Schneider Electric ((SBGSY)) has held its Q4 earnings call. Read on for the main highlights of the call.
Claim 55% Off TipRanks
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Discover top-performing stock ideas and upgrade to a portfolio of market leaders with Smart Investor Picks
Schneider Electric’s latest earnings call struck an upbeat tone, as management highlighted record revenue above €40 billion, strong Q4 acceleration, robust free cash flow and a record backlog that stretches well into 2027. While acknowledging pressure from tariffs, raw materials, FX and China deflation, executives stressed clear margin recovery plans and confident 2026 financial targets.
Record Revenue Milestone
Schneider Electric crossed the €40 billion annual revenue mark for the first time in 2025, posting €40.2 billion and 9% organic growth year over year. The performance underscores the company’s ability to capture structural demand in electrification, automation and digital solutions despite macro and cost headwinds.
Strong Q4 Finish
Momentum strengthened into year‑end, with Q4 revenue around €11 billion and organic growth in the 10.7–11% range. Systems revenue grew 19% and software and services 10% organically in the quarter, signaling broad‑based acceleration across both hardware and higher‑value digital offerings.
Backlog and Data Center Visibility
The order book now exceeds €25 billion, up about 18%, giving Schneider 18–24 months of visibility in data center projects alone. Management emphasized that this backlog underpins revenue visibility into 2026–2027, anchoring growth expectations in cloud, AI and other power‑hungry digital infrastructure.
Profitability and Margin Progress
Adjusted EBITA rose 12.3%, landing squarely within the company’s 10–15% growth ambition. Organically, the adjusted EBITDA margin expanded by 50 basis points in 2025, demonstrating that Schneider can still lift profitability even while absorbing cost inflation and mix shifts.
Cash Flow and Conversion Strength
Free cash flow reached €4.6 billion, marking the third straight year above €4 billion and underscoring the business’s cash‑generating power. Cash conversion ran slightly above 110% on an underlying basis, reinforcing the balance sheet flexibility to fund restructuring, investment and shareholder returns.
Digital and Recurring Revenue Momentum
Digital “flywheel” revenue climbed to €25 billion, now 62% of the group, and grew 15% year on year, highlighting the shift toward more software‑rich and connected solutions. Services and software together account for nearly 20% of the portfolio, with AVEVA’s annual recurring revenue up 12%, boosting the base of predictable income.
Energy Management and Industrial Automation Mix
Energy Management delivered slightly above 10% growth, its fifth straight year of double‑digit expansion, driven by electrification and efficiency demand. Industrial Automation returned to growth with 3% for the year and 7% in the second half, signaling early recovery in automation markets after prior softness.
Sustainability and People Metrics
Schneider reported cumulative “saved and avoided” CO2 emissions of 862 million tonnes through its programs, reinforcing its green positioning as a commercial advantage. The company also extended access to clean energy to 61 million people and maintained strong employee share ownership, with 63% of staff participating worldwide.
2026 Targets and Strategic Priorities
Management set 2026 ambitions for 7–10% organic revenue growth and 10–15% adjusted EBITA growth, alongside 50–80 basis points of organic margin expansion to roughly 19.1–19.4%. Strategic focus will center on AI‑driven offerings, regionalization of supply, and structured gross‑margin programs to lock in operating leverage.
Gross Margin Pressure
Group gross margin came in at 42.1%, about 40 basis points lower organically than the prior year, underlining near‑term profitability challenges. Executives cited tariffs, higher copper and silver costs and a shift toward systems over products as key drags, but pointed to pricing and mix actions to offset these over time.
FX Headwinds
Currency movements, particularly a weaker U.S. dollar, weighed on 2025 results and remain a concern into 2026. At current rates, Schneider expects an €850–950 million negative impact on 2026 revenue and about a 10 basis‑point drag on adjusted EBITDA margin from FX translation alone.
Net Income and Non‑Operational Charges
Reported net income slipped about 2%, even as adjusted net income rose 4% reported and 14% on an organic basis, highlighting underlying strength. Non‑operational items, including around €100 million in second‑half impairments and higher financing and PPA costs, depressed the bottom line on a reported basis.
Restructuring and Simplification Costs
Restructuring and simplification expenses climbed to nearly €300 million in 2025 as Schneider accelerates its simplification agenda. Management framed these costs as front‑loaded investments intended to cut SFC‑to‑sales by 1.5–2 percentage points between 2026 and 2030, unlocking future margin upside.
Industrial Automation Margin Lag
Industrial Automation’s adjusted EBITDA margin was about 14.2%, improving only around 10 basis points organically and lagging group levels. Management attributed the slower progress to first‑half operating deleverage, mix effects and the ongoing subscription transition at AVEVA, which temporarily weighs on margins.
China Deflation and Market Headwinds
China remained a drag with low single‑digit growth in 2025, as persistent deflation and weak building and construction markets pressured pricing. While Schneider sees tentative signs that pricing is stabilizing, China’s conditions were a notable headwind to group price realization and overall margins.
Price‑Cost Timing and H1 2026 Risks
Management expects to be net price positive in 2026 and to restore gross margin growth over the year, but warned of a soft first half. Because pricing actions, tariffs and raw material dynamics do not align perfectly in time, gross margin could be flat to slightly negative in H1 before improving later in 2026.
Software Transition and Disruption Risk
The shift of AVEVA and OSI to subscription and more AI‑centric software models introduces near‑term complexity in margin and revenue recognition. New token and flexible pricing structures may cause short‑term disruption, particularly for some user‑interface‑based software layers, even as they aim to deepen customer stickiness longer term.
Forward‑Looking Guidance
For 2026, Schneider is guiding to 7–10% organic revenue growth and 10–15% adjusted EBITA growth, with 50–80 basis points of organic margin uplift to about 19.1–19.4%. Management expects gross margin to turn positive over the year, supported by the record backlog and strong data‑center visibility, though FX will be a material headwind and cash conversion is targeted around 100%.
Schneider Electric’s earnings call painted a picture of a structurally growing, increasingly digital business navigating cyclical and cost challenges with disciplined execution. For investors, the combination of record revenue, strong cash flow, rich backlog and explicit 2026 targets offers a constructive backdrop, even as margins face a choppy path in the near term.