How did Siemens AG perform in Q3 FY25 across key segments like Digital Industries, Mobility, and Smart Infrastructure?
Siemens AG (ETR: SIE), the German industrial giant, reported a resilient set of results for the third quarter of fiscal 2025, buoyed by surging Mobility orders and continued strength in Smart Infrastructure, even as Digital Industries faced a sharp decline due to lower software sales. For the three months ended June 30, 2025, the company posted €24.7 billion in orders—up 28% on a comparable basis—and €19.4 billion in revenue, reflecting a modest 5% comparable growth.
The headline numbers were backed by an impressive free cash flow of €2.9 billion, a 38% jump from the same quarter last year. Siemens also reaffirmed its full-year guidance, projecting comparable revenue growth of 3% to 7% and EPS before purchase price allocation accounting (EPS pre PPA) in the range of €10.40 to €11.00.
CEO Roland Busch attributed the performance to “robust results despite the volatile global market,” highlighting that Siemens continues to capitalize on trends in digitalization and sustainability. The recently closed acquisition of Dotmatics is expected to open new doors in the life sciences space, complementing Siemens’ industrial AI stack.
What led to the record surge in free cash flow and how does it support Siemens’ full-year goals?
Siemens’ Q3 FY25 free cash flow from continuing and discontinued operations stood at €2.9 billion, significantly higher than the €2.1 billion posted in the prior-year quarter. The surge was driven by improvements across all industrial businesses, lower tax outflows (€0.8 billion vs €1.2 billion in Q3 FY24), and disciplined working capital management.
CFO Ralf P. Thomas emphasized that Siemens is targeting a double-digit free cash flow return for the full fiscal year, calling the Q3 result “excellent” and aligned with the company’s financial ambition. The cash conversion ratio improved to 1.30, reflecting strong operational leverage. Siemens also raised €11 billion in bond issuance during the quarter, bolstering its liquidity profile, although the proceeds are excluded from free cash flow metrics.
Why did Digital Industries underperform in the third quarter despite automation recovery?
Siemens’ Digital Industries segment reported a 10% drop in revenue to €4.4 billion and a 43% decline in profit to €642 million in Q3 FY25, largely due to a steep fall in the software business. Software-related revenue slumped 25% on an actual basis—and 30% on a comparable basis—following an exceptional Q3 FY24 which had included several large license contracts.
While the automation subsegment showed signs of recovery, especially in China and the United States, it wasn’t sufficient to offset the software dip. Profitability also suffered due to €70 million in severance-related charges and a €30 million impact from the Altair and Dotmatics acquisitions. The segment’s profit margin fell to 14.5% (16.1% excluding severance), compared to 22.9% in the prior-year quarter.
What drove the sharp order increase in the Mobility segment and how sustainable is the momentum?
Mobility was the standout performer this quarter, posting a staggering 200%+ jump in orders to €7.9 billion, primarily driven by two mega-deals: a €3.5 billion turnkey rail system order in Egypt and a €1.7 billion high-speed train and service contract in the U.S. Revenue rose 18% to €3.1 billion, with solid contributions from both rolling stock and services businesses.
Profit for the segment increased by 26% to €286 million, with margins expanding to 9.3%. Analysts suggest that the robust order pipeline indicates continued momentum in public transport infrastructure investments, especially in emerging markets and the U.S., where federal funding for high-speed rail is gaining traction.
How did Smart Infrastructure manage to maintain profit growth despite a modest decline in new orders?
Smart Infrastructure delivered a strong performance, with revenue rising 9% on a comparable basis to €5.7 billion, even as orders dipped 1% to €5.7 billion. Profit climbed 16% to €1.07 billion, and profit margins improved to 18.8%—driven by strong execution in the electrification business and improved productivity.
The segment benefitted from sustained demand in energy and data center verticals, and despite facing currency translation headwinds, it posted growth across all reporting regions. Notably, the service business within this segment grew 8%, continuing its upward trajectory as a recurring revenue contributor.
What are the key financial highlights and capital trends that investors should know?
Net income rose 5% year-over-year to €2.24 billion in Q3 FY25, with basic EPS at €2.61 and EPS pre PPA at €2.78. The company’s return on capital employed (ROCE) declined to 14.6%, impacted by the increased capital base following the Altair acquisition. Meanwhile, Siemens ended the quarter with €14.6 billion in cash and cash equivalents, up from €9.2 billion at the end of FY24.
Total equity increased to €66 billion, while industrial net debt rose to €13.7 billion, resulting in a net debt/EBITDA ratio of 1.0x—still comfortably within investment-grade territory. Capital expenditures remained stable at €554 million for the quarter, while R&D expenses rose to €1.65 billion, indicating continued investment in innovation.
What is the outlook for FY25 and how are recent acquisitions expected to influence performance?
Siemens maintained its full-year guidance, projecting comparable group revenue growth between 3% and 7%, and a book-to-bill ratio above 1. Segment-wise, Smart Infrastructure is expected to grow revenue by 6% to 9% with profit margins between 17% and 18%, while Mobility is guided to deliver 8% to 10% revenue growth and margins between 8% and 10%.
Digital Industries, the current laggard, is forecasted to see revenue changes between -6% and +1%, with margin expectations trimmed to 15%–19%. The outlook excludes the impacts from Altair, Dotmatics, and the Innomotics divestment, though these contributed €2.44 to EPS pre PPA during the first nine months of the year.
Analysts remain watchful of continued volatility in Siemens’ software segment, particularly within Digital Industries, where licensing revenue has shown sensitivity to cyclical enterprise spending and delayed deal closures. The segment’s sharp decline in Q3 FY25, following an exceptional prior-year comparison base, has prompted concerns around the pacing of large software contracts and customer transitions toward subscription-based models. While the automation business has begun to recover, especially in China and the United States, the broader software unit may face additional headwinds if macro uncertainty or procurement delays persist into Q4.
At the same time, regulatory approvals related to Siemens’ U.S. airport logistics business divestment—which is still pending—remain on the radar for institutional investors. The sale of this non-core business in Europe, Asia, and the Middle East was successfully completed in Q3, contributing a €154 million gain, but the U.S. phase of the transaction, slated for completion in 2026, remains contingent on compliance reviews. Delays here could temporarily affect Siemens’ ability to unlock further balance sheet efficiencies in fiscal 2026.
Despite these near-term risks, institutional sentiment toward Siemens AG remains broadly constructive. Investors have responded positively to the group’s robust €2.9 billion quarterly free cash flow, improving cash conversion rate, and ongoing discipline in capital deployment. The company’s consistent delivery on its capital efficiency goals, evidenced by a healthy 1.0x net debt-to-EBITDA ratio and stable ROCE, reinforces its position as a reliable industrial compounder.
Moreover, Siemens’ strategic exposure to long-cycle secular growth drivers—including industrial artificial intelligence, energy-efficient infrastructure, rail electrification, and digital twin technologies—is increasingly seen as a structural tailwind by long-term fund managers. The addition of Dotmatics is expected to enhance Siemens’ portfolio depth in the life sciences AI market, while Smart Infrastructure’s steady outperformance continues to validate its role in supporting global energy transition mandates.
With the macroeconomic narrative now shifting toward capital expenditure reallocation, Siemens’ diversified order book, €117 billion backlog, and high book-to-bill ratio are providing institutional investors with confidence in its revenue visibility. For many, the industrial conglomerate remains a top conviction pick in the European industrials sector, especially among ESG-focused funds and those seeking defensible growth across infrastructure and automation cycles.
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