Q4 and FY2026 earnings call, November 11, 2026: record year, FY2027 guidance of 14% to 16% margin, and plan to separate Transformation of Industry

Siemens Energy used its fiscal 2026 results to reset its medium-term ambitions well above those set at last year's Capital Markets Day. For fiscal 2030, management now targets revenue of more than EUR 70 billion, up from EUR 44 billion today, a comparable growth rate of 12% to 14% a year. The profit margin before special items is expected to rise from 12.4% to 20% to 22%, which CFO Maria Ferraro said means "roughly tripling our profit before special items within just 4 years." The group's fiscal 2028 margin target will be reached a year early, in fiscal 2027, when management guides to a 14% to 16% margin, net income of around EUR 5 billion and pretax free cash flow of around EUR 10 billion.

Margin Bridge Rests on Backlog Quality and Cost, Not More Pricing

Ferraro stressed that the path from 12.4% to 20% to 22% is "driven predominantly by levers already embedded in our backlog or within our control. It does not depend on another step up in pricing or an even more favorable market environment." The first lever is the margin quality of the backlog combined with mix, as Gas Services and Grid Technologies take a larger share. The second is operational excellence and cost control, including lower nonconformance costs, automation, robotics and AI in factories and functions. The third is the Siemens Gamesa recovery to 8% to 10%. The fourth is the expiry of the Siemens brand license fee, which largely ends in fiscal 2030. The fiscal 2030 margin targets exclude the fee, the fiscal 2027 outlook still includes it, and any remainder will be treated as a special item.

CEO Christian Bruch said the next phase of margin expansion "must increasingly come from operational excellence and cost control." Gross productivity improved 5% in fiscal 2026, overhead cost intensity fell from 8.7% to 8.0%, nonconformance costs dropped 140 basis points and the Net Promoter Score was 62. Management plans to raise capacity across gas turbines, power transformers and gas-insulated switchgear by more than 50% between fiscal 2026 and fiscal 2030, with 96% of CapEx projects within budget in fiscal 2026.

Gas Services: New-Unit Backlog Margins Up 26 Points Since FY2022

Gas Services delivered fiscal 2026 revenue of EUR 14.5 billion, up 20.3% on a comparable basis, with profit before special items of EUR 2.4 billion, a 16.4% margin, and pretax free cash flow of EUR 6.4 billion. Backlog rose 35% to EUR 74 billion. New-unit backlog margins are now 26 percentage points higher than in fiscal 2022, with 14 points of that gained in fiscal 2026 alone. Management targets an 18% to 20% margin in fiscal 2027, a year ahead of the prior fiscal 2028 goal, and 25% to 27% by fiscal 2030, on revenue growth of 15% to 17% a year. That would roughly triple segment profit.

Siemens Energy booked 42 gigawatts of new unit orders in fiscal 2026, its highest ever. Year-end commitments totaled 104 gigawatts, made up of 65 gigawatts of firm orders and 39 gigawatts under slot reservation agreements. Management expects the reservations to convert into firm orders in fiscal 2027 at better margins than fiscal 2026 orders. Bruch said "we believe we book next year higher prices than in '26." Ferraro said the 2030 targets assume no further price step-up. Bruch said conversion is managed against milestones and that where contractual rights allow, slots can be reallocated to other customers: "Our objective is not to maximize gigawatts, but to maximize the returns generated by the capacity we deploy."

Asked by Morgan Stanley about press reports of cancellations and the weak 2 gigawatts booked in Q4, Bruch called Q4 "a timing effect" and said he was confident about the first quarter of fiscal 2027. He said he sees no slowdown and no visible impact from the US midterms, adding that hesitation by some communities over data centers "is not new."

Data Centers Are Less Than 10% of Backlog, but Carry a Timing Premium

Management repeatedly sought to put data center exposure in context. Data center customers account for about EUR 15 billion of the EUR 164 billion backlog, less than 10%. Bruch said demand excluding data centers rose by around 50% between fiscal 2024 and fiscal 2026. In grid, data centers represent roughly one fifth of the 70% of demand linked to rising consumption. Management estimates gas turbine additions of 140 to 150 gigawatts in fiscal 2026, a similar average level through fiscal 2030 and 120 to 150 gigawatts annually from fiscal 2031 to 2035.

Responding to JPMorgan on margin differences by customer type, Bruch said the premium is about speed rather than segment: "short-term available slots are higher margin profile... the longer you reach out the less push you have on the timing element and then actually margins start to normalize." He said more than 50% of current installations are behind the meter rather than utility-driven. He added that the company tries to avoid double counting between utility and data center demand.

Service Super Cycle Extends Earnings Beyond 2030

Siemens Energy expects about 250 gigawatts of fleet additions from expected orders between fiscal 2024 and fiscal 2030, and a fleet approaching 1,000 gigawatts in the 2030s. At today's pricing, a 20-year service contract represents more than EUR 400 million of lifecycle revenue per gigawatt, a service opportunity of more than EUR 100 billion from the newly added capacity. Service revenue is expected to more than double by fiscal 2035. New long-term service agreements signed in fiscal 2026 carry margins around 5 percentage points above the existing service backlog. Bruch noted that the large HL-frame service business that begins to kick in after 2030 "is the most profitable service we have."

Ferraro cautioned analysts against simply extrapolating the 5-point gain: "You must take cost inflation into that as well," although she said some cost increases can be passed on to customers. Transactional service, she said, is generally priced at market and enjoys high margins. Asked about supply shortages of materials such as rhenium, Bruch said the supply chain is "constrained but controlled."

Grid Technologies: Highest Margin in the Group, With Pricing Flattening

Grid Technologies grew revenue 26.2% to EUR 14.1 billion in fiscal 2026 at an 18.9% margin, the highest in the group, and generated EUR 4.1 billion of free cash flow. Backlog is EUR 52 billion, up almost 25%, with visibility of 2 to 8 years. Embedded backlog margins have improved 12 percentage points since fiscal 2022. Management targets 21% to 23% in fiscal 2027, already above the fiscal 2028 target set last year, and 24% to 26% by fiscal 2030 on 16% to 18% annual revenue growth. The company is investing around EUR 4 billion across 37 factories in 26 locations through fiscal 2030 and still sees a capacity gap in products such as large power transformers.

Bruch was candid that the pricing environment differs from gas: "the pricing environment in grid is flattening out." Ferraro said each order is still accretive but year-on-year gains of 9% to 10% are not to be expected in the more regulated, solutions-oriented business, while large power transformers still command high prices because of long waits for customized units. Asked by Oxcap why the guide is well above that of a large competitor, Bruch pointed to productivity in new factories, project mix and a lower supply chain dependence than in gas. Ferraro added that the Charlotte large power transformer factory is sold out for a little over two years beyond its ramp. The company expects a first solid-state transformer prototype in 2028 and aims for more than EUR 2.5 billion of grid services and digital grid revenue by 2030.

Siemens Gamesa Reaches Breakeven; Wind's Long-Term Role Still Open

Siemens Gamesa delivered a 0.1% margin on revenue of EUR 10.6 billion, up 6.7%, with free cash flow of minus EUR 1.6 billion. Management targets a 0% to 2% margin in fiscal 2027, retains the 3% to 5% indication for fiscal 2028, and targets 8% to 10% by fiscal 2030, equal to around EUR 1 billion of profit. Cash-positive operations are still targeted by fiscal 2028. Offshore installations rose more than 40% to around 5 gigawatts, onshore structural costs fell 20%, and more than 25 gigawatts of the SG 15 turbine are secured. Bruch acknowledged that order intake was weak in fiscal 2026.

Asked by HSBC whether double-digit margins remain a precondition for keeping the business, Bruch said 8% to 10% is "a milestone type of thing, not the end" and that the company has not yet decided on the long-term shape of the business. He said "some of the onshore markets are unclear, take the U.S.," and "the offshore market trajectory is not fully clear." He said he believes offshore will remain a decent-sized market in selected countries, and that the company aims to answer the strategic questions over the coming quarters.

Transformation of Industry to Be Separated With a Co-Investor

Siemens Energy plans to establish Transformation of Industry as a stand-alone company with a co-investor, retaining what Bruch called "a meaningful minority stake." Preparation of the legal and operational separation is under way, and discussions with potential co-investors start early next year. The segment grew revenue 3.4% to EUR 5.8 billion at a 12.1% margin, with backlog stable at around EUR 8 billion. Management targets 3% to 5% annual growth and a 14% to 16% margin by fiscal 2030, lifting profit about 1.4x. Bruch said the remaining Siemens Energy will gain sharper capital allocation focused on electricity infrastructure.

Cash Generation and Capital Allocation

Pretax free cash flow rose from EUR 1.9 billion in fiscal 2024 to EUR 4.7 billion in fiscal 2025 and EUR 8.8 billion in fiscal 2026. Management expects about EUR 55 billion cumulatively from fiscal 2027 through fiscal 2030, including around EUR 15 billion a year from fiscal 2028. For fiscal 2027, about 75% of the roughly EUR 10 billion is expected to be driven by profit, with the remainder from customer prepayments and slot reservation fees that track backlog development. CapEx is expected at 5% to 6% of revenue in fiscal 2027 before normalizing below 4%. S&P upgraded the company to BBB+ and Moody's to Baa1 with a positive outlook.

Management outlined a capital deployment envelope of around EUR 60 billion through fiscal 2030, made up of about EUR 8 billion of starting net cash and EUR 52 billion of cumulative operating cash flow. About 25% is earmarked for operations and organic growth, around 45%, or more than EUR 25 billion, for shareholder returns, and about 30% for financial flexibility. Returns comprise a 40% to 60% dividend payout and buybacks of up to around EUR 3 billion a year. For fiscal 2026 the company will propose a dividend of EUR 2.30 per share, versus EUR 0.70 a year earlier, after EUR 3.1 billion of buybacks in the year.

Ferraro told Goldman Sachs that the flexibility bucket includes the commitment to raise the stake in Siemens Energy India from 16% to 51% in 2028, for which EUR 3.5 billion to EUR 4.5 billion is earmarked. It also covers liquidity needs and the headroom to remain net cash positive. M&A firepower beyond the India commitment and the investment-grade requirement is not included in the targets. Bruch said Gas Services M&A will focus on vertical integration supporting service, while Grid Technologies M&A is more about broadening the portfolio, mainly through bolt-ons in digital grid. He said "don't expect short-term surprises." Asked about returns on capital, Ferraro said the businesses enjoy negative operating working capital, but she would not describe returns as in the triple-digit range.

Q4 and FY2026 Results

Q4 revenue reached a record EUR 12.8 billion, up 21% on a comparable basis, with new unit revenue up 27% and service up 11%. Profit before special items more than tripled to EUR 1.5 billion, a 12% margin, and free cash flow pretax was EUR 1.6 billion. Q4 orders rose 5.2% comparably to EUR 14.8 billion, moderating from the first three quarters. For the full year, orders were EUR 68.1 billion, up 19%, book-to-bill was 1.54, and backlog reached a record EUR 164 billion, of which about EUR 71 billion is services. Around 85% of expected fiscal 2027 revenue is already covered. Full-year comparable revenue grew 15.5% to 16%, the margin was 12.4%, up 640 basis points, and net income exceeded EUR 4.1 billion. Bruch described the group's end markets as supported by expected global electricity generation growth of more than 60% by 2040.