74Software (STU:1XV) Full Year 2025 Earnings Call Highlights: Strong Financial Performance Amid …

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Thu, February 26, 2026 at 10:04 AM GMT+9 4 min read

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**Revenue Growth:** Axway organic growth at 4.6%, SBS at 3%.

**Unlevered Free Cash Flow:** EUR80 million, EUR2.75 per share.

**Operating Margin:** Increased by 160 basis points to 15.2%.

**Gross Profit Margin:** 67.3%.

**EPS Growth:** Up more than 40% compared to pro forma 2024.

**Net Debt Reduction:** Reduced by EUR57 million, 23% decrease.

**Leverage Ratio:** Reduced to 1.92 times.

**ARR Growth:** CAGR of 10% for both Axway and SBS.

**Product Revenue:** 81% of total revenue.

**Recurring Revenue:** 75% of total revenue.

**Service Revenue Decline:** SBS services down 12%, Axway flat.

**Net Promoter Score (NPS):** Axway at 55, SBS improved to 38.

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Release Date: February 25, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

74Software (STU:1XV) achieved strong financial results in 2025, meeting or exceeding all guidance metrics, including a significant unlevered free cash flow of EUR80 million.

The company has successfully implemented a scalable operating model, enhancing efficiency and accountability across its brands, Axway and SBS.

Axway brand reported double-digit ARR growth in its MFT product line and significant expansion in B2B and API management, indicating strong customer trust and adoption.

SBS brand achieved a notable increase in its Net Promoter Score, reflecting positive customer perception and successful transformation into a product-centric strategy.

74Software is strategically positioned to leverage AI opportunities, with investments in AI-driven and AI-augmented capabilities, enhancing its competitive edge in a regulated, mission-critical environment.

Negative Points

The company faces challenges with FX headwinds impacting total revenue growth, particularly due to US dollar and British pound fluctuations.

There is a continued decline in service revenues, particularly within the SBS brand, as the company transitions to a subscription-driven model.

Despite strong financial performance, the company anticipates slightly higher restructuring costs in 2026, which could impact cash flow.

The shift towards cloud solutions may present revenue recognition challenges, as cloud contracts often involve ramp-up periods that delay full revenue realization.

The company remains cautious in its margin guidance for 2026, reflecting potential uncertainties in inflation and market conditions, which could affect profitability.

Q & A Highlights

Q: Does the free cash flow guidance for the year include restructuring outflows, and how significant might these outflows be? A: The free cash flow guidance is unlevered, meaning it is before restructuring and interest costs. In 2025, restructuring costs were EUR12 million, and a slightly higher amount is expected for 2026. - Tobias Unger, CFO

Story Continues  

Q: What are the expected sources of revenue growth in the coming years, and how do you foresee the balance between volume growth, price increases, and new customer acquisitions? A: Revenue growth will be a mix of cross-sell and upsell, particularly on the Axway side, driven by volume and the adoption of Fusion. On the SBS side, growth will mainly come from cross-sell, with new logos contributing less significantly. - Eric Bierry, Deputy CEO

Q: With the increased sales growth guidance, does this imply a higher margin potential, and when should we expect the decline in services to stabilize? A: Services are expected to decline further in 2026, but the reduction should slow to around 4% to 6%. Product revenue growth will be at the upper end of the 3% to 5% range. Services are anticipated to stabilize and start growing again by the end of 2026. - Tobias Unger, CFO

Q: How has the AI revolution affected sales cycles and decision-making by clients? A: There hasn’t been a major shift in sales cycles. Some clients have accelerated their demand for AI capabilities, but overall, decision-making processes remain consistent. - Eric Bierry, Deputy CEO

Q: Can you discuss the pipeline and any metrics that indicate its health, particularly in light of AI developments? A: The pipeline remains strong, with 2.5 to 3 times coverage for expected bookings. The AI developments have increased demand for modernizing systems of record, improving the quality of the pipeline. - Patrick Donovan, CEO

Q: What pricing model will you use for AI products, and how do you plan to monetize these innovations? A: The strategy involves a subscription fee for accessing AI capabilities, with additional upsell opportunities for specific use cases. The focus is on providing platforms rather than monetizing individual use cases. - Eric Bierry, Deputy CEO

Q: How does the shift to cloud affect your revenue guidance, and is AI expected to drive more cloud adoption? A: Cloud adoption is factored into the revenue guidance, with a stable share of cloud bookings assumed. AI may drive cloud adoption, but there is also potential for on-premise solutions to gain traction due to data control concerns. - Tobias Unger, CFO

Q: How do you reconcile the increased top-line growth guidance with the potential for lower margins in 2026? A: The lower end of the margin guidance reflects a conservative approach in an uncertain environment. Factors like inflation and potential higher sales and marketing expenses are considered, but the overall strategy remains focused on disciplined execution. - Tobias Unger, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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