Siemens (Siemens EDA / ex-Mentor Graphics)
Diversified industrial-technology group monetizing hardware (automation, grid, rail, medtech), software (Xcelerator: EDA, PLM Teamcenter, NX, Simcenter, now Altair) and services; shifting toward recurring SaaS/ARR. Reportable segments: Digital Industries, Smart Infrastructure, Mobility, Siemens Healthineers (majority-owned, separately listed), plus Siemens Financial Services.
Earnings, margins, COGS & capex
Record FY2025: revenue EUR 78.9B (+4% nominal, +5% comparable), net income EUR 10.4B (+16%, third straight record), Profit Industrial Business EUR 11.8B (+3%), free cash flow EUR 10.8B (record). Basic EPS EUR 12.25; EPS pre-PPA EUR 12.95 (EUR 10.71 excluding the Innomotics divestment gain and Altair/Dotmatics PPA/one-offs). Proposed dividend raised to EUR 5.35/share (from EUR 5.20). Momentum into FY2026: Q2 orders +18% comparable to EUR 24.1B, book-to-bill 1.22, order backlog a record EUR 124B, revenue +6% comparable, FCF EUR 1.7B; a new up-to-EUR-6B buyback (up to 5 years) was announced. Digital Industries -- home of Siemens EDA -- declined in FY2025 on automation destocking/China weakness and a tough software base, then its software business drove digital-business growth of 19% in H1 FY2026.
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~62¢ is cost of goods and ~22¢ operating expense, leaving ~16¢ of operating profit (~13¢ net).
Revenue trend
Margins
stable-high
re-rating up on software mix
up
record
COGS structure
COGS split across hardware (automation gear, switchgear/grid equipment, rail rolling stock, imaging systems) and software/services delivery. Software (EDA, PLM, simulation) carries far higher gross margin than the electrical-equipment and rail hardware; the group's margin-uplift thesis rests on tilting mix toward Xcelerator software and ARR.
Capex
Group capex ~EUR 1.3-1.6B/yr (~2% of revenue). Growth spend is dominated by software M&A rather than physical capex -- Altair (~$10.6B equity value / ~$10B EV, closed March 2025) is the defining recent capital deployment, adding mechanical/EM simulation, HPC and data-science/AI.
Latest earnings
Strong quarter -- orders +18% comparable to EUR 24.1B, book-to-bill 1.22, record EUR 124B backlog, revenue +6% comparable, Profit Industrial Business EUR 3.0B (15.4% margin), FCF EUR 1.7B; new up-to-EUR-6B buyback announced
FY2026: group comparable revenue growth +6-8%; Digital Industries +5-10% comparable growth and 15-19% margin; Smart Infrastructure +6-9% comparable growth and 18-19% margin; EPS pre-PPA EUR 10.40-11.00 (underlying, ex the FY2025 one-offs)
- Q2 FY2026 orders
- EUR 24.1B (+18% comparable YoY; book-to-bill 1.22)
- Digital Industries software ARR
- EUR 4.5B (up from EUR 3.6B; cloud ARR share 24% to 45%)
- FY2025 dividend proposed
- EUR 5.35/share (up from EUR 5.20)
- FY2025 net income
- EUR 10.4B (record, +16%)
Growth drivers
- AI-driven semiconductor design boom lifting EDA demand (orders up notably in the US EDA software business)
- Data-center power + grid electrification supercycle driving Smart Infrastructure
- Industrial-software / digital-twin adoption and the SaaS transition: Digital Industries software ARR EUR 4.5B (up from EUR 3.6B), with cloud ARR share rising from 24% to 45%
- Altair integration extending the design-to-simulation-to-manufacturing portfolio
- Rail/Mobility electrification and reshoring/automation recovery off the FY2025 destocking trough
Bull & bear
An industrial-software compounder that owns a toll-booth EDA franchise and rides a data-center/grid electrification supercycle -- profitability re-rating, orders +18% and a record backlog into FY2026, plus a fresh buyback.
- Calibre is effectively a tax on the semiconductor industry: foundries mandate it for tape-out, so Siemens EDA earns regardless of whether NVIDIA, AMD, Apple or Intel wins the AI-chip race
- Digital Industries software ARR of EUR 4.5B (up from EUR 3.6B, cloud share 24% to 45%) is a genuine software compounder hidden inside an industrial P&L; Altair deepens the moat in simulation/HPC/AI
- Record FY2025 (EUR 10.4B net income, EUR 10.8B FCF) plus a raised EUR 5.35 dividend and a new up-to-EUR-6B buyback; Q2 FY2026 orders +18% comparable with a record EUR 124B backlog
- Data-center power demand and grid modernization give Smart Infrastructure -- guided to an 18-19% margin -- a durable secular tailwind
- H1 FY2026 digital-business revenue grew 19%, led by Digital Industries software, evidencing recovery from the FY2025 destocking trough
- Sum-of-parts: pure-play EDA peers (Synopsys, Cadence) trade at 40-60x earnings; a partial re-rating of Siemens' software toward those multiples is meaningful optionality
A slower-growth European conglomerate carrying a persistent holding-company discount, cyclical automation exposure, and a distant-third EDA position against consolidating, higher-growth pure-plays -- now near an all-time high.
- EDA is really a Calibre-anchored ~13% niche; away from sign-off, Synopsys (now with Ansys) and Cadence out-scale and out-invest Siemens EDA
- Conglomerate complexity and listed minority stakes keep a structural discount on the stock; the software value never gets fully credited
- Digital Industries revenue declined in FY2025; automation is cyclical with heavy China exposure and an uncertain recovery slope
- The ~$10.6B Altair deal adds integration and goodwill risk on top of digesting prior software acquisitions
- EUR strength blunts reported nominal growth and USD-denominated (SIEGY) returns
- With SIE.DE at an all-time high (~EUR 282) and a mid-single-digit organic grower, the stock already trades in the low-20s x FY2025 EPS pre-PPA -- and higher on the more conservative FY2026 guided EPS -- so the industrial-multiple margin of safety has thinned
- Broad European industrial cyclicality, energy costs and geopolitical/export-control risk overhang the whole group
What it is worth
Blended P/E on EPS pre-PPA plus sum-of-parts vs pure-play software peers
Automation/China drag persists, FX headwinds bite, EDA share is pressured outside Calibre, and the holding-company discount widens; stock drifts toward the low analyst estimate (~$139).
Mid-single-digit comparable revenue growth, ~15.9% Industrial margin, steady EPS compounding, a raised dividend and the new buyback; stock tracks toward the ~$169 average target.
Software re-rating + electrification supercycle drive the group toward the high end of guidance and compress the conglomerate discount; SIEGY toward/above the ~$186 high analyst estimate.
On FY2025 EPS pre-PPA of EUR 12.95 (basic EPS EUR 12.25), the ordinary shares (SIE.DE, at an all-time high ~EUR 282.55 on Jun 30 2026) trade around low-20s x trailing -- and higher (~mid-20s) on the more conservative FY2026 EPS-pre-PPA guidance of EUR 10.40-11.00, which strips the FY2025 one-offs. SIEGY ADR ~$159 vs an average analyst 12-mo target ~$169 (high ~$186, low ~$139). The bull case rests on sum-of-parts: pure-play EDA peers (Synopsys, Cadence) trade at 40-60x, so crediting Siemens' Xcelerator software closer to peer multiples implies upside; the bear case is that the conglomerate discount and cyclical automation keep it a mid-single-digit grower whose re-rating has already narrowed the margin of safety.
SWOT
Strengths
- Siemens EDA's Calibre is the foundry-certified DRC/LVS sign-off standard at TSMC, Samsung and Intel -- a near-mandatory step in chip tape-out that guarantees relevance regardless of which AI-chip designers win
- Breadth of the Xcelerator industrial-software stack (EDA + PLM Teamcenter + NX + Simcenter + Altair) creates cross-sell and design-to-manufacture lock-in
- Record profitability and cash generation — EUR 10.4B net income, EUR 10.8B FCF FY2025, funding a raised dividend (EUR 5.35) plus a new up-to-EUR-6B buyback
- Diversification across EDA, automation, grid, rail and medtech smooths any single cyclical downturn
- Deep installed base and switching costs in automation (SIMATIC/TIA) and PLM
Weaknesses
- Only ~#3 in EDA (~13% share, 2024) behind Synopsys (~31%, now + Ansys) and Cadence (~30%); scale gap outside Calibre
- Conglomerate/holding-company discount — complex structure with listed stakes (Siemens Healthineers, residual Siemens Energy) obscures the software value
- Digital Industries revenue declined in FY2025 on automation destocking and China industrial weakness -- cyclical drag on the software-adjacent segment
- Slower-growth industrial profile vs pure-play EDA/software comps despite the recent re-rating
- Large software M&A (Altair) carries goodwill and integration risk
Opportunities
- Ride the AI semiconductor design wave — every advanced node still needs Calibre sign-off and increasingly Siemens verification/DFT/emulation tools
- Data-center electrification and grid buildout as a multi-year Smart Infrastructure tailwind
- Accelerate the SaaS transition to grow high-margin recurring ARR beyond EUR 4.5B (cloud ARR share already 24% to 45%)
- Embed generative/industrial AI (with Microsoft, NVIDIA) across Xcelerator to differentiate vs Synopsys/Cadence
- Sum-of-parts re-rating if the software businesses are valued closer to pure-play multiples
Threats
- Synopsys+Ansys and a scaling Cadence pressing Siemens EDA outside its Calibre stronghold
- Semiconductor capex cyclicality and any downturn in chip-design R&D spend
- China industrial slowdown and geopolitical/export-control exposure in both EDA and automation
- EUR strength as an FX headwind to reported nominal growth and USD-translated (SIEGY) results
- European industrial malaise, energy costs and automation demand softness
Moats, dependencies & bottlenecks
Moats
TSMC/Samsung/Intel specify Calibre-clean tape-out; displacing it means re-qualifying an entire foundry flow -- a near-permanent relevance anchor for Siemens EDA.
NX, Simcenter) Deeply embedded in customer engineering workflows and data; multi-year rip-and-replace cost.
Factory-floor standardization and retraining costs entrench Digital Industries automation hardware+software.
Moderate-Strong Cross-domain integration (electronic + mechanical + simulation, now Altair) is hard for narrower rivals to match.
Rail signaling and medical-imaging approvals create long qualification cycles that deter entrants.
Grid, rail and industrial buyers favor a proven, long-lived vendor for multi-decade assets.
Dependencies
EDA and verification demand tracks chip-design spending; a downturn hits the software growth story.
Ecosystem/technical Calibre's value depends on staying the certified sign-off tool at leading-edge nodes.
Demand/geopolitical Automation (Digital Industries) is materially exposed to China capex and to export-control risk.
Technology/partnership SaaS delivery and industrial-AI differentiation lean on hyperscaler and NVIDIA collaboration.
EUR strength depresses reported nominal growth and USD-translated (SIEGY) value.
Realizing the long-term revenue and synergy case depends on clean integration.
Advantages
- Calibre sign-off franchise gives Siemens EDA structural, foundry-anchored relevance across the whole chip industry
- Only vendor pairing a leading EDA/verification stack with a full mechanical/simulation + PLM + automation + grid portfolio
- EUR 10.8B annual free cash flow funds M&A, dividends and buybacks through cycles
- Record profitability with margins re-rating upward as software mix grows
- Diversification across four large end-markets dampens single-segment cyclicality
Weaknesses
- Distant #3 in EDA vs Synopsys and Cadence outside the Calibre stronghold
- Persistent conglomerate/holding-company valuation discount
- Cyclical automation exposure and China concentration in Digital Industries
- Lower structural growth than pure-play EDA/software peers
- Integration and goodwill risk from the large Altair acquisition
Bottlenecks
- Pace of automation destocking recovery and Chinese industrial demand normalization
- Digesting and integrating Altair plus prior large software acquisitions
- SaaS-transition optics -- deferred-revenue drag can mask underlying software growth
- Conglomerate structure limiting the multiple the market assigns to the software assets
- FX translation headwinds from a strong euro
Top signals & trends
Top signals
Broad demand re-acceleration, led by Smart Infrastructure and Digital Industries.
Capital return on top of the raised EUR 5.35 dividend, signalling cash-flow confidence.
Evidence of a real recurring-software compounder, and an accelerating cloud mix, inside the industrial P&L.
Portfolio sharpened toward industrial software + AI, though integration risk remains.
Expands the EDA pie but intensifies competition outside Calibre.
Cyclical trough; the recovery slope is the key watch item.
Trends
More, more-complex chips = more EDA/verification/emulation seats; benefits Siemens EDA.
Structural tailwind for Smart Infrastructure, guided to an 18-19% margin.
Grows high-margin ARR (EUR 4.5B, cloud share rising); Altair + AI deepen the moat.
Weighed on Digital Industries in FY2025; recovery pace uncertain.
Supports automation and grid demand across regions.
Headwind to reported nominal growth and USD-translated SIEGY returns.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
Foundry that certifies Calibre for tape-out -- a technical/ecosystem dependency more than a supplier of goods.
Azure cloud + generative-AI copilot partner underpinning Xcelerator SaaS.
Omniverse/industrial-AI and accelerated-compute partner; also an EDA customer.
Chips and components feeding Siemens automation, grid and rail hardware.
NVIDIA / AMD / Qualcomm / Broadcom / Apple / Intel Leading chip designers that consume Siemens EDA (Calibre sign-off, verification, DFT, emulation).
Use Teamcenter/NX/Simcenter PLM and SIMATIC automation.
grid operators & data-center owners Buy Smart Infrastructure electrification, switchgear and grid software.
Mobility rolling stock, signaling and rail services customers.
#1 EDA (~31% share 2024; FY2024 rev ~$6.1B); acquired Ansys (~$35B), extending into simulation where it now also overlaps Siemens' Altair. The primary EDA rival.
#2 EDA (~30% share 2024; FY2024 rev ~$4.6B); scaling fast on AI-chip design and system analysis. Direct EDA rival.
PLM/3D simulation rival (CATIA, SIMULIA) competing with Teamcenter/NX/Simcenter in industrial software.
PLM/CAD/IoT (Windchill, Creo) competing in the industrial-software stack.
Direct rival in electrification, grid and building/data-center power (Smart Infrastructure).
Automation, motion and electrification competitor across Digital Industries and Smart Infrastructure.
Factory automation and industrial software rival, strong in North America.
Automation/process controls (and majority owner of AspenTech) competing in industrial software+automation.
Grid/power-electrification competitor riding the same data-center/grid tailwind as Smart Infrastructure.