Translation: Original published in Finnish on 5/11/2026 at 7:00 am EEST.

We reiterate our Accumulate recommendation and EUR 4.2 target price for Teleste. The company's Q1 earnings exceeded our estimates, and we have revised our estimates marginally upwards. Although the merger of the Networks segment’s largest customer will create continued uncertainty regarding order trends in the coming quarters, the recovery of the European market along with an expanded customer base in both business units and implemented efficiency measures provide a solid foundation for continued earnings growth. This is also what Teleste's outlook suggests. Compared to the earnings growth outlook for the coming years, Teleste's share valuation (2026e adj. P/E 10x) appears moderate. 

Q1 result clearly above our estimates

Teleste's Q1 revenue remained at the comparison period level of 32.2 MEUR, which was slightly below our forecast. Networks segment revenue grew by 4%, in line with our expectations. However, revenue growth was driven by European DOCSIS 4.0 deliveries, while the merger between Teleste's largest customer, Cox, and Charter in North America is causing a short-term shift in orders. Public Safety and Mobility’s development (–6.5%) fell short of our forecast, but this was due more to project timing factors, and the outlook for the full year remains stable. Adjusted EBIT was 1.9 MEUR in Q1 (Q1'25: 1.5 MEUR), exceeding our forecast of 1.4 MEUR clearly. Teleste managed to defend its gross margin better than we expected against a strong comparison period, partly thanks to a favorable revenue mix. At the same time, the company's previous efficiency measures and continued cost discipline are evident in the improved adjusted EBIT margin (5.8% vs. 4.5%), despite stable revenue.

Outlook unchanged as expected

As expected, Teleste reiterated its outlook and guides for revenue of 140-160 MEUR and an adjusted EBIT of 7-10 MEUR for this year. Earnings are still expected to be weighted toward H2, which, after a strong Q1, bodes well for the full year's performance. Following the Q1 report, we slightly increased our forecasts for the coming years, now expecting revenue of 145 MEUR and an adjusted EBIT of 9.2 MEUR this year. The merger of Cox and Charter is now expected to be completed in the second half of the year (previously by mid-year), creating uncertainty regarding the key customer's short-term investment level. However, this is a shift in order timing, as Cox has not discontinued its DOCSIS 4.0 investment projects. According to Teleste, the European market outlook in the Networks segment has improved, which is positive after previously being more cautious. Teleste's outlook for growth in North America also remains very good beyond a few quarters, as the company already has over 20 customers on the continent. In addition, the expanded customer base of Public Safety and Mobility and the implemented efficiency measures create a solid foundation for continued profitable growth. While challenges related to component availability and prices introduce some uncertainty to the outlook, the company has proactively acquired components for its inventory.

Moderate valuation and continued earnings growth make risk/reward attractive

After several challenging years, Teleste's investor story turned a new page last year, as earnings growth offered by the North American market began to materialize properly. With improved earnings performance, the stock's valuation already receives support from the 2025 realized earnings (EV/EBIT 11x). With our 2026 estimates, Teleste's adjusted P/E ratio is 10x and a corresponding EV/EBIT ratio is 9x. We consider these levels to be moderate, as Teleste's medium-term earnings potential is still higher than this year. The value of our DCF model (EUR 4.6) also indicates an upside, and our estimates are still below the company's targeted level.