley.

Profitability is expected to be supported by the removal of Tech Services costs beginning in the third quarter and additional efficiency measures.

Tietoevry also announced a new cost optimization initiative targeting €75 million in annualized savings by the end of 2026. 

“While we’d expect consensus to move FY25 organic growth expectations lower on the back of today’s results, we still view the lower end of the guide as achievable, particularly given that order backlog was up 14% y/y (9% organic),” Morgan Stanley added.

Endre Rangnes, who had been serving as interim CEO, was appointed as the company’s new president and CEO.

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