For many months now, Schneider Electric has been THE most active French stock in artificial intelligence. The company's shareholders will have been delighted with the stock's exceptional performance until the beginning of the year. But now the scenario has changed somewhat. The AI narrative has lost some of its freshness. To continue to attract investors, AI needs to deliver concrete applications for businesses. US trade policy has also been a downer in recent weeks. Indeed, it is difficult to imagine that the tech giants will maintain their colossal levels of investment in AI if the outlook for the future becomes less clear. It is therefore unsurprising that Schneider Electric's share price has fallen sharply since the beginning of the year.
The group reported revenue of €9.33bn, up 7.4% on an organic basis (excluding the effects of acquisitions and exchange rates), one point below the consensus of 8.4%. The overall performance was driven by data centers, the group's growth engine, which posted double-digit growth, as well as infrastructure solutions, particularly for electricity and network operators, transportation, water, and wastewater. However, the situation is more complicated in the industrial market and especially in the residential sector, which is suffering from macroeconomic uncertainty and persistently high interest rates.
Geographically, the picture is also mixed, with strong growth in North America (+15.2%), the main region, albeit slightly below expectations. Asia-Pacific (27% of revenue) rebounded well and the rest of the world is also progressing. However, Europe is still struggling (-3.6%).
The annual growth targets remain unchanged: between +7% and +10% for revenue, with an order book that remains resilient in most of the target markets. Nevertheless, residential will continue to be a drag in the short term and the macroeconomic environment calls for caution. As a result, and with an unfavorable exchange rate effect, margin targets have been revised slightly downward.
