Earnings call transcript: Sinch AB's Q3 2025 results fall short, stock drops 14.79%

Sinch AB reported its Q3 2025 earnings on November 5, revealing a significant miss on both earnings and revenue forecasts. The company posted an earnings per share (EPS) of -0.01 USD, falling short of the anticipated 0.55 USD. Revenue also missed expectations, coming in at 6.66 billion USD against a forecast of 6.86 billion USD. This disappointing performance led to a sharp decline in Sinch's stock price, which dropped 14.79% in pre-market trading.

Key Takeaways

• Sinch's Q3 EPS was -0.01 USD, missing the forecast by 101.82%.
• Revenue reached 6.66 billion USD, below the expected 6.86 billion USD.
• Stock price fell by 14.79% following the earnings announcement.
• Gross margin improved by 1.2 percentage points to 34.8%.
• Initiated a share buyback program, acquiring 1.8% of shares.

Company Performance

Sinch AB's Q3 2025 performance was marked by flat net sales year-over-year, totaling 6.7 billion SEK. Despite the flat sales, the company achieved a 5% organic growth in gross profit and an 8% growth in adjusted EBITDA. The gross margin increased to 34.8%, the highest since 2019, while the EBITDA margin reached 14%. These improvements indicate strong operational efficiencies despite the revenue shortfall.

Financial Highlights

• Revenue: 6.66 billion USD (missed forecast by 2.92%).
• EPS: -0.01 USD (missed forecast by 101.82%).
• Gross profit: 2.3 billion SEK, 5% organic growth.
• Adjusted EBITDA: 915 million SEK, 8% organic growth.
• Gross margin: 34.8%, up 1.2 percentage points YoY.

Earnings vs. Forecast

Sinch's Q3 2025 results were below expectations, with an EPS surprise of -101.82% and revenue surprise of -2.92%. This marks a significant deviation from forecasts, highlighting potential challenges in meeting market expectations. Compared to previous quarters, this is a notable miss, potentially impacting investor confidence.

Market Reaction

Following the earnings release, Sinch's stock dropped by 14.79%, reflecting investor disappointment. The stock's price fell from a previous close of 34.01 USD to a significant low, nearing its 52-week low of 15.7 USD. This reaction underscores the market's sensitivity to the earnings miss and the company's future outlook.

Outlook & Guidance

Sinch reaffirmed its midterm targets, anticipating 7-9% organic growth and a 12-14% adjusted EBITDA margin by the end of 2027. The company is focusing on expanding enterprise solutions, self-serve products, and conversational messaging, with AI integration seen as a key growth driver.

Executive Commentary

CEO Lorinda Pang emphasized Sinch's role as a critical communications layer in the AI economy, stating, "More AI adoption means more traffic, generating more revenue in our existing core business." Pang also highlighted the potential for AI and conversational messaging to drive larger communication volumes.

Risks and Challenges

• Competitive pressures in traditional messaging, particularly in the Americas and India.
• Potential market saturation in established communication channels.
• Macroeconomic pressures affecting customer spending.
• Execution risks in AI integration and product innovation.
• Regulatory challenges in global markets.

Q&A

During the earnings call, analysts focused on competitive pressures and the company's strategic shift towards conversational messaging. Questions also addressed the phasing out of fixed price contracts in EMEA and the limited yet promising AI contracts.

Full transcript - Sinch AB (SINCH) Q3 2025:

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Hello everyone and very, very welcome to Sinch Q3 2025 report presentation. My name is Mian Odlander and I'm Head of Investor Relations and Sustainability. With me here today I have our CEO Lorinda Pang and our CFO Jonas Dahlberg. We will hear them presenting the quarter and thereafter there will be time for questions. To ask your questions, please dial in and remember to dial key 5 on your telephone keypad. So once again, very welcome to this presentation. I hand over to you, Lorinda.

Lorinda Pang, CEO, Sinch: Thank you, Mian. And thanks everyone for joining us today. One year ago at our first CMD, we shared a strategy for value creation and today marks a clear milestone of our disciplined execution and value delivery on that strategy. Let's turn to slide two to look at the highlights from the quarter. As we begin, I will remind you of the continued large FX headwinds in the quarter, mainly due to a weak US dollar. As we always do, we will point you to organic changes which normalize these swings and are a consistent representation of the underlying business. I am pleased to report a quarter of continued organic gross profit growth, improved profitability, and the initiation of our share buyback program. We delivered solid performance that demonstrates focused execution against our strategic priorities, even though currency effects obscure some of the underlying momentum.

Gross profit of SEK 2.3 billion grew 5% organically year over year and, roughly in line with last quarter, we expanded gross margin to 35%. Both the gross profit and gross margin development are a testament to the strength of our offerings and our focus on higher value interactions and more profitable product lines. Our ability to expand profitability in a dynamic market highlights the resilience and efficiency of our business model. However, turning to the top line, net sales were flat year over year at SEK 6.7 billion and I want to be direct about this. While our profitable growth is very positive, this level of revenue is not what I expect, nor is it the shape of the growth we are aiming over the long term. I'll address this further on the next slide when we break out the regional segments.

Adjusted EBITDA of SEK 915 million increased organically by a strong 8%. This was an adjusted EBITDA margin of 14%, which was the highest on record since 2019 and was driven by gross profit growth and operational efficiency. As a reflection of our confidence in our strategy and financial strength, Sinch initiated its first ever share buyback program during the quarter with 1.8% of shares now held in Treasury. Beyond the financials, we are proud that Sinch was named a leader in Gartner's Magic Quadrant for CPaaS for the third consecutive year, a powerful validation of our market position and strategy. We also ranked number one in their Critical Capabilities for CPaaS report for multinational organizational use cases. This highlights the strength of our platform's ability to meet the complex needs of global enterprises.

We also strengthened our position in AI during the quarter with leading innovators across all regions adopting our API products to power customer engagement, underscoring the scale and robustness of our platforms, and in an important milestone of conversational messaging, we launched RCS for Business with all three major mobile operators in the United States, cementing our leadership in this transformative channel. Let's look at slide 3 next please. To begin, let me provide some color on the flatness in net sales. This primarily reflects two factors. First, we've encountered competitive pressure in the traditional messaging space concentrated within a few large accounts in the Americas customer base and in the India market more broadly. Second, we have continued to steer away from fixed price contracts that have negatively impacted EMEA and to a lesser extent Asia Pacific as these opportunities do not fit an acceptable risk profile.

However, we're not standing still. We are proactively reshaping our revenue profile for more sustainable long term success. This strategy is twofold, first, diversifying our customer base and second, accelerating our leadership in conversational messaging. We are making excellent progress on customer diversification, having recently secured several notable new enterprise clients who are in the early stages of ramping up their volumes. While their full contribution is not yet reflected in our top line, they represent a significant driver of future growth and a key reason we are winning is our leadership in conversational messaging. We grow here by winning new customers directly onto modern channels like RCS and WhatsApp and migrating our existing base to these higher value interactions. In India, for example, this combined success in over the top channels and strong growth in email has neutralized the pressure on traditional messaging in the Americas.

While net sales were flat, the region delivered strong organic gross profit growth of 8% with margins expanding by 2 percentage points. This was driven by a strong turnaround in our US Network voice business and solid performance in other product categories. In EMEA, organic net sales and gross profit declined by 2% and 3% respectively. This was primarily due to the strategic decision I just mentioned regarding steering away from fixed price contracts. Notwithstanding this, the underlying API business remains healthy and is growing, and in Asia Pacific, organic net sales grew by 8%—I'm sorry, 7%. Organic gross profit increased by 1%. The strong net sales performance was driven by new large messaging wins, but was offset by competitive pressure in applications in Australia and the India SMS pressure I mentioned earlier. We've been experiencing this downward pressure for some time, but Sinch India has now stabilized sequentially.

Before we leave this slide, let me reiterate the actions I mentioned. Diversifying our base, leading in next gen messaging and email, and improving our commercial terms. These are fundamental to building a more resilient and sustainable business. They strengthen our foundation and position us to capture higher quality growth going forward. Next slide please. Our strategy for value creation is very clear. We are executing with discipline. It is built on three core pillars: reaccelerating growth, expanding our EBITDA margin, and disciplined capital allocation, all fueled by continued strong cash generation. The third quarter marks another period of significant progress across each of these pillars and is another firm step on our path to delivering our midterm financial targets of 7-9% organic growth and a 12-14% adjusted EBITDA margin by the end of 2027.

Next on Slide 5, let's look at the progress for growth reacceleration. The four growth drivers we outlined are deeply interconnected in enterprise expansion. We are winning with the world's most demanding businesses. Our large enterprise customer base has increased by 5% year to date, including the addition of companies like Nespresso, Visa, Dollar Shave Club, and Nordstrom. Our self-serve products continue to be a powerful growth engine, delivering high-margin double-digit growth year to date. As another proof point, our self-serve capabilities are resonating in the market. We have increased our customer count to more than 190,000. As it relates to RCS, our traffic has tripled year to date, and as mentioned in the third quarter highlights, we have now fully achieved coverage with all US Tier 1 operators. Touching quickly on our continued strength in email, volumes have increased nearly 40% since last year.

Finally, Partners in Ecosystems, which is all about scale. We embed Sinch directly into the workflows of the world's leading enterprise software companies. The partner enabled business has grown gross profit by 5% on a year to date basis. These growth drivers are powered by two major opportunities, the growth in conversational messaging and the rise of generative AI. Let's move to Slide 6 to take a look at our progress in conversational. We are a leader in this transformation and the momentum in conversational messaging is a clear testament to the market's demand for richer engagement to enhance the customer experience. Our RCS message volume growth is being led by India, Latin America and early adopter markets in EMEA like France and in the U.S. we have some great early use cases with brands like Enfamil and Omaha Steaks.

We have launched WhatsApp Upscale as a complement to RCS Upscale. This is more than just switching channels. It's about delivering real business impact through better security and higher trust, improved conversion rates and more innovative customer communications. To illustrate the last point, our customers Picard, Courier, and Clarins were nominated for Innovation Awards for their high impact RCS campaigns. Clarins took home the win by transforming customer communications with rich interactive messaging. Their campaigns deliver much higher engagement and stronger business outcomes. Next page. Generative AI is set to dramatically amplify the effectiveness of conversational messaging. While these two phenomena evolved independently, they are now creating a powerful synergy where each makes the other more valuable. Put simply, consumers now expect conversations that are intelligent and context aware.

AI provides the intelligence to meet this demand, while rich channels like RCS and WhatsApp provide the perfect vehicle to deliver those enhanced experiences. This powerful combination is creating an exciting new era for digital customer communications. In this era, machines themselves are becoming new buyers of communications. As autonomous AI agents begin to orchestrate interactions, they will drive a significant increase in overall communication volumes. On the next slide, I'll talk about what this inflection point means to Sinch. First, we see strong market validation that we are a platform of choice. The world's leading AI innovators are building their future on our infrastructure, choosing Sinch's APIs to power their communication needs across all regions. This reinforces our unique position as the trusted execution engine. These companies need to know that when AI triggers a message to be sent, it gets delivered securely and reliably every single time.

That is our core strength. Our leadership in this new AI era is built on a foundation we have been laying for years. We have strategically embedded AI across our product suite to make our solutions smarter, more intuitive, and more valuable. Let me give you a few tangible examples of how we are delivering value to customers today in email. Mailgun Inspect uses AI for quality assurance and our open source MCP Server allows developers to query email analytics using natural language in multi channel campaigns. Our Sinch Engage platform uses AI to orchestrate campaigns, personalize experience, and create content in Voice. Our Programmable Voice API allows businesses to automatically capture and transcribe conversations for compliance analytics and deeper customer insights.

In our core messaging offering, AI is deeply embedded to enable our customers to recognize intent, perform sentiment analysis, and protect their users by detecting profanity and spam. We are continuing to enhance our platform's capabilities and enabling campaigns and conversation orchestration. We have already seen a 41% year to date volume increase in conversations facilitated through our Chatlayer platform and are now developing AI agents directly within our Sinch Engage platform. We expect to launch a closed beta with our first customers before the end of the year. In summary, this trend directly fuels our platform's capabilities and growth. More AI adoption means more traffic, generating more revenue in our existing core business. We are the essential communications layer for the AI economy and we are well positioned to grow as it does.

With that, I'll hand the word over to Jonas to take you through the financials in more detail.

Jonas Dahlberg, CFO, Sinch: Thank you, Lorinda. Let's get into the financials and we start at the top of the panel with net sales. First, a couple of words on our financials. When looking at Sinch financials, it's important to understand a couple of things. The first thing is that we have a strong seasonal pattern where typically the year end is the strongest, driven by the retail system. Secondly, we have significant FX effects and our reporting currency is Swedish krona, but it's a very limited share of our business. In fact, the US dollar is the dominant currency of trade with about 60% of the business. There are a lot of FX effects and that's why we always communicate organic numbers for comparability and communicate year on year. In the quarter, net sales came in at SEK 6.7 billion and that's down 7% due to currency translation effects.

However, when adjusting for this effect we have a marginal positive organic growth. Now under the surface there's actually more excitement as we exhibit continued solid net sales growth in our high margin products such as our email products and several of our applications. Moreover, we continue to diversify our customer base and reduce customer concentration. In all this provides a positive mix effect and stronger financial profile both here and now and for the future. Next chart. Moving on to gross profit. Looking at organic numbers, we continued with a stable 5% growth in the quarter with the strongest growth coming from our most important market which is the Americas. The improvement in Americas is driven by all product categories including our API and application business, but with a particularly strong quarter for our network business which is now really back after the turnaround.

What's positive in the quarter across the company is that all product categories contributed to organic GP growth as well as two out of our three regions. However, on a reported basis we have this currency translation effect and the impact is 8 percentage points as a currency translation headwind. Moving to our margins, combined we have very positive development of our margins with a strong 34.8% gross margin in the quarter and this is an increase of 1.2 percentage points year on year. This improvement is driven by a combination of both increased profitability at product level as well as a positive product mix shift. As I mentioned earlier, our most profitable products continues to grow faster than the average mix and this is mainly our email products and application and hence contributes positively to the higher margin through a positive product mix shift.

Disaggregating these two effects, about half of the margin increase comes from a positive development of product margins while the other half comes from a positive development product mix shift. Moving over to EBITDA margins, we deliver close to record high 14% adjusted EBITDA margin. In fact, in modern Sinch time I would say it's the highest post 2019 and the acquisitions we did in 2021 which truly transformed the company and we also see a very strong margin on non adjusted EBITDA. We're already now at the upper range of our 12-14% EBITDA margin target for the end of 2027 that we established one year ago at our capital markets day.

In terms of the targets that we set out, one year one is down and that's the EBITDA margin target and now it's one to go which is really to get the gross profit growth also going. Moving to the next page to take a closer look at cost and EBITDA. Starting with operating expenses, we continue on our path of cost discipline and continued synergy extraction in the combined Sinch. OpEx is down 5% compared to the same quarter last year, which represents a marginal 3% organic OpEx increase. Measures we're taking on the cost side are about leveraging truly the combined strength of Sinch, consolidating platforms and product, consolidating support functions to lower cost locations, and recently leveraging AI to gain efficiency throughout our operations.

I want to stress that this is not a one-off effort, but rather an ongoing effort over several years to increase our cost efficiency. This effort will continue and there is more potential. It will both support the potential of increased profitability in line with our targets as well as allowing for investments in future growth, predominantly through investments in sales, marketing, and product development. With an organic 5% gross profit growth but only 3% OpEx growth, we get a favorable drop down to adjusted EBITDA with an 8% organic improvement in the quarter. Since we have lower adjustment items, primarily through SEK 41 million lower restructuring and integration charges, we achieved 16% organic EBITDA improvement compared to the same quarter last year.

Moving over to cash conversion and cash flow, operating cash flow amounted to SEK 1.4 billion over the last 12 months which corresponds to a 30% cash conversion rate. This is very close to our guidance of 40-50% cash conversion over a 12 month period. It's important to emphasize that we have some working capital swings between quarters, but this is quite normal for us. I would like to say that the cash conversion rate going forward and what we report now is very much in line with what you can expect. Just to prove this point, I would like to move over to net working capital sequentially. We're essentially at the same level of receivables as the last quarter and the negative impact on working capital mainly comes from lower payables in the quarter.

In fact, it's the lowest level of payables in several years. In all, we continue to operate the business with a negative working capital, although a slight increase from the previous quarter. While we have and we are likely to have variations in cash flow impacting quarterly, sorry, in net working capital influencing quarterly cash flows, we don't see any structural changes impacting our working capital and stay confident with our cash conversion guidance. Lastly, before handing back to Lorinda, looking at the balance sheet, we continue to have a strong balance sheet with net debt to adjusted EBITDA slightly increasing to 1.4 turns. As you know, the last quarter the board result activates the repurchase program mandated by the AGM allowing for a repurchase of up to 10% of outstanding shares. During the quarter, we repurchased 1.8% of outstanding shares for some SEK 519 million.

In addition, we spent SEK 241 million for an equity swap arrangement to hedge Sinch long term incentive program. In this program, a partner bank acquired further Sinch stock for SEK 241 million. In total, this corresponds to 2.7% of outstanding shares. In combination, these are the drivers for a slightly increased leverage ratio in the quarter. What's worthwhile to mention also is that during the quarter we also refinanced existing bank facilities at largely unchanged and very favorable terms, which means that we currently have an additional SEK 4.2 billion in unused credit facilities. With that, I'm handing back to Lorinda.

Lorinda Pang, CEO, Sinch: Thanks very much, Jonas. Okay, before we go to questions, I just wanted to reiterate our value creation agenda here. It's around three: reaccelerating growth, expanding EBITDA margins, and a disciplined capital allocation strategy. We've in the third quarter delivered on all three of those. An important step towards our midterm guidance, which we also reaffirm here today. With that, I'll open it up for questions.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Thank you very much. Lorinda and Jonas, I want to remind you to ask a question. Please remember to dial pound key and five. Let's open for the telephone questions first. Online we have Erik Lindblom, Ramil Khouri, Thomas Nilsson.

Lorinda Pang, CEO, Sinch: Hello.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Hello.

Yes, good afternoon. Two questions please, if I may start with one and then come back with the second one perhaps. Just on API platform, you had quite solid development in this area in Q2 that seemed to slow quite clearly in Q3. I'm just wondering sort of what gives you confidence that you can re-accelerate in this area and is it mainly sort of driven by these new enterprise wins and the conversational piece that you mentioned, or is it fair to say that the growth here maybe will be a bit lower during the period of churning out these fixed price contracts in EMEA? Thanks.

Lorinda Pang, CEO, Sinch: Yeah, thanks Erik for the question. To your point, the two pieces or the two headwinds that I called out do both affect the API platform. To your point, the fixed price contracts will, you know, they will cycle out over the next several quarters, so that will continue to put pressure from a year over year standpoint. However, the increases in the new customer wins, those are within API platform and as those volumes come online, we've seen some of them, but they're not at full levels. As those volumes come online they will have a positive impact as will conversational messaging. It will show up in API platform as well. We've called out the headwinds, but we also have a good line on what the incremental growth will look like.

I'm sorry, one last point I would make is the AI contracts that I talked about that we have come to agreement with in the third quarter. Those will also positively impact API over the long term.

Great. Just as a follow up to that, perhaps, I mean how meaningful are those AI contracts today and when do you think they will start sort of moving the needle meaningfully on the group level?

Yeah, they're not meaningful today because they just got the agreement, just came to terms. They have yet to ramp. The way that I see these, this new way of doing business in this new AI world with these innovators is they're going to come to us with regards to specific use cases and they will grow from there. I do think that, as I mentioned in my prepared remarks, this combination between AI and conversational messaging will absolutely generate larger volumes for communications ultimately. These newer contracts are the first step to being able to capture those volumes.

All right, perfect. Just a question on network connectivity. It's really a stellar quarter and looks like more than 20% organic gross profit growth in America in this segment. I mean, how sustainable do you think this gross profit level is? Yeah, what are your sort of more long term hopes for this business?

Jonas Dahlberg, CFO, Sinch: Thank you.

Lorinda Pang, CEO, Sinch: Sure. On the network connectivity side, if you remember a bit over a year ago, this part of the business was on a fairly rapid decline and that resulted from some significant price increases from carriers in the U.S. and we have completely reversed that. The performance in network connectivity today is as a result of turning around that business that comes after really three aspects. The first was price negotiations. The second was price increases to customers that leverage these services. The third was also the transition from the legacy network infrastructure into a go forward infrastructure. I think we've spoken about that quite a bit in the past. The price increases to customers, you know, you can only go so far. I would say that we're, you know, we're getting closer to the end of that.

The cost savings from price negotiations are fairly flat, I would say. The larger opportunity for us is to get completely off of this legacy infrastructure. That will have a very meaningful impact to us on the cost side. The other thing I would call out in Q3, and I apologize, is there was an actual release, an accrual release that positively impacted us in Q3. You should not look at Q3 performance for network connectivity and think of it as the new baseline. It is unusually high.

All right, great. Are you able to quantify that one, the approval?

Jonas Dahlberg, CFO, Sinch: I think what you should look at, you know, is more the sequential development and then, you know, from previous quarters, which is a step up from previous performance. It is difficult to say with precision, of course, and we do not give exact guidance, but it gives you a hint.

Okay, perfect. Thank you.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Thank you. Next on line we have Ramil Khouri from DNB Bank. Hello.

Hi guys. Hi. Thank you, Mian, for taking my questions. And hi guys. Just trying to parse out sort of the moving parts here. Trying to sort of understand what's new here in Q3, which you didn't know going into the quarter, so to say. So app pressure in Australia, competitive pressures on large US customers, fixed price contracts in EMEA being phased out. Like what's new of this? And why, you know, did you decide to take the actions you took now in Q3?

Lorinda Pang, CEO, Sinch: Hey, Ramil. Excuse me, I'm losing my voice. Excuse me. If you remember in Q2, what we said from a GP perspective was that you should expect the average of the first half of the year to look quite similar in the second half of the year. You know, I think we started in Q1 with 2% gross profit growth, then we went to 6%. Now we're roughly at 5%. We actually did call for a fairly, call it, quarter over quarter, stable quarter. You know, the fixed price contracts is a continuation. I raised that in the first quarter. I wanted to remind everybody of that because it did dramatically affect the EMEA business this quarter.

As far as the price compression or the price competitiveness that's been going on, I would say for roughly the last, call it six months or so. You know, we've had to make a few concessions there, but conversely, we've had, you know, some good wins. These are pieces that we've known and we're just telling you what the headwinds are that affected us this quarter.

Okay, that's very clear, Laurinda. Thank you. Clearly there's a mix shift.

Happening in the business as well.

Year to date, the gross margin is up more than 80 basis points year over year. How dependent are you of volume growth into 2026 to deliver on, you know, the notion of Sinch being a growth company?

Jonas Dahlberg, CFO, Sinch: First of all, the most important metric for us is GP growth. Having that said, over time, we obviously need net sales growth as well. I think it's, you know, the audience has to define what's a growth company. We are progressing towards our target of 7-9% gross profit growth at the end of 2027. You remember that we set out two targets one year back. One was on profitability. We said we would deliver 12-14% EBITDA margin on adjusted basis. We're now actually at 14% and non-adjusted, 13%. We're already at the upper range. You know, one down, one to go. We also said it won't be, you know, a straight linear extrapolation when it comes to growth. We are confident that we're on the right track towards our targets and we're progressing basically.

Okay. Okay. A question I've asked before, perhaps I'm sounding like a broken record here, but trying to understand like where the competitive pressures are coming from. Because all your listed competitors operating in the U.S. have higher gross margins and they seem quite reluctant to dilute their gross margins. You guys coming from sort of a lower base, so to say, and having the scale benefits when you bargain with carriers. Could you shed some light on, you know, are these U.S., European, you know, or rest of world players competing for these volumes and where are the volumes originated that you're giving concessions on right now?

First of all, the absolute level or the gross margin level with competitors depends on the mix. That does not mean that they have parts of the business where they can compete with us and be quite aggressive. Where we see competition is competitive pressure is mainly on a very limited number of very significant accounts who basically set up multi-vendor relationships and there it is, you know, highly competitive. Now this is a continuous competition and it does not sound like we are losing any customers. We may have lost a bit of volume, but we can fight back also.

Lorinda Pang, CEO, Sinch: Ramil, thank you. The competitive pressure we're talking about is predominantly on the messaging side. The traditional messaging side. Right. You know, yes, we've had a disciplined approach, but we also have the ability to change the product mix and deliver on higher valued products which do bring higher gross margin. When you look at the overall mix of the business, to your point, it's shifting and it is maintaining our gross margin level. I would just make sure that that's not lost on the audience here.

Okay. And then just geographically speaking, where are you seeing the competitive pressures in terms of termination of the volumes?

It's, you know, as I mentioned, a few accounts in the Americas, we're seeing large pressure in the India market very specifically, but that is intra India. It is based off of the telcos getting into the SMS business for large, you know, local companies. Excuse me, those are the two call outs that we would make.

Okay, thank you guys.

Thank you, Ramil.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Thank you. Next one is Frieda. Jack is Ramil Khouri from DNB Bank.

Lorinda Pang, CEO, Sinch: Hello. Hello.

Hi, Lorinda, Jonas and me. And thanks for taking my questions. The first one, based on what you said around network connectivity and on accruals. So if we think then of organic GP growth for Q4 and for the start of 2026, will these growth rates be declining from the level we see now in, in the third quarter?

Jonas Dahlberg, CFO, Sinch: Sorry, I didn't exactly get your question here. Please. The accruals.

Based on what you've said in terms of network connectivity, that the growth rate there could be on alleviated level right now in the third quarter. If we look down to Q4 and to 2026, the start of 2026, could we see that the growth rates will be declining from the levels we see now in the third quarter?

I think, as Lorinda said, you can't use the third quarter as your new baseline for the sequential development of network voice. Look more at the sequential numbers you've had earlier in the year and then we continue to improve the business, but again we can't give any precise guidance. What we can say is this business is turned around and we continue to work on the cost side, shifting out legacy to the M technology with much more cost efficient IP technology and that will continue to drive margins, but that will mainly come in the next year.

Sure.

I was possibly unclear. I was thinking more of, you know, based on the potential extra tailwind in that segment and refer more to the organic growth rates on a group level. If 5% makes sense or 4% makes sense, average of Q1 to Q3 makes sense towards the next coming one, two, three quarters.

What we've said and what we continue to say is the same thing, that the second half of the year on average will be in line with the first half of the year.

Okay, super. In terms of the customer count growth of 5% that you call out in Q3, if you can relate this to the first and the second quarters, please.

Lorinda Pang, CEO, Sinch: We've been on this study, this is 5% on a year to date basis predrag and so this has been steady since Q1. I think we actually called it out in Q1 as well at 5% and what the definition of enterprise customers is customers who are spending north of $150,000 per year with. With US dollars. Sorry, yes, US dollars.

Yeah, super. Basically, you're continuing on a healthy net ads trend on the customer side. Correct the message here.

Yeah, absolutely right.

On a follow up question on what you've discussed on AI so far and the benefit you see and what drives this, I think from the outside it looks to me that Sinch is mostly beneficiary, playing on the infrastructure level rather than the application level compared to, for example, Twilio, based on the examples you give. I may be wrong here. I would love to hear your takes here and more on what Sinch could be powering on an application level as well, if that would be the case.

Yeah, so we actually do both. We have on the application side. I actually called out a couple of examples of what we're doing there relative to our email product as well as our Sinch Engage platform. We are embedding AI capabilities into both of those platforms to enable customers to be able to develop their own campaigns to personalize content, create content, etc. The application side of the house is the side of the house that's the highest margin. Our self serve business is growing at a healthy double digit rate. That's positive. The other piece to your point is the infrastructure side. You know, our infrastructure, the fabric of the network and the capabilities that we have is the perfect vehicle for AI powered communications. That I think comes through a couple of different ways.

One is through the large innovators themselves and their needs to power their customers, and then also with agents more directly. Those can come from the large innovators as well as enterprises as they become more, they lean more and more into agentic AI.

That's very good. Thank you very much, guys.

Thank you.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Thank you. Next online we have Laura Medici from Morgan Stanley. Hello Laura.

Hi. Thank you for taking my questions. Three questions please. The first one is on your midterm gross targets. What do you need to do to bridge your gross profit growth to your midterm targets and what are the key priorities? Second one is you talked about early success in terms of benefiting from increased communication from autonomous AI agents. Can you give us a sense of the kind of contract terms that you have on those first contracts that you've been signing? Are they aligned with your usual types of contracts? Lastly, AI is expected to reduce the cost of coding and software development. Could we please get your view on whether you think Sinch is insulated from the risk of AI disruption in the form of in housing and if so, why do you think that's the case? Thank you.

Lorinda Pang, CEO, Sinch: Okay. Hey Laura. Midterm growth, you know, to your point, we have organic growth of 7-9% that we've called out and what we need to do in order to bridge that is deliver on the growth drivers that we've called out. That is expand in enterprise, that is to continue this double-digit rate in self serve, it is to win in the conversational and the email space. It is also, you know, the need to win in the partners and ecosystem space. Those are the four key growth drivers that we've called out. When we did call those out, we did not have AI in the mix. I would say that AI will be an addition to that in terms of the contracts with these AI innovators themselves.

You know, we're not going to talk about terms per se, but I wouldn't say that they're unusual at this point. You know, I think that right now, or I know right now, you know, these sorts of contracts are coming in at use case level, so they're pretty limited in terms of volumes. I would imagine, as you know we grow with them, that there will be, you know, terms that will become a bit more aggressive or competitive and then finally the in housing or the cost of coding. Did you, did, was your question, do you think we're immune from, from.

Jonas Dahlberg, CFO, Sinch: That or if we're correct. Yeah, if there is a risk that we will be disrupted. If I start, you know, really the core of our business is a communication service, you know, infrastructure that powers communications and that will not be disrupted. If anything, it will be enabled by AI making the communication easier and also drive more communication. The answer is no.

Thank you. One follow up please. When you talked about the growth drivers for your midterm targets, you said that you didn't have AI in the mix when you called those out initially. Does that mean that with AI now representing an opportunity for you, you think you could potentially grow faster than what you said are your midterm targets?

Lorinda Pang, CEO, Sinch: Yeah, we haven't changed our midterm targets yet. I'm being, you know, again, full disclosure, we had those four drivers outlined one year ago and AI was not a part of it.

Okay, thank you very much.

Jonas Dahlberg, CFO, Sinch: The thing I'd like to add on the midterm growth is you ask what do we need to achieve to get there? I'd like to remind you that there is a bit of drag currently from the fixed price contracts in India that influence how we deliver on against comparable numbers. Once out of that drag, and obviously assuming there is no new drag coming into the business, that's also positive. Okay.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Okay, thank you, Laura. Next one is Daniel Torsson from ABG. Hello Daniel.

Yes, thank you very much. Two questions. The first one on the phasing of the fixed price contracts in EMEA and also related to your reasoning on the financial targets being in the upper end of the margin already and now looking to reinvest into growth. Does that mean that those fixed price contracts are actually loss making? Because otherwise they would likely help you to reach a higher GP growth as you are already within the margin range. I just want to understand why you do this. Also, if you have more to come ahead as well.

Jonas Dahlberg, CFO, Sinch: Yeah, thank you, Donna. Excellent question. The problem with the fixed price contract is not really the margins per se, it's more the cash flow profile and the risk profile. If you go back a couple of years, you will actually see the discussion around these contracts. It is part of more risk management. Also, the sustainability of those contracts is more transaction over a limited period of time and it becomes pretty volatile. This is more the logic why we're not super excited about those contracts. We haven't taken a decision to completely exit, but it's more taking a more cautious stance. To provide some numbers here, at the peak, this represented maybe 3% of GP and now two thirds of that is gone and that has happened over a 12-18 month period.

What we need is another 12 months to get it out of the comps. That gives you a little bit of guidance of the impact. It is predominantly consolidated in EMEA, so that is why you see the drag on EMEA.

Okay, excellent. That's very clear. The second one on the increased competition in certain markets you mentioned here. Does that increase your appetite for a return to M and A by consolidating some markets and become a larger player or do you view your options differently here?

Lorinda Pang, CEO, Sinch: You know, first I would say that M&A continues to be a part of our strategy, although we've been quiet for the past couple of years as we've been integrating these companies, so very much we have an appetite for that. Certainly we've been spending the last two years cleaning up inside of Sinch and while we're not complete, we've certainly made progress. You know, we certainly are in a position at this point in time. The balance sheet is strong. Again, we are in a good position. Consolidation needs to happen. You know, we're believers in it. This continues to be a fairly disjointed or disaggregated industry. There are plenty of opportunities there to potentially consider.

Okay, can I just end with a final short one here, is the emergence of RCS and WhatsApp volumes here growing three times year over year? Is that hampering net sales growth but enhancing gross profit growth due to potentially lower prices but higher profitability for you?

No.

Okay, thank you.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Thank you. Next one is Fredrik Axel from Handelsbanken. Hi Fredrik.

Jonas Dahlberg, CFO, Sinch: Thank you.

Thank you for taking my questions as well. I thought, Louisa, maybe if we saw Twilio report a bit earlier here last week or something like that and they had an organic growth of north of 10% and you're about flattish. I know, I mean you are peers but you're not apples to apples. So if you would pick some of your pieces apart and compare, where do you see you stand in comparison to Twilio's similar unit. It would be interesting to hear your elaboration on it without sort of speaking on Twilio necessarily.

Thank you.

Lorinda Pang, CEO, Sinch: Thanks, Fredrik. Yeah, to your point, it's hard to do a direct comparison because certainly I think the normalization of the business, I know how we do it, I don't know how they do it. That's hard. The other piece is just the business mix is different. Even though we sell similar products, just the segments as well as the geos that we sell in or at least have the majority of our business in is different. If I try to peel it apart and look at a more comparable, you know, Americas business versus Twilio and the growth that we see in the underlying API business specific messaging, the comparison is actually, you know, the gap is not nearly as large as, you know, one might look at at the very highest of levels.

I think, you know, for me as the leader of this business, it's important for Sinchers to play our game and to win in the markets that we have invested in. Within the Americas right now, again, the teams are doing a very good job winning new business so that we can shorten or rather lower the customer concentration in that market. We're doing it with a disciplined approach, we're doing it with multi products so that it provides a higher value to the customers, and we're also within this diversification also being able to address, you know, a market that's a bit lower and less price sensitive than what we experience at the very highest ends of the market.

If it's so that you feel that you are losing market share to Twilio when you meet Twilio.

No, I don't actually. You know, in fact I mentioned a lot of the wins, the good positive wins that we're seeing in Americas and in Asia PAC as good examples where we of course are winning against our competitors. They happen to be one of them.

Okay, perfect. Thank you.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Thank you. Next one is Thomas Nilsson from Nordea.

Lorinda Pang, CEO, Sinch: Hi Tomas.

Okay, thank you for taking my question.

Since you're spending quite a bit of money investing in your network and your infrastructure, how many of your competitors are investing into the networks at such an ambitious level, and how do you view this will differentiate the various players in the CPaaS market in the coming years?

Are the network infrastructure, maybe that. I'm not sure what you're looking.

Jonas Dahlberg, CFO, Sinch: Sorry, can you repeat the question?

I mean your level of investment in CapEx is quite high. How many of your competitors do you see investing at such a high level as you and Twilio? How do you think this will play out in the market in competitive terms in the coming years? How many of your competitors are really.

Investing in the networks the way you are?

I think first of all, I'm not sure I subscribe to the idea that we have a very high CapEx level. It's around SEK 500,000,000 a year in line with historical depreciations, give and take some changes. It is a level we've been at. It's a level we think we will continue to do that and, you know, don't expect any big changes, at least not material changes in the grand scheme of things. You know, when it comes to our competitors, I can't really comment on that and their investment plans.

Lorinda Pang, CEO, Sinch: The other thing I would call out is just on the network connectivity piece we are, and this might be what you're talking about, Thomas, is, you know, we have been investing in the migration from a legacy network to a digital or an IP network. That cost will go away, you know, roughly at about mid next year.

Okay, thank you.

Mian Odlander, Head of Investor Relations and Sustainability, Sinch: Thank you very much. I think that was it for today. Thank you very much to everyone who called in today. We will be back here for the Q4 report on the 17th of February. If you have any questions, feel free to reach out to the IR department. We are very happy to answer your questions. Once again, thank you very much and goodbye.

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