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Hexagon AB (HXGBY)
OTHER OTC:HXGBY
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Hexagon AB
(OTC:HXGBY)
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Rating:60Neutral
Price Target:
$10.50
▼(-10.87% Downside)
Action:ReiteratedDate:02/01/26
The score is primarily held back by weakening recent financial trajectory and a technically soft setup, while a high P/E limits valuation support. Offsetting these, the latest earnings call highlighted strong gross margins and cash conversion plus actionable cost and portfolio initiatives, but near-term FX and destocking headwinds temper the outlook.
Positive Factors
Gross margin strength
Hexagon's 67.5% gross margin indicates durable pricing power and a favorable software/hardware mix. Persistently high gross margins create a structural buffer to fund R&D, M&A and restructuring while preserving operating cash flow through cyclical slowdowns.
Cash generation and conversion
Consistently strong operating cash flow and exceptional cash conversion demonstrate high earnings quality and working-capital discipline. Reliable free cash flow enhances financial flexibility to fund the Octave separation, dividends and cost programs without heavy external financing.
Recurring revenue / SaaS momentum
A shift toward recurring SaaS (Octave ~70% recurring, record bookings) increases revenue visibility and customer stickiness. Structural recurring revenue supports long-term margin stability and predictable cash flows as Octave scales post-separation.
Negative Factors
Sharp 2025 revenue decline
A near-30% revenue contraction materially erodes operating leverage and scale advantages, pressuring net margin and ROE. Protracted top-line weakness constrains reinvestment capacity, makes hitting restructuring savings harder, and risks slower multi-quarter recovery.
FX & channel destocking
Significant currency headwinds and Geosystems channel destocking reduce near-term revenue and compress margins. These external shocks can persist across quarters, degrading forecast visibility and delaying the restoration of normal demand and margin trends in key regions like China.
Profitability pressure from Octave & R&D timing
Investments for Octave's public-readiness and a narrowing R&D capitalization-amortization gap create structural near-term margin headwinds. Recovery depends on successful new-product ramps (12–15 month timelines) and Octave achieving scale after separation.
Hexagon AB (HXGBY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$27.72B
Dividend Yield1.34%
Average Volume (3M)9.16K
Price to Earnings (P/E)43.4
Beta (1Y)0.90
Revenue Growth2.98%
EPS Growth-33.47%
CountryUS
Employees25,091
SectorTechnology
Sector Strength88
IndustryHardware, Equipment & Parts
Share Statistics
EPS (TTM)0.14
Shares Outstanding2,595,227,800
10 Day Avg. Volume0
30 Day Avg. Volume9,157
Financial Highlights & Ratios
PEG Ratio-1.10
Price to Book (P/B)2.62
Price to Sales (P/S)4.94
P/FCF Ratio26.24
Enterprise Value/Market Cap0.94
Enterprise Value/Revenue4.79
Enterprise Value/Gross Profit7.22
Enterprise Value/Ebitda15.01
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)0.51
Revenue Forecast (FY)$6.50B
Hexagon AB Business Overview & Revenue Model
Company DescriptionHexagon AB is a global leader in digital reality solutions, combining sensor, software, and autonomous technologies. The company operates primarily in the fields of geospatial and industrial manufacturing, offering products and services that enhance productivity and quality. Its core offerings include 3D laser scanning, measurement technologies, and software solutions designed for industries such as construction, manufacturing, automotive, and aerospace.
How the Company Makes MoneyHexagon makes money primarily by selling software, hardware/sensors, and related services that help customers capture and use measurement and location data across the lifecycle of assets and products.
1) Software revenue (licenses and subscriptions): A major part of Hexagon’s business is software used for design/engineering, geospatial/land and infrastructure workflows, and industrial data/quality and production-related applications. Revenue is generated through software licensing and, where offered, recurring subscription/maintenance and support arrangements. These recurring elements typically include updates, technical support, and ongoing access to software capabilities.
2) Hardware and sensor systems: Hexagon sells measurement and sensing equipment used in metrology and positioning—such as instruments and systems that capture high-precision dimensional data in manufacturing and other industrial settings, and positioning-related devices used for surveying, construction, and other field operations. Revenue is recognized from product sales, often complemented by associated installation and configuration work.
3) Services and solutions delivery: Hexagon also earns revenue from professional services tied to its products, including implementation, integration, training, consulting, and support services. These services help customers deploy Hexagon solutions, connect them to existing systems, and tailor workflows to specific operational needs.
4) Solution bundling and enterprise deployments: Many customer engagements involve bundled offerings (software + hardware + services) to deliver end-to-end workflows—for example, capturing real-world data with sensors, processing it in software, and using analytics/visualization to drive operational decisions. This approach can increase deal sizes and attach rates for maintenance/support and services.
5) Partnerships and ecosystem effects: null
Hexagon AB Earnings Call Summary
Earnings Call Date:Jan 30, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 23, 2026
Earnings Call Sentiment Positive
The call conveyed a predominantly constructive message: Hexagon delivered organic growth (3%), record gross margin (67.5%), exceptional cash conversion (121%), and a standout performance in Autonomous Solutions (23% organic growth). Operational progress includes strategic acquisitions, a clear restructuring program targeting EUR 110m savings, and continued SaaS momentum and market recognition for Octave with a planned spin-off in H1 2026. Offsetting factors are meaningful near-term headwinds — notably FX (-150 bps on EBIT margin), a reported earnings decline, China channel destocking (EUR 8–10m in Q4 and Q1) and a temporary margin drag from R&D capitalization/amortization timing and Octave investments. Management presented actionable mitigants (cost program, pricing, product ramp-ups), and the positives (growth, margins, cash generation, strong order intake) outweigh the near-term negatives.Q4-2025 Updates
Positive Updates
Return to Organic Growth
Group organic growth of 3% in Q4 2025 (reported revenue EUR 1.4bn; reported -1% due to FX). Recurring revenues grew 3% and new products contributed ~2% to growth.
Record Gross Margin
Record gross margin of 67.5% in the quarter, driven by favorable product mix and pricing discipline; rolling 12-month gross margin in line with prior year.
Outstanding Cash Conversion
Very strong operating cash flow before tax and interest of EUR 509m and cash conversion of 121% for the quarter, helped by a working capital release of EUR 121m and reduced capitalized R&D.
Autonomous Solutions Surge
Autonomous Solutions delivered EUR 196.4m revenue, up 23% organic year-on-year, with EBIT of EUR 67.7m and an EBIT margin of 34.5%, driven by aerospace/defense and mining strength.
Regional Strength in Americas
Americas grew strongly at 11% organic, with positive contribution across business areas and particular strength in construction (Americas), aerospace & defense, and mining.
Strategic M&A and Portfolio Actions
Announced acquisitions (Inertial Sense for Autonomous Solutions and IconPro for metrology services) and progress on the sale of Design & Engineering to Cadence (expected closing in Q1).
Octave SaaS Momentum and Market Recognition
Octave delivered another quarter of double-digit SaaS growth, recorded new bookings (record quarter), 2% organic growth overall, recurring revenue ~70% of total, and leadership recognition from Gartner and IDC.
Restructuring Progress and Cost Savings
Restructuring program launched to target EUR 110m annual run-rate savings by end-2026 (EUR 74m Hexagon core, EUR 36m Octave). Q4 generated EUR 11m in savings with an annualized run rate of EUR 65m.
Strong Order Intake in Manufacturing Intelligence
Manufacturing Intelligence reported strong order intake growth of 7% year-on-year and exited the quarter with a robust order book for 2026 (revenues EUR 491m, 1% organic growth).
Corporate Actions and Leadership
Board to propose dividend EUR 0.14 per share; appointed new CFO for Hexagon core (Enrique Patrickson) and continuing progress toward Octave separation (targeted H1 2026 / Q2 for spin-off filings and investor day planned).
Negative Updates
Significant Currency Headwinds
Material FX drag reduced EBIT margin by ~150 basis points in Q4 and drove reported sales down (currency -6% on sales). Management expects FX to be a significant headwind in Q1 at current rates.
Reported Operating Earnings Decline
Operating earnings decreased 7% to EUR 420m in Q4 2025; adjusted EPS declined ~5% to EUR 0.118. EBIT1 (including PPA amortization of EUR 27m) diluted margin to 27.5%.
China Weakness and Geosystems Destocking
China declined 5% overall. Geosystems reported EUR 363m revenue (-1% organic); management proactively destocked channels (EUR 10m impact in Q4, EUR 8m of which in China). Destocking will persist in Q1 (EUR 8–10m) but is expected to be completed thereafter.
Octave Profitability Pressure from Investments
Octave EBIT margin decreased to 32% from 35% year-on-year due to higher mix of perpetual revenue in prior year, FX headwinds and deliberate investments in product development, go-to-market and public-company readiness.
R&D Capitalization-Amortization Gap Headwind
Narrowing gap between R&D capitalization and amortization (as recently launched products begin amortizing) creates a near-term margin headwind until new products ramp and contribute materially (management cites a 12–15 month ramp for major products).
Sector-Specific Weaknesses
Automotive remains weak in key EMEA markets and turned negative in China due to overcapacity. Agriculture sector remains muted globally post-COVID. Electronics strong in China but weaker elsewhere.
One-off Tax and Tariff Impacts
Quarterly tax rate rose to 26.8% due to one-off legal entity reorganizations (adjusted rate 18%). Tariffs created a headwind of roughly EUR 5m in the quarter.
Seasonal and Near-term Headwinds for Q1 2026
Management flagged normal seasonality (merit increases from Jan 1) and FX exposure as expected headwinds for Q1 2026; restructuring benefits will ramp throughout 2026 but full savings realized by end-2026.
Company Guidance
Management guided that Q1 2026 will see normal seasonality and a material FX headwind similar to Q4 (which reduced EBIT margin by ~150 bps), plus Geosystems channel destocking of ~EUR8–10m expected to persist in Q1; they reiterated the restructuring program targeting EUR110m annualized savings by end‑2026 (EUR74m in Hexagon core, EUR36m in Octave), noting EUR11m of savings realized in Q4 and a EUR65m run‑rate already in place. The Octave separation is on track for H1 2026 (targeted Q2; Form 10 filing in February; Octave Investor Day March 26), the Board will propose a dividend of EUR0.14/share, and management expects new‑product ramps (new products contributed ~2% in Q4; management cited ~3–4% contribution on a rolling basis) and strong gross margins (Q4 gross margin 67.5%) to help offset near‑term margin pressure from the narrowing R&D capitalization/amortization gap. Cash guidance emphasized continued strong liquidity and working‑capital performance: Q4 operating cash flow before tax and interest was EUR509m, operating cash flow EUR352m, net working‑capital release EUR121m (rolling 12‑month NWC/Sales 3.2%), with a target full‑year cash conversion in the ~80–90% range despite the Q4 outturn of 121%.Hexagon AB Financial Statement Overview
Summary
Strong underlying margin structure and consistently positive free cash flow support a solid base, but the latest period shows meaningful deterioration (sharp 2025 revenue decline, lower net margin and ROE, and weaker free cash flow momentum). Leverage remains manageable, yet the recent downshift is a key risk.Income Statement
Profitability remains solid for the industry, with consistently strong gross margins (~63%–67%) and healthy operating margins across the period. However, growth has weakened materially: revenue was roughly flat in 2024 and declined sharply in 2025 (-29.6%), and 2025 also saw a notable step-down in operating profit and net margin (net margin fell to ~11% vs. ~19% in 2024). Overall, the business shows good underlying margin structure but a weakened recent trajectory.62
Positive
Balance Sheet
Leverage looks manageable with debt-to-equity generally in the ~0.34–0.45 range, suggesting the company is not overly debt-funded. That said, equity declined in 2025 (vs. 2024) while debt increased, and returns on equity have come down (to ~6.0% in 2025 from ~9%–10% in prior years), indicating reduced efficiency in generating profits from shareholder capital. Balance sheet risk appears moderate, but recent deterioration is a watch item.70
Positive
Cash Flow
Cash generation is solid, with operating cash flow consistently strong and free cash flow positive each year. Free cash flow relative to net income is reasonable (~0.54–0.70 historically; ~0.63 in 2025), supporting earnings quality. The main weakness is volatility: free cash flow growth fell sharply in 2025 and has been uneven across the period, and cash flow as a share of sales is not exceptionally high, implying less flexibility if operating conditions stay soft.66
Positive
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 5.42B | 5.40B | 5.44B | 5.16B | 4.34B |
| Gross Profit | 3.60B | 3.61B | 3.54B | 3.36B | 2.80B |
| EBITDA | 1.73B | 2.01B | 1.78B | 1.72B | 1.40B |
| Net Income | 617.40M | 1.02B | 858.90M | 1.01B | 801.60M |
Balance Sheet | |||||
| Total Assets | 17.11B | 17.85B | 16.88B | 16.48B | 14.10B |
| Cash, Cash Equivalents and Short-Term Investments | 758.20M | 663.80M | 547.10M | 486.30M | 472.10M |
| Total Debt | 4.11B | 3.83B | 4.08B | 3.87B | 2.94B |
| Total Liabilities | 6.85B | 6.65B | 6.84B | 6.61B | 5.33B |
| Stockholders Equity | 10.22B | 11.16B | 10.01B | 9.83B | 8.73B |
Cash Flow | |||||
| Free Cash Flow | 1.02B | 955.90M | 743.80M | 763.30M | 898.70M |
| Operating Cash Flow | 1.62B | 1.59B | 1.37B | 1.33B | 1.32B |
| Investing Cash Flow | -1.26B | -710.10M | -1.03B | -1.80B | -1.17B |
| Financing Cash Flow | -177.40M | -764.10M | -249.30M | 493.30M | -86.50M |
Hexagon AB Technical Analysis
Negative
11.78
Price Trends
11.07
Negative
11.46
Negative
11.28
Negative
Market Momentum
-0.14
Positive
37.10
Neutral
38.21
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HXGBY, the sentiment is Negative. The current price of 11.78 is above the 20-day moving average (MA) of 10.81, above the 50-day MA of 11.07, and above the 200-day MA of 11.28, indicating a bearish trend. The MACD of -0.14 indicates Positive momentum. The RSI at 37.10 is Neutral, neither overbought nor oversold. The STOCH value of 38.21 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HXGBY.
Hexagon AB Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $29.41B | 27.35 | 8.65% | ― | 7.41% | -12.85% | |
73 Outperform | $49.77B | 33.10 | 16.50% | ― | 7.95% | 39.54% | |
69 Neutral | $51.66B | 48.81 | 3.58% | ― | 20.80% | ― | |
63 Neutral | $15.60B | 43.86 | 7.46% | ― | -0.86% | -75.37% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
60 Neutral | $27.72B | 43.44 | 5.99% | 1.34% | 2.98% | -33.47% | |
59 Neutral | $17.10B | 30.16 | 6.90% | 0.43% | -8.96% | -30.29% |
* Technology Sector Average
HXGBY
Hexagon AB
10.07
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-8.95%
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Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.