Tieto (TIETO) Q3 2025 earnings summary

Executive summary

• Q3 marked by the completion of the Tech Services divestment, resulting in a more focused business structure and significant net cash inflow, reducing net debt.

• Profitability improved across all business segments, supported by cost optimization and transformation initiatives, with margin recovery underway.

• Transformation efforts included customer-centric initiatives, sales harmonization, AI governance, and a shift in Create to local delivery with global capabilities.

• Order backlog increased 11% year-over-year, especially in Industry and Banking, supporting future revenue growth.

• Organic revenue growth reached 4% in Q3, but underlying growth was -1% when excluding a one-time court ruling in Banking.

Financial highlights

• Q3 revenue: €454.2M, up 4% year-over-year; adjusted EBITA: €87.8M (19.3% margin), or 15.2% excluding Banking court ruling effect.

• EUR 75 million of the EUR 115 million cost optimization target achieved by end of Q3; 1,500 FTEs reduced year-over-year.

• Net debt reduced to €552M from €900M, mainly due to Tech Services divestment; leverage at 2.4x EBITDA.

• Operating cash flow solid at €44.7M, though not fully comparable due to Tech Services divestment.

• Discontinued operations (Tech Services): net loss of €-169.7M for 9 months, including €108.4M impairment.

Outlook and guidance

• Full-year 2025 organic growth expected between -2% and 0%, with adjusted EBITA margin guidance of 12.7–13.3%.

• Q4 outlook: Create to face weak demand, Banking impacted by mainframe contract ending and increased VAT, Care affected by legacy product decline.

• Profitability in Banking and Industry expected above prior year, Create at or above, Care at or below prior year.

• 2026 expected to be a transition year for top line, with most backlog contribution starting in 2027.

• Cost optimization target of €115M run-rate savings by end of 2026; €75M achieved by Q3.