Tietoevry Q1’25 earnings preview: Weak start to the year expected

Translation: Original published in Finnish on 4/25/2025 at 6:50 am EEST.

Tietoevry will publish its Q1 report on Tuesday at 9:00 am EEST. We updated our forecasts in March with the sale of Tech Services and have now revised them with further revisions and the absence of Tech Services from the Q1 figures. We expect Q1 revenue to be lower for the new Tietoevry structure. In addition, we expect the result to be at the level of the comparison period due to several efficiency measures. The company will issue new guidance in connection with the Q1 report, taking into account the new structure. For 2025, we forecast a slight decline in revenue and an increase in profitability, supported by efficiency measures. We lower our target price to EUR 20.0 (was 21.0) reflecting estimate revisions. At the same time, we reiterate the Accumulate recommendation.

We expect a drop in revenue in Q1

We expect Tietoevry's revenue to have declined by 5% to 483 MEUR, weighed down by the continued weakness in the IT market. The weakness in demand spread in Q3 and is affecting all businesses in one way or another. Tietoevry completed the sale of Tech Services in March. In addition to revenue, we are monitoring market comments and the development of the order book.

We expect a slight increase in profitability, driven by efficiency measures

We expect Tietoevry's adjusted EBIT-% to have increased marginally to 12.0% in Q1 (Q1'24: 11.6%). Profitability was supported by efficiency measures in all businesses. On the other hand, profitability is constrained by pressure on billing rates due to declining revenue and pricing pressure on customer prices. In absolute terms, we expect adjusted EBITA to have been at the level of the comparison period at 56 MEUR (Q1'24: 57 MEUR). We have adjusted EBIT by a total of 21 MEUR for costs related to the Tech Services divestment, PPA depreciation and efficiency programs. We do not expect any major changes in the other income lines. We expect Q1 earnings per share to amount to EUR 0.15, adjusted for one-off items EUR 0.30 per share.

Tietoevry publishes new guidance with Q1 report

We have now moved Tech Services to discontinued operations for Q1 as well (was from Q2 onwards). This lowered our estimates for the current year. In addition, the result from continuing operations is burdened by certain costs of Tietoevry Tech Services that the company could not allocate to discontinued operations. The company estimates the impact of these costs on the 12.0% adjusted EBITA in 2024 was approximately 1.6 pp. The company has also recently published 2024 figures adjusted for Tech Services, and we have now updated the 2024 figures to reflect this.  We expect Tietoevry's revenue to fall by 1% to 1,854 MEUR (excluding Tech Services). In addition, we expect the adjusted EBITA-% to increase to 12.9% in 2025, driven by efficiency measures. Tietoevry will issue an updated guidance for the continuing operations in connection with its Q1 report.

Tietoevry is more credible as a growth company after divestiture

On our estimates, the adjusted P/E multiples for 2025-2026 are 12-10x and the EV/EBIT multiples are 11-10x. The multiples are ~30% below international peers. One-time costs will decline significantly in the future, making them more comparable to peers. In our view, the absolute valuation of the share is attractive and the relative valuation is even very attractive. Given our lowered dividend estimates for the next few years, the dividend yield of 8% in itself provides support for owning the share.