Tietoevry Q3'25: Correctly priced turnaround company

Translation: Original published in Finnish on 10/23/2025 at 9:11 pm EEST.

We raise Tietoevry's target price to EUR 18.0 (was EUR 17.0) reflecting estimates changes and lower our recommendation to Reduce (was Accumulate) following the rise in the share price. Tietoevry's Q3 was well in line with our and consensus expectations. The company's efficiency measures have progressed well, supporting earnings growth next year. However, it is important for the company to regain growth momentum within its business to establish a more solid foundation for continuous earnings growth. With the rise in the share price, the valuation picture of the share (2026e: P/E 17x, and adj. 12x and dividend-% 7%) has become neutral. 

Revenue increased following resolution of the Sparebank1 dispute

Tietoevry's Q3 revenue grew by 4% to 454 MEUR, slightly exceeding the consensus estimate but still fully in line with our estimate. Excluding income related to the Sparebank1 dispute, revenue decreased by 1%. By business area, positive development was seen in Industry (+4% y/y) and Care (+3% y/y). Banking grew strongly (+14% y/y), driven by the Sparebank1 dispute. Create's development, on the other hand, remained sluggish (-3% y/y). Another positive aspect of the report was the growth in the company's order book, which increased by 11% year-on-year. However, according to the company, some effects will not be reflected in revenue until 2027.

Although profitability was "technically" strong, significant efficiency measures also provided support

Tietoevry's adjusted EBITA increased by 57% to 88 MEUR, corresponding to a margin of 19.3%. However, the company does not view income from the Sparebank1 dispute as non-recurring, though we consider it to be so to an extent. We have not adjusted these figures in the company's results, but operationally, excluding the disputed income, the profitability corresponds to a margin of 15.2%. Profitability in Q3 was supported in particular by extensive efficiency measures implemented across all businesses. However, the result was negatively affected by one-time costs related to the efficiency program and the costs of Tech Service's group operations.

Company is aiming for upper end of its guidance

Tietoevry updated its guidance in September, estimating organic growth to be between -2% and 0%. The company also estimates its full-year adjusted EBITA to be 12.7-13.3%. Driven by a successful cost-saving program (75 MEUR already realized out of a 115 MEUR target) and the Industry segment, we have slightly raised our earnings estimates (~1%). Regarding expectations for the Capital Markets Day, Tietoevry commented in the conference call that the company does not need a new strategy but rather better execution. Thus, we expect the company to present more specific plans at the Capital Markets Day at the end of November. Of particular interest will be the company's growth acceleration measures and its new medium-term targets.

Tietoevry is correctly priced turnaround company

Tietoevry is clearly a turnaround company, which limits its valuation. However, with the Tech Services transaction, the company's structure was simplified, and the remaining parts are positioned in the market's growing sub-segments. Tietoevry is now a more purely international company offering software, development and consulting services. According to our forecasts, the adjusted P/E and EV/EBITA multiples for 2026 are 12x and 11x, while the reported corresponding multiples are 17x and 14x. Roughly two-thirds of the 2026e one-off items are "justifiably" adjusted PPA amortizations. The multiples are about 20% below international peers. We consider the company’s valuation neutral. The dividend yield is approximately 7% according to our estimates, limiting the downside of the share price. However, in our view, a higher acceptable valuation would require greater visibility into revenue growth and, subsequently, profitability improvement.