RWS Holdings eyes stronger H2 surge as AI and APAC growth offset first-half profit hit

How Did RWS Holdings plc Perform in H1 FY25?

RWS Holdings plc, a global leader in technology-enabled language, content, and intellectual property services, issued its half-year trading update for the six months ending 31 March 2025. The Group delivered 1.3% organic constant currency (OCC) revenue growth, signaling a positive turnaround from the 2% decline reported in the same period last year. Despite this underlying growth momentum, reported revenue stood at approximately £344 million, reflecting a 1.8% decline versus the prior year due to currency fluctuations and other transitional challenges.

The company’s half-year performance highlights the consolidation of the return to growth observed in the second half of fiscal 2024. Notably, three out of RWS Holdings’ four divisions posted OCC growth, with its Language & Content Technology (L&CT) segment leading the charge. Continued expansion in AI-powered products, particularly through TrainAI and Language Weaver, underscored the Group’s strategic pivot toward high-growth areas.

Client retention remained strong across RWS Holdings’ diversified sector base, which includes automotive, e-commerce, financial services, legal, media, and technology industries. New client wins were secured across all operating divisions, further strengthening the Group’s market position. High levels of customer satisfaction were also reflected in the company’s highest-ever Net Promoter Score (NPS) of +51 over the trailing twelve months.

However, profitability was impacted by a mix of strategic transitions and external factors. Adjusted profit before tax (PBT) is expected to be approximately £17 million, compared to £46 million in the first half of fiscal 2024. This decrease was largely attributed to non-trading items such as foreign exchange losses, increased amortization following recent investments, the sale of the PatBase database, and a strategic shift toward expensing more technology investments during the year.

What Drove Divisional Performance at RWS Holdings?

The Language Services division delivered organic growth, supported strongly by performance in the Asia-Pacific (APAC) region and robust execution within TrainAI, the Group’s AI-powered data services platform. Major wins with west coast technology clients secured in FY24 continued to contribute materially, alongside new TrainAI contract awards from additional global technology players early in FY25.

Nevertheless, certain operational challenges emerged within Language Services. Two large client accounts faced disruptions related to transitions in delivery models and content type changes. Management responded by implementing workflow automation enhancements, successfully stabilizing gross margins for one account by March 2025, with corrective measures for the second client scheduled for rollout in the third quarter.

Language & Content Technology (L&CT) achieved strong growth, led by outstanding performances from Language Weaver and Propylon. Momentum from the content technology segment’s second-half rebound in FY24 continued seamlessly into the first half of FY25. Furthermore, L&CT advanced its strategic objective of increasing the share of recurring revenue through a higher proportion of SaaS licenses.

The Intellectual Property (IP) Services division also reported positive organic growth, buoyed by a strong performance in renewals and a particularly robust second quarter. Growth within the Worldfile segment and favorable developments in APAC added to the division’s resilience.

By contrast, Regulated Industries faced setbacks, with revenue declining on an organic basis. Project delays and a reshuffle in the sales and management team disrupted performance. RWS Holdings is actively refreshing its go-to-market strategy for this division, aiming to rebuild momentum through the remainder of the fiscal year.

What Challenges Did RWS Holdings Encounter in HY25?

Despite multiple bright spots, RWS Holdings faced several headwinds that affected first-half profitability. Foreign exchange volatility impacted reported earnings, while increased amortization costs tied to technology investments weighed further on margins. Moreover, the decision to expense a greater proportion of technology development costs in FY25 added £8 million to overheads, reflecting a strategic move to align more closely with best practices for tech-led enterprises.

Another critical factor was the evolving client mix, which resulted in a 300 basis point reduction in gross margin for the full fiscal year. Transitioning clients onto new automated delivery platforms brought short-term margin pressures, even as these changes are expected to enable higher efficiency and scalability in the long term.

Cash flow, however, remained robust. After paying a £37 million final dividend for FY24, RWS Holdings maintained a modest net debt position of around £27 million as of 31 March 2025, providing a solid foundation to fund ongoing transformation initiatives.

What Is the Full-Year Outlook for RWS Holdings in FY25?

Looking ahead, RWS Holdings expects to achieve modest single-digit organic constant currency growth for the full fiscal year, consistent with earlier guidance. Management anticipates an acceleration of organic growth through the second half, driven by improved operational execution, strengthened customer relationships, and growing traction for AI-led solutions.

The Group projects adjusted PBT for FY25 to be between £60 million and £70 million, assuming an H2 average GBP/USD exchange rate of 1.33. The anticipated second-half margin recovery will partly mitigate the first-half pressures, aided by previously announced cost reduction programs and a strategic investment in automation.

CEO Ben Faes emphasized that RWS Holdings’ transition toward an AI-powered, SaaS-oriented model is critical for capturing future growth opportunities. He noted that despite temporary profitability impacts during the transition, the Group’s long-term profitability would benefit from improved efficiency, greater agility, and a refreshed delivery model better aligned with evolving client demands.

What Does Market Sentiment and Stock Performance Say About RWS Holdings?

As of 25 April 2025, RWS Holdings plc shares traded at 66.00 pence, reflecting a modest 2.80% uptick on the day. Nevertheless, the broader picture reveals a sharp decline, with the stock falling from a 52-week high of 212.00 pence, suggesting considerable market skepticism about near-term recovery prospects. The stock’s price-to-earnings (P/E) ratio stands at a low 5.15, implying that the company might be undervalued, although the high dividend yield of 18.86% raises questions about payout sustainability given profitability challenges.

Institutional ownership of RWS Holdings is around 36.79%, with key stakeholders such as Liontrust Investment Partners LLP holding 13.02% and Canaccord Genuity Wealth Ltd. holding 5.067%. Chairman Andrew Brode’s substantial insider holding of 24.38% indicates strong boardroom confidence in the company’s long-term outlook, even amid short-term volatility.

Recent analyst updates have shifted sentiment from a “Strong Sell” to a more cautious “Sell” recommendation, reflecting the widening trading range and falling trend in the short term. Analysts remain wary of the profitability impacts tied to business mix transitions and heavy investment phases, even as they recognize the strategic merit in RWS Holdings’ AI and automation pivot.

From an investment perspective, investors with a long-term horizon may find RWS Holdings attractive if they believe in the long-term potential of its AI-driven transformation and SaaS revenue model. Current shareholders might prefer to retain their positions awaiting clearer operational stabilization and margin recovery in H2 FY25. Risk-averse investors concerned about continued volatility and short-term profitability challenges could consider exiting until stronger signs of sustained earnings growth emerge.

Overall, while RWS Holdings is building the foundations for future growth through strategic pivots into AI, SaaS, and APAC expansion, the stock’s near-term sentiment remains cautious, warranting a carefully balanced investment approach.

How Is RWS Holdings Positioning for Long-Term Growth?

RWS Holdings continues to make deliberate investments to ensure sustainable future growth. A key priority is enhancing its go-to-market approach, ensuring that the company’s value proposition—helping clients manage their content, data, and ideas more effectively through cutting-edge technology—is clearly communicated.

The pivot toward higher automation, broader SaaS adoption, and expanded AI capabilities positions RWS Holdings favorably in sectors undergoing digital transformation. Language Weaver and TrainAI, in particular, exemplify the company’s strategic emphasis on combining human expertise with artificial intelligence to deliver superior solutions in language services and content localization.

Additionally, the APAC region remains a strategic growth frontier for RWS Holdings, with its strong first-half performance affirming management’s belief in the region’s long-term potential. The company’s expansion strategy there focuses on securing new global logos while strengthening existing relationships.

While macroeconomic uncertainties persist, RWS Holdings’ diversified client base, technology investments, and strategic repositioning initiatives provide a resilient foundation for navigating market volatility. The Group’s focus on driving operational excellence and technological leadership is expected to yield accelerating returns as these initiatives mature in the second half of FY25 and beyond.

As CEO Ben Faes prepares to present the refreshed corporate strategy with the full HY25 results on 17 June 2025, stakeholders are likely to gain further insights into how RWS Holdings plans to reinforce its leadership position in the evolving language, content, and intellectual property services market.