Hexagon Q3'25 preview: Profitability under pressure

Hexagon will announce its Q3 financials on Friday, October 24. We expect organic growth to improve sequentially, but the negative FX impact is likely to heavily restrict total growth. The FX changes and increased fixed cost base are likely to burden profitability, even if we are somewhat more optimistic about profitability compared to the consensus view.

Source: Inderes & Bloomberg (consensus includes 16 estimates)

FX changes eat away the positive momentum in organic growth

We forecast Hexagon to report improving organic growth for Q3, with negative FX impact, however, offsetting most of the growth. Our revenue estimate of 1,306 MEUR implies 0.5% growth year-over-year, of which 4% is organic and -4% is driven by FX changes. The estimated uptick in organic growth is mainly driven by the improved market activity in the Manufacturing Intelligence division. We expect Autonomous Solutions to continue to benefit from strong demand in the aerospace and defense segments. Consensus revenue estimate is slightly higher compared to ours.

Organic growth per division

Source: Inderes estimate

Profitability likely to decline slightly

Hexagon’s profitability has been on a decreasing trend in H1 2025 owing to the negative impact from FX changes and increased opex spend amid strategic growth pursuits. We expect a similar trend to take place in Q3, with adjusted EBIT declining to 366 MEUR (Q3’24: 377 MEUR). However, we estimate profitability to decline less in Q3 compared to H1, given that the company has increasingly begun to emphasize cost control over growth investments. Hexagon is also contemplating another cost-saving program that is likely to make public the savings target and a related one-off restructuring cost in the Q3 report. Our Q3 adjusted EBIT estimate is 8% higher compared to consensus. We expect EPS to stay flat year-over-year, supported by lower net financing cost.

Large strategic changes upcoming

Hexagon is seeking a more focused business scope and plans to split into two listed entities, Hexagon and Octave, in H1 2026. Hexagon will focus on sensors and robotic solutions, including hardware and software. Octave will be a pure-play software as a service (SaaS) business that focuses on solutions for designing, building, operating, and protecting industrial assets. This strategic transformation has already resulted in a significant divestment that we consider lucrative for Hexagon. We would not be surprised if the company conducts further divestments while searching for an optimal strategic structure.

Considering the current state of Hexagon, we anticipate continued growth in 2026, despite the short-term challenges posed by foreign exchange rate fluctuations. Improving growth and an upcoming efficiency program will likely result in recovering profitability, albeit our estimated adjusted EBIT of 29.4% in 2026 is still slightly below the 2024 level of 29.7%. We find the current valuation demanding, with an adjusted EV/EBIT of nearly 20x for 2025e. The estimated 17.4x for 2026 is closer to a fair level assuming the recovery in profitability materializes. However, it does not allow for much upside, especially considering the uncertainty included in the estimates.