Q3 2026 Siemens AG Earnings Call

August 6, 2026

Speaker #1: Good morning, ladies and gentlemen, and welcome to the Siemens 2026 Q3 conference call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the Safe Harbor statement on page 2 of the Siemens presentation.

Operator: Good morning, ladies and gentlemen, and welcome to the Siemens 2026 Q3 Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on page two of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Speaker #1: This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties.

Speaker #1: At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Operator: At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Speaker #2: Good morning, ladies and gentlemen, and welcome to our fiscal Q3 26 conference call. All documents were released this morning and can be found also on our IR website.

Tobias Atzler: Good morning, ladies and gentlemen, and welcome to our fiscal Q3 2026 Conference Call. All documents were released this morning and can be found also on our IR website. I am here today with our CEO, Roland Busch, and our CFO, Veronika Bienert. Both will review the Q3 results. After the presentation, we will have time for Q&A. With that, I hand it over to you, Roland.

Speaker #2: I'm here today with our CEO, Roland Busch, and our CFO, Veronica Biener. Both will review the Q3 results. After the presentation, we will have time for Q&A.

Speaker #2: With that, I hand it over to you, Roland.

Speaker #3: Thank you, Tobias, and good morning, everyone. Thank you for joining us to discuss our Q3 results. Siemens delivered another record Q3 with strong performance across all metrics.

Roland Busch: Thank you, Tobias, and good morning, everyone. Thank you for joining us to discuss our Q3 results. Siemens delivered another record Q3 with strong performance across all metrics, despite a persistently volatile geopolitical environment. We have been making good progress in driving customer value and fast innovation by executing our ONE Tech program. Our technological leadership across all our businesses, our focus on driving industrial AI, and our strong position in attractive markets provide a solid basis for sustained value creation. Let me now turn to the highlights. Book-to-bill reached an outstanding 1.34, lifting order backlog to a record EUR 132 billion. Group orders surged to an all-time high of EUR 27.9 billion, up 14% on the prior year. Smart Infrastructure topped the EUR 8 billion order intake mark for the first time.

Speaker #3: Despite a persistently volatile geopolitical environment, we have been making good progress in driving customer value and fast innovation by executing our OneTech program. Our technological leadership across all our businesses, our focus on driving industrial AI, and our strong position in attractive markets provide a solid basis for sustained value creation.

Speaker #3: Let me now turn to the highlights. Book-to-bill reached an outstanding 1.34, lifting order backlog to a record €132 billion. Group orders surged to an all-time high of €27.9 billion, up 14% on the prior year.

Speaker #3: Small infrastructure, topped the 8 billion euro order intake mark for the first time. SI's data center vertical showed exceptional momentum, again with triple-digit order growth over the prior year and exceeding our excellent Q2.

Roland Busch: SI's data center vertical showed exceptional momentum, again with triple-digit order growth over the prior year and exceeding our excellent Q2. Customer demand remains dynamic, driven by the rapid build-out of cloud and AI infrastructure. With +9%, Digital Industries stayed on its path to healthy growth. Its market environment was supportive in industries such as electronics, semiconductors, aerospace, and defense. Besides the beneficiaries of the AI infrastructure build-out, DI also saw some improvements in the broader manufacturing space. Mobility achieved one of its highest quarterly order volumes ever, close to the prior year's exceptional level. Looking ahead, several high-profile contracts for improving rail services in Germany are already on the books for Q4. Overall, broad-based revenue growth reached 8%, fueled by Digital Industries and Smart Infrastructure. All regions contributed to growth. The Americas led the way, up 11%, fueled by strong momentum in the US.

Speaker #3: Customer demand remains dynamic, driven by the rapid build-out of cloud and AI infrastructure. With plus 9%, Digital Industries stayed on its path to healthy growth.

Speaker #3: Its market environment was supportive in industries such as electronics, semiconductors, aerospace, and defense. Besides the beneficiaries of the AI infrastructure build-out, DI also saw some improvements in the broader manufacturing space.

Speaker #3: Mobility achieved one of its highest quarterly order volumes ever, close to the prior year's exceptional level. Looking ahead, several high-profile contracts for improving rail services in Germany are already on the books for the fourth quarter.

Speaker #3: Overall, broad-based revenue growth reached 8%, fueled by digital industries and smart infrastructure. All regions contributed to growth. The Americas led the way, up 11%, fueled by strong momentum in the United States.

Speaker #3: EMEA grew 6%, and Asia/Australia was up 10%, driven by India, which was up 13%. Industrial business profit reached a record €3.5 billion, resulting in a profit margin of 17.3%, on operational trends of Digital Industries and Smart Infrastructure.

Roland Busch: EMEA grew 6%, and Asia, Australia was up 10%, driven by India, which was up 13%. Industrial business profit reached a record EUR 3.5 billion, resulting in a profit margin of 17.3% on operational strengths of Digital Industries and Smart Infrastructure. Effects from tariff refunds in the US, primarily at Siemens Healthineers, also supported profitability. Margin expansion resulted into higher earnings per share pre-PPA of EUR 3.14. Free cash flow was a standout achievement, reaching EUR 4.1 billion. After a strong year-to-date performance, we raise our earnings outlook for fiscal 2026 on the group level. Veronika will give you some more color later. To drive future success, we have continued investing organically in switchgear capacity in Frankfurt, as well as in bolt-on acquisitions to strengthen our portfolio in the real and digital worlds.

Speaker #3: Effects from tariff refunds in the US, primarily at Siemens Healthineers, also supported profitability. Margin expansion resulted in higher earnings per share pre-PPA of €3.14.

Speaker #3: Free cash flow was a standout achievement, reaching €4.1 billion. After a strong year-to-date performance, we raised our earnings outlook for fiscal 2026 on the Group level. Veronica will give you some more color later.

Speaker #3: To drive future success, we have continued investing organically in switchgear capacity in Frankfurt, as well as in bolt-on acquisitions to strengthen our portfolio in the real and digital worlds.

Speaker #3: We made progress regarding the plan to deconsolidate Siemens Healthineers, and Veronica will give you an update on the tax authority's decision and the timeline.

Roland Busch: We made progress regarding the plan to deconsolidate Siemens Healthineers, and Veronika will give you an update on the tax authority's decision and the timeline. In addition to contractual topics that we discuss in a constructive dialogue with Siemens Healthineers, we plan to reduce our supervisory board mandates from Siemens AG managing board members from three to one, effective as of Siemens Healthineers' next AGM in February 2026. Veronika and I will drop our mandates. Over recent years, three companies have developed from Siemens roots into market and technology leaders in their respective fields. We understand Siemens Healthineers and Siemens Energy's considerations regarding the use of independent brands in the future. We are pursuing a clear strategy in this respect to ensure an orderly process with both companies in line with existing agreements and for the benefit of all stakeholders involved.

Speaker #3: In addition to contractual topics that we discussed in a constructive dialogue with Siemens Healthineers, we plan to reduce our Supervisory Board mandates from Siemens AG Managing Board members from three to one, effective as of Siemens Healthineers' next AGM in February 2026.

Speaker #3: Veronica and I will drop our mandates. Over recent years, three companies have developed from Siemens' roots into market and technology leaders in their respective fields.

Speaker #3: We understand Siemens Healthineers' and Siemens Energy's considerations regarding the use of independent brands in the future. We are pursuing a clear strategy in this respect to ensure an orderly process with both companies in line with existing agreements and for the benefit of all stakeholders involved.

Speaker #3: Siemens will sharpen its image as the trusted technology partner for the AI age—a company with a unique ability to combine the real and the digital worlds.

Roland Busch: Siemens will sharpen its image as the trusted technology partner for the AI age, a company with a unique ability to combine the real and the digital worlds. Let's look at the four key levers for driving our growth ambitions as one tech company. First, we start with Grow Digital. During the first nine months of fiscal year 2026, we grew our digital business revenue by 18% on a nominal basis, well ahead of the ambition level of 15% that we set last November. With Vectron X, we welcome a new member to the Siemens Xcelerator family. Vectron X is a highly digitalized next-generation locomotive that builds on our best-selling Vectron platform. Its digital driver's cap features a smart screen, app functionalities with standardized interfaces, and near real-time connectivity. The result, enhanced driver experience, higher operational efficiency, and optimized data-driven maintenance. Second, Grow Regions.

Speaker #3: Now, let's look at the four key levers for driving our growth ambitions as one tech company. And first, we start with Grow Digital. During the first nine months of fiscal year 2026, we grew our digital business revenue by 18% on a nominal basis, well ahead of the ambition level of 15% that we set last November.

Speaker #3: Since last November, with Vectronics, we welcome a new member to the Siemens Accelerator family. Vectronics is a highly digitalized, next-generation locomotive that builds on our best-selling Vectron platform.

Speaker #3: Its digital driver's cap features a smart screen, app functionalities with standardized interfaces, and near real-time connectivity. The result? Enhanced driver experience, higher operational efficiency, and optimized data-driven maintenance.

Speaker #3: Second, grow regions. With a landmark agreement, we have deepened our collaboration with HD Hyundai to create a scalable blueprint for digital shipyards. The agreement includes a low triple-digit million contract for a broad range of industrial software and automation offerings.

Roland Busch: With a landmark agreement, we have deepened our collaboration with HD Hyundai to create a scalable blueprint for digital shipyards. The agreement includes a low triple-digit EUR million contract for a broad range of industrial software and automation offerings. By connecting data, software, and automation technologies across the shipyard, we are creating the operating system for industrial AI. These capabilities will help shipbuilders increase capacity, improve quality, and reduce rework. We will support the launch of the US-Korea Shipbuilding Technology Cooperation Center. It will be a platform for exploring modernization strategies and strengthening maritime competitiveness in the US and allied markets. Third, Grow Verticals. The semiconductor industry showed strong growth momentum driven by the AI flywheel. We capitalized on this demand with attractive orders across our entire portfolio. Among them was a wide-ranging electrification win for a major new fab project in the US.

Speaker #3: By connecting data, software, and automation technologies across the shipyard, we are creating the operating system for industrial AI. These capabilities will help shipbuilders increase capacity, improve quality, and reduce rework.

Speaker #3: We will support the launch of the US-Korea Shipbuilding Technology Cooperation Center. It will be a platform for exploring modernization strategies and strengthening maritime competitiveness in the US and allied markets.

Speaker #3: Third, grow verticals. The semiconductor industry showed strong growth momentum driven by the AI flywheel. We capitalized on this demand with attractive orders across our entire portfolio.

Speaker #3: Among them was a wide-ranging electrification win for a major new fab project in the US. At Computex, we announced an expansion of our partnership with Intel across the entire value chain, from design to chip manufacturing.

Roland Busch: At Computex, we announced an expansion of our partnership with Intel across the entire value chain, from design to chip manufacturing. Fourth growth lever, Grow AI. Our IGEM engineering agent continues to demonstrate our ability to rapidly translate advances in AI into commercial industrial software. We have expanded the product globally while continuously introducing new capabilities based on direct customer feedback. Adaption has been strong. Hundreds of customers from across more than 30 countries and ranging from small system integrators to global industrial OEMs have signed on. With the launch of this agent in China at the World AI Conference, we were the only global company to receive the prestigious Super AI Leader Star Award. The PAC Innovation Radar recognized Siemens AI Engineering Agent as the leading platform for GenAI advanced industrial engineering in Europe 2026.

Speaker #3: The fourth growth lever: Grow AI. Our eigen engineering agent continues to demonstrate our ability to rapidly translate advances in AI into commercial industrial software. We have expanded the product globally while continuously introducing new capabilities based on direct customer feedback.

Speaker #3: Adoption has been strong. Hundreds of customers from across more than 30 countries, ranging from small system integrators to global industrial OEMs, have signed on.

Speaker #3: With the launch of this agent in China at the World AI Conference, we were the only global company to receive the prestigious Super AI Leader Star Award.

Speaker #3: The PAC Innovation Radar recognized Siemens' Eigen Engineering Agent as the leading platform for GenAI advanced industrial engineering in Europe in 2026. Another example: at our global customer reference conference, Realize LIVE, we launched Intelligent Center X, a powerful new offering to orchestrate industrial AI.

Roland Busch: Another example, at our global customer conference, Realize LIVE, we launched Intelligence Center X, a powerful new offering to orchestrate industrial AI, available as part of Siemens Xcelerator. Our customers run plenty of AI pilots, but they usually get stuck in the testing phase. Intelligence Center X breaks that pattern. This system enables experts to orchestrate AI agents and bring industrial AI into live operations at scale. The system features four capabilities that work together seamlessly. First, it pulls together customer data from across the entire life cycle in a knowledge graph. Graph Studio puts individual data into their overall context, live and in real-time, from design to engineering, manufacturing, and maintenance, but also from supply chains and customers, for example. Second, this is crucial, Intelligence Center X comes with industrial ontologies right out of the box.

Speaker #3: Available as part of Siemens Accelerator. Our customers run plenty of AI pilots, but they usually get stuck in the testing phase. Intelligent Center X breaks that pattern.

Speaker #3: This system enables experts to orchestrate AI agents and bring industrial AI into live operations. At scale, the system features four capabilities that work together seamlessly.

Speaker #3: First, it pulls together customer data from across the entire lifecycle in a knowledge graph. Graph Studio puts individual data into their overall context, live and in real time, from design to engineering, manufacturing, and maintenance.

Speaker #3: But also from supply chains and customers, for example. Second—and this is crucial—Intelligent Center X comes with industrial ontologies right out of the box.

Speaker #3: They map how assets, products, and processes in industrial engineering and manufacturing relate to each other. The result is codified, industry-specific knowledge ready to use.

Roland Busch: They map how assets, products, and processes in industrial engineering and manufacturing relate to each other. The result is codified industry-specific knowledge ready to use. The ontologies are linked to our Siemens Xcelerator portfolio, for example, to our market-leading, most secure PLM software, Teamcenter. Third, AI comes into play. AI Studio delivers machine learning and AI models trained on real operational data. It continuously monitors model quality and established rules, giving AI agents and LLMs access to advanced machine learning and data science to make more reliable predictions and decisions. This approach makes AI explainable and predictable, and thus ready to move into production at industrial scale. Fourth, and finally, Mendix. Customers use this AR-augmented low-code platform to develop their own AI agents and connect them to existing systems and external agents.

Speaker #3: And the ontologies are linked to our Siemens Xcelerator portfolio, for example, to our market-leading, most secure PLM software, Teamcenter. Third, AI comes into play.

Speaker #3: AI Studio delivers machine learning and AI models trained on real operational data. It continuously monitors model quality and establishes rules, giving AI agents and LLMs access to advanced machine learning and data science to make more reliable predictions and decisions.

Speaker #3: This approach makes AI explainable and predictable, and thus ready to move into production at industrial scale. And fourth, and finally, Mendix. Customers use this AR-augmented low-code platform to develop their own AI agents and connect them to existing systems and external agents.

Speaker #3: They govern their AI agents with workflows based on clear roles, where humans continue to have oversight and make critical decisions. As a result, the power of automated AI delivers measurable outcomes in business processes.

Roland Busch: They govern their AI agents with workflows based on clear roles, where humans continue to have oversight and make critical decisions. As a result, the power of automated AI delivers measurable outcomes in business processes. In short, Intelligence Center X makes AI scalable for industry. Early customers are already seeing real successes. It is further proof that Siemens is using AI to deliver unique value to customers. These applications show that industrial AI is becoming real and will continue to drive exceptional growth opportunities for data center infrastructure and compute power. Market fundamentals remain strong, and we are a trusted partner across the entire spectrum, from hyperscalers to colos to enterprise customers. Nine of the global top 10 data centers providers rely on Siemens. The first nine months, order volume reached close to EUR 6 billion, up triple digit over the prior year.

Speaker #3: So in short, Intelligent Center X makes AI scalable for industry. Early customers are already seeing real successes. It's further proof that Siemens is using AI to deliver unique value to customers.

Speaker #3: These applications show that industrial AI is becoming real and will continue to drive exceptional growth opportunities for data center infrastructure and compute power. Market fundamentals remain strong, and we are a trusted partner across the entire spectrum—from hyperscalers to colos to enterprise customers.

Speaker #3: Nine of the global top ten data center providers rely on Siemens. In the first nine months, order volume reached close to $6 billion, up triple digits over the prior year.

Speaker #3: Similarly impressive, the team grew our revenue by more than 50% to $3.1 billion. Our backlog and customer framework agreements provide visibility well into fiscal year 2027 and even beyond, while the sales pipeline looks healthy.

Roland Busch: Similarly impressive, the team grew our revenue by more than 50% to EUR 3.1 billion. Our backlog and customer framework agreements provide visibility well into fiscal year 2027 and even beyond, while the sales pipeline looks healthy. Looking ahead, we might see some volatility in order intake due to lumpiness of large orders. Our strong position today is based on several long-term success factors, such as a comprehensive portfolio across disciplines, including prefabricated, modular, and standardized solutions. A reliable track record of execution with the ability to grow global delivery capacities and supply chains accordingly. Proven global domain knowhow available in regional hubs. A strong ecosystem of partners across the full value chain. Building on this strength, we are shaping the roadmap towards 800-volt DC architecture, which will be required to deal with high rack density in AI factories in an efficient and reliable way.

Speaker #3: Yet, looking ahead, we might see some volatility in order intake due to the lumpiness of large orders. Our strong position today is based on several long-term success factors.

Speaker #3: Such as a comprehensive portfolio across disciplines, including prefabricated, modular, and standardized solutions. Our reliable track record of execution, with the ability to grow global delivery capacities and supply chains accordingly.

Speaker #3: Proven global domain know-how available in regional hubs. And a strong ecosystem of partners across the full value chain. Building on these strengths, we are shaping the roadmap towards 800-volt direct current architecture which will be required to deal with high rack density in AI factories in an efficient and reliable way.

Speaker #3: Rather than being a wholesale shift, adoption of 800-volt DC is likely to progress in stages over the next four to five years, with hybrid architectures dominating the early phases.

Roland Busch: Rather than being a wholesale shift, adoption of 800 volt DC is likely to progress in stages over the next four to five years, with hybrid architectures dominating the early phases. As technologies mature and operational requirements and standards evolve, a centralized DC distribution architecture will become viable. We expect that AC and DC will also coexist with mixed topologies in brownfield retrofit and greenfield installations. We are helping major data center providers to design, test, and deploy safe and reliable DC power distribution to tackle the high-density challenge they are facing. We expect the first pilots in 2027. At Siemens, we know how to handle a DC environment based on our experience in other areas, such as marine applications, battery storage, and industrial campuses.

Speaker #3: As technologies mature and operational requirements and standards evolve, a centralized DC distribution architecture will become viable. But we expect that AC and DC will also coexist, with mixed topologies in brownfield retrofit and greenfield installations.

Speaker #3: We are helping major data center providers to design, test, and deploy safe and reliable DC power distribution to tackle the high-density challenge they are facing.

Speaker #3: And we expect the first pilots in 2027. At Siemens, we know how to handle a DC environment based on our experience in other areas such as marine applications, battery storage, and industrial campuses.

Speaker #3: With our proven capabilities in digital twin automation and electrification, we can deliver a holistic approach—from designing and simulating systems to innovating at the component level.

Roland Busch: With our proven capabilities in digital twin, automation, and electrification, we can deliver a holistic approach from design and simulating systems to innovating on the component level. We are driving organic innovation partnerships and a broadening of the ecosystem. Let me highlight some recent innovation examples to show our progress. We developed a reference architecture together with NVIDIA, nVent and Fluence across compute, cooling, power, and control systems for the latest DGX VeraRubin platform. The goal, maximizing tokens per watt and ensure predictable, scalable operations. Building on this architecture, we have developed a modular and scalable automation framework with ready-to-use SIMATIC libraries. Our PLCs are already automating critical OT infrastructure in several megawatt scale data centers. In the electrification area, we are continuously optimizing our factory-assembled, pre-tested kits and are working on new DC products.

Speaker #3: We are driving organic innovation partnerships and a broadening of the ecosystem. Now, let me highlight some recent innovation examples to show our progress. We developed a reference architecture together with NVIDIA, nVent, and Fluence across compute, cooling, power, and control systems for the latest DSX Vera Rubin platform.

Speaker #3: The goal? Maximizing tokens per watt and ensuring predictable, scalable operations. Building on this architecture, we have developed a modular and scalable automation framework with ready-to-use SIMATIC libraries.

Speaker #3: Our PLCs are already automating critical OT infrastructure in several megawatt-scale data centers. In the electrification area, we are continuously optimizing our factory-assembled, pre-tested kits and are working on new DC products.

Speaker #3: One great example is our collaboration with Infineon, where we are integrating their silicon carbide power modules into our latest solid-state circuit breakers—a critical enabler for safe and reliable distribution of DC power.

Roland Busch: One great example is our collaboration with Infineon, where we are integrating their silicon carbide power modules into our latest solid-state circuit breakers, a critical enabler for safe and reliable distribution of DC power. Summing up, we are very well positioned to win in traditional and hybrid architectures and on the way forward to 800V DC. I am very pleased with the momentum and performance of our DI software business. At 11% over the prior year quarter, organic ARR growth remained at a very healthy level. Integration of our Altair and Dotmatics acquisitions is progressing very well. We are bringing our simulation products together and are launching new products. Early revenue synergies are materializing as well. Strategic partnerships such as those with IFS and Xometry complement our industrial AI offerings.

Speaker #3: Summing up, we are very well positioned to win in traditional and hybrid architectures and on the way forward to 800-volt DC. I'm very pleased with the momentum and performance of our DI software business.

Speaker #3: At 11%, overall ARR growth remained at a very healthy level. Integration of our Altair and Dotmatics acquisitions is progressing very well. We are bringing our simulation products together and are launching new products.

Speaker #3: Early revenue synergies are materializing as well. Strategic partnerships, such as those with IFS and Xometry, complement our industrial AI offerings. With IFS, we are offering a digital twin to connect design, production, and asset performance.

Roland Busch: With IFS, we are offering a digital twin to connect design, production, and asset performance in order to deliver productivity and adaptability for manufacturers. The software business is moving fast, strategically, and in operations. Now, over to you, Veronika.

Speaker #3: In order to deliver productivity and adaptability for manufacturers, the software business is moving fast, strategically, and in operations. You know, over to you, Veronica.

Speaker #1: Thank you, Roland, and good morning, everyone. Let me share further details on our record Q3 and our outlook for fiscal 2026. Orders for digital industries at $4.9 billion were 9% above the prior year with a book to bill of $0.98.

Veronika Bienert: Thank you, Roland, good morning, everyone. Let me share further details on our record Q3 and our outlook for fiscal 2026. Orders for Digital Industries at EUR 4.9 billion were 9% above the prior year, with a book-to-bill of 0.98. Orders in automation were up 11%, with a book-to-bill of 1.01, driven by the short cycle business. Roland mentioned, overall market dynamics has been further improving. In addition, I want to point out that DI saw an upswing in its core vertical of machinery driven by China, but improving elsewhere as well. Capacity utilization in some of our key industrial markets, particularly in Europe, is still on a relatively low level. DI software business delivered 5% growth over the prior year, with orders close to EUR 1.7 billion. A key driver was the PLM business, including a major order with a large automotive OEM modernizing its entire system landscape.

Speaker #1: Orders in Automation were up 11%, with a book-to-bill of 1.01, driven by the short-cycle business. As Roland mentioned, overall market dynamics have been further improving.

Speaker #1: In addition, I want to point out that DI saw an upswing in its core vertical of machinery, driven by China but improving elsewhere as well.

Speaker #1: Yet capacity utilization in some of our key industrial markets, particularly in Europe, is still at a relatively low level. The DI software business delivered 5% growth over the prior year, with orders close to $1.7 billion.

Speaker #1: A key driver was the PLM business, including a major order with a large automation automotive OEM modernizing its entire system landscape. The EDA business was soft, as expected.

Veronika Bienert: The EDA business was softer as expected. Our backlog at Digital Industries was stable at around EUR 10 billion. Revenue for DI increased 10%. The software business was up a strong 15%, driven by the EDA business, growing more than 30%. DI's automation revenue was up 7% to EUR 3.1 billion on broad-based growth in discrete and process automation. DI's profitability improved sharply to 18.7% with a strong contribution from its software business. A high share of accretive EDA revenue and the successful integration of Altair and Dotmatics drove margin expansion. Economies of scale and a clearly net positive economic equation supported margin improvement in the automation business. Sustainable productivity gains more than compensated for cost inflation and increasing pressure from rising prices for selected electronic components. Integration-related costs for Altair and Dotmatics accounted for 70 basis points in Q3, in line with expectations.

Speaker #1: Our backlog at Digital Industries was stable at around $10 billion. Revenue for DI increased 10%. The software business was up a strong 15%, driven by the EDA business, which grew more than 30%.

Speaker #1: DI's automation revenue was up 7% to $3.1 billion on broad-based growth in discrete and process automation. DI's profitability improved sharply to 18.7%, with a strong contribution from its software business.

Speaker #1: A high share of accretive EDA revenue and the successful integration of Altair and Dotmatics drove margin expansion. Economies of scale and a clearly net positive economic equation supported margin improvement in the automation business.

Speaker #1: Sustainable productivity gains more than compensated for cost inflation and increasing pressure from rising prices for selected electronic components. Integration-related costs for Altair and Dotmatics accounted for 70 basis points in the third quarter, in line with expectations.

Speaker #1: I'm very pleased with DI's extraordinary free cash flow performance of almost $1.5 billion, which is an all-time quarterly high. Cash conversion was excellent in both Software and Automation.

Veronika Bienert: I'm very pleased with DI's extraordinary free cash flow performance of almost EUR 1.5 billion, which is an all-time quarterly high. Cash conversion was excellent in both software and automation. Looking at the regional top-line perspective, DI's automation businesses grew strongly across most regions. China showed good momentum with orders up 17%, and revenue grew 9% on healthy sequential revenue dynamics fueled by motion control. Our local China portfolio was accretive to revenue growth, up by a rate in the mid-20s. The picture in Europe remains somewhat mixed. Order recovery is on the way, with a book-to-bill above one and healthy growth. Revenue in Germany was still muted due to discrete automation, while the latter drove clear growth elsewhere in Europe. The US continued its growth path. The AI-driven investment boom also supported core manufacturing industries. This benefited our discrete automation business.

Speaker #1: Looking at the regional top-line perspective, DI's automation businesses grew strongly across most regions. China showed good momentum, with orders up 17%, and revenue grew 9% on healthy sequential revenue dynamics.

Speaker #1: Fueled by motion control, our local China portfolio was accretive to revenue growth, up by a rate in the mid-20s. The picture in Europe remains somewhat mixed.

Speaker #1: Order recovery is on the way, with a book-to-bill above 1, and healthy growth. Revenue in Germany was still muted due to discrete automation.

Speaker #1: While the latter drove clear growth elsewhere in Europe, the US continued its growth path. The AI-driven investment boom also supported core manufacturing industries and the automation business.

Speaker #1: Based on delivering a strong performance after nine months, we confirm our DI guidance for fiscal year 2026 in all aspects. Revenue growth is expected in the range of 7 to 10%, and profit margin is expected to reach 17 to 19%.

Veronika Bienert: Based on delivering a strong performance after nine months, we confirm our DI guidance for fiscal year 2026 in all aspects. Revenue growth is expected in the range of 7% to 10%, and profit margin is expected to reach 17% to 19%. For the Q4, we see DI orders around the prior year level on very tough comps due to an exceptionally high volume of EDA bookings. Automation orders are expected to be clearly up, while the software order volume will be below the prior year's record level. Nevertheless, the software sales funnel is promising. We anticipate that DI's revenue growth will be in the range of 5% to 7%, supported by growth in automation and software. We expect DI's profit margin to be flat sequentially because of the business mix.

Speaker #1: For the fourth quarter, we see DI orders around the prior year level on very tough comps due to an exceptionally high volume of EDA bookings.

Speaker #1: Automation orders are expected to be clearly up, while the software order volume will be below the prior year's record level. Nevertheless, the software sales funnel is promising.

Speaker #1: We anticipate that DI's revenue growth will be in the range of 5% to 7%, supported by growth in automation and software. And we expect DI's profit margin to be flat sequentially because of the business mix.

Speaker #1: Now, let's turn to Smart Infrastructure, which once again delivered an outstanding performance across all businesses and key metrics. Orders were up 42%, reaching a new record level of $8 billion.

Veronika Bienert: Now, let's turn to Smart Infrastructure, which once again delivered an outstanding performance across all businesses and key metrics. Orders were up 42%, reaching a new record level of EUR 8 billion. This increase was driven by massive growth of 58% in SI's electrical products business and 55% in its electrification business. Both businesses benefited again from a high volume of large order wins with data center customers in the US, but also in Europe, where we won, for example, a large project in the Nordics. Even without the data center-related business, order growth was strong and reached the high teens. Book-to-bill came in at an outstanding 1.25. SI's record order backlog of EUR 23.7 billion gives us a lot of confidence for sustained growth momentum into fiscal year 2027. Revenue growth was broad-based and reached 13%.

Speaker #1: This increase was driven by massive growth of 58% in SI’s electrical products business and 55% in its electrification business. Both businesses benefited again from a high volume of large order wins with data center customers in the US, but also in Europe, where we won, for example, a large project in the Nordics.

Speaker #1: Even without the data center-related business, order growth was strong and reached the high teens. Book-to-bill came in at an outstanding 1.25.

Speaker #1: Siemens' record order backlog of €23.7 billion gives us a lot of confidence for sustained growth momentum into fiscal year 2027. Revenue growth was broad-based and reached 13%.

Speaker #1: The largest contribution again came from the Electrification business, up 20%, and the Electrical Products business, up 18%. Consistent backlog conversion led to further operational margin expansion.

Veronika Bienert: The largest contribution, again, came from the electrification business, up 20%, and the electrical products business, up 18%. Consistent backlog conversion led to further operational margin expansion. SI's margin was up 120 basis points year over year to 20%. An impairment related to the e-mobility charging business partly offset positive effects from tariff refunds in the US. The net effect amounted to 50 basis points, implying an operational margin of 19.5%. Structurally, SI's business continued to benefit from economies of scale due to higher revenue combined with improved capacity utilization and from sustained productivity improvements. Pricing measures in SI's product business compensated increasingly, but not yet fully, for higher commodity costs. Free cash flow showed consistent cash conversion at 0.94, with a seasonal increase in operating working capital well below the top-line growth trajectory.

Speaker #1: Si’s margin was up 120 basis points year over year to 20%. An impairment related to the e-mobility charging business partly offset positive effects from tariff refunds in the US.

Speaker #1: The net effect amounted to 50 basis points, implying an operational margin of 19.5%. Structurally, SI's business continued to benefit from economies of scale due to higher revenue, combined with improved capacity utilization and sustained productivity improvement.

Speaker #1: Pricing measures in SI's product business increasingly compensated, but not yet fully, for higher commodity costs. Free cash flow showed consistent cash conversion at 0.94, with a seasonal increase in operating working capital well below the top-line growth trajectory.

Speaker #1: Looking at the regional top-line development, orders were up double digits across the board, and stringent backlog execution drove revenue in all geographies. The US again showed exceptional order momentum, up 81%, led by data center and semiconductor wins.

Veronika Bienert: Looking at the regional top-line development, orders were up double digit across the board and stringent backlog execution drove revenue in all geographies. The US again showed exceptional order momentum, up 81%, led by data center and semiconductor wins. Bookings and buildings saw growth in the low double digits. Germany recorded substantial order growth in buildings. Electrification and electrical products grew around 10%. The Europe and Middle East region also benefited from large data center orders in Finland and Spain. SI's top line in China recovered further, with order strength in buildings ahead of price increase while electrical products drove revenue. The service business delivered 7% growth, clearly up in Asia and in Europe. Our SI teams continue to expect very healthy end market dynamics, with data centers and power utilities as key engines for growth.

Speaker #1: Bookings in Buildings saw growth in the low double digits. Germany recorded substantial order growth in Buildings. Electrification and Electrical Products grew around 10%. The Europe and Middle East region also benefited from large data center orders in Finland and Spain.

Speaker #1: SiS top line in China recovered further, with order strengths in buildings ahead of the price increase, while electrical products drove revenue. The service business delivered 7% growth, clearly up in Asia and in Europe.

Speaker #1: Our SI teams continue to expect very healthy market dynamics, with data centers and power utilities as key engines for growth. After delivering 11% revenue growth in the first nine months of fiscal year 2026, and given high visibility from our order backlog, we raise SI’s guidance for the full fiscal year.

Veronika Bienert: After delivering 11% revenue growth in the first nine months of fiscal year 2026 and given high visibility from order backlog, we raise SI's guidance for the full fiscal year. For comparable revenue growth, we now expect a range of 10% to 11%, up by 150 basis points at the midpoint. Building on a very consistent margin expansion trajectory, we lift SI's profit margin outlook by 50 basis points to a range of 18.5% to 19.5%. For Q4, we anticipate that SI's revenue growth will approach the lower end of the full-year range, and that the profit margin will be in line with full-year expectations. Mobility recorded a robust set of results in Q3. Orders at EUR 7.6 billion included a high share of attractive service contracts and topped our expectations with an excellent book-to-bill ratio of 2.35.

Speaker #1: For comparable revenue growth, we now expect a range of 10% to 11%, up by 150 basis points at the midpoint. Building on a very consistent margin expansion trajectory, we lift SI's profit margin outlook by 50 basis points to a range of 18.5% to 19.5%.

Speaker #1: For the fourth quarter, we anticipate that SIs revenue growth will be a will approach the lower end of the full year range and that the profit margin will be in line with full year expectations.

Speaker #1: Mobility recorded a robust set of results in the third quarter. Orders at €7.6 billion included a high share of attractive service contracts and topped our expectations, with an excellent book-to-bill ratio of 2.35.

Speaker #1: Order backlog increased to $58 billion with an attractive gross margin profile. As Roland noted, we see a very promising sales pipeline for the fourth quarter of fiscal year 2026, including the booking of the majority of a $3 billion contract with Italo Holding.

Veronika Bienert: Order backlog increased to EUR 58 billion with an attractive growth margin profile. As Roland noted, we see a very promising sales pipeline for Q4 of fiscal year 2026, including the booking of the majority of a EUR 3 billion contract with Italo Holding. The contract includes rolling stock as well as a 30-year service agreement. Revenue in Q3 was up 6% over the prior year, fueled by low double-digit growth in the rail infrastructure business. Margin performance was solid at 8.6%, with a somewhat less favorable project mix and slightly higher severance costs compared to the previous year. As indicated, free cash flow picked up materially, and cash conversion improved due to stringent collection of large payments from customers. Looking at project payment profiles and the timing of order awards, we continue to expect further substantial catch-up in Q4.

Speaker #1: The contract includes rolling stock, as well as a 30-year service agreement. Revenue in Q3 was up 6% over the prior year, fueled by low double-digit growth in the rail infrastructure business.

Speaker #1: Margin performance was solid at 8.6%, with a somewhat less favorable project mix and slightly higher severance costs compared to the previous year. As indicated, free cash flow picked up materially.

Speaker #1: And cash conversion improved due to stringent collection of large payments from customers. Looking at project payment profiles and the timing of order awards, we continue to expect further substantial catch-up in the fourth quarter.

Speaker #1: After a consistent Q3 performance, we confirm mobility's full year outlook for revenue growth in the range of 5 to 7%. We continue to anticipate that mobility's full year margin will come in with the range of 8 to 10% with the expected outcome towards the lower end.

Veronika Bienert: After a consistent Q3 performance, we confirm Mobility's full-year outlook for revenue growth in the range of 5% to 7%. We continue to anticipate that Mobility's full-year margin will come in with the range of 8% to 10%, with the expected outcome towards the lower end. For Q4, we expect Mobility's revenue growth to accelerate on strong backlog execution and achieve a level between 9% and 11%. Profit margin is expected to be within Mobility's full-year guidance. Page 17 in the appendix shows our below IB performance. The results included a strong SFS contribution fueled by a gain of EUR 156 million from the sale of a stake in an equity investment in the UK. Free cash flow of more than EUR 4.1 billion in Q3 was up more than 40% over the prior year, driven by all industrial businesses.

Speaker #1: For the fourth quarter, we expect Mobility's revenue growth to accelerate on strong backlog execution and achieve a level between 9% and 11%. Profit margin is expected to be within Mobility's full-year guidance.

Speaker #1: Page 17 in the appendix shows our below IB performance. The results included a strong SFS contribution, fueled by a gain of €156 million from the sale of a stake in an equity investment in the UK.

Speaker #1: Free cash flow of more than $4.1 billion in the third quarter was up more than 40% over the prior year, driven by all industrial businesses.

Speaker #1: Free cash flow return on revenue stood at 11% after nine months, and we are firmly on track to achieve a double-digit return again for the full year. We further deleveraged our capital structure to 0.6 for industrial net debt over EBITDA, which gives us the entrepreneurial freedom to act from a position of strength.

Veronika Bienert: Free cash flow return on revenue stood at 11% after nine months, we are firmly on track to achieve a double-digit return again for the full year. We further deleveraged our capital structure to 0.6 for industrial net debt over EBITDA, which gives us the entrepreneurial freedom to act from a position of strength. Our leadership team remains fully committed to delivering stringent capital allocation and strong shareholder return. As Roland already mentioned, we made good progress with our plan to deconsolidate Siemens Healthineers. As expected, we have now received binding decisions from the tax authorities clarifying the relevant tax topics. As a result, we can proceed with the spin-off of Siemens Healthineers as planned. We confirm the timeline for receiving the shareholders' approval at the annual shareholders' meetings of both companies in February 2027. Currently, we are working on contractual details.

Speaker #1: Our leadership team remains fully committed to delivering stringent capital allocation and strong shareholder returns. As Roland already mentioned, we made good progress with our plan to deconsolidate Siemens Healthineers.

Speaker #1: Meanwhile, and as expected, we have now received binding decisions from the tax authorities clarifying the relevant tax topics. As a result, we can proceed with the spin-off Siemens Healthineers as planned.

Speaker #1: We confirm the timeline for receiving the shareholders' approval at the annual shareholders' meetings of both companies in February 2027. Currently, we are working on contractual details.

Speaker #1: In connection with our Q4 earnings release, we will update you on the next steps and related decisions. At the beginning of July, following completion of the previous program, we launched our new share buyback program for up to 6 billion over a period of up to 5 years.

Veronika Bienert: In connection with our Q4 earnings release, we will update you on the next steps and related decisions. At the beginning of July, following completion of the previous program, we launched our new share buyback program for up to EUR 6 billion over a period of up to five years. Execution started swiftly with a buyback volume of EUR 400 million in the first month. Finally, our group outlook and expectations for our core business at a glance. Following the strong first nine months, we raised our fiscal 2026 outlook for EPS pre PPA to a range of EUR 11.20 to EUR 11.50, up by EUR 0.45 at the midpoint. We continue to expect to reach the upper half of our group revenue growth guidance of 6% to 8%. In a time of highly volatile geopolitics, we are leveraging market opportunities and are delivering strong earnings performance with healthy growth and excellent free cash flow.

Speaker #1: Execution started swiftly, with a buy-back pack volume of €400 million in the first month. Finally, our group outlook and expectations for our core business at a glance.

Speaker #1: Following the strong first nine months, we raise our fiscal 2026 outlook for EPS pre PPA to a range of 11.20 to 11.50 up by 45 cents at the midpoint.

Speaker #1: We continue to expect to reach the upper half of our group revenue growth guidance of 6 to 8%. In a time of highly volatile geopolitics, we are leveraging market opportunities and are delivering strong earnings performance with healthy growth and excellent free cash flow. With that, I hand it back to Tobias for Q&A.

Veronika Bienert: With that, I hand it back to Tobias for Q&A.

Speaker #2: Thank you, Veronica. We are now ready for Q&A. Please limit yourselves to one question per person. We want to give as many of you as possible the opportunity to raise your question.

Tobias Atzler: Thank you, Veronika. We are now ready for Q&A. Please limit yourself to one question per person. We want to give as many of you as possible the opportunity to raise your question. Operator, please open the Q&A now.

Speaker #2: Operator, please open the Q&A now.

Speaker #3: Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star followed by one on the touchdown telephone. If you wish to remove yourself from the question queue, you may press star followed by two.

Operator: Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from James Moore from Rothschild & Co Redburn. Please go ahead.

Speaker #3: If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time.

Speaker #3: One moment for the first question please. And the first question comes from James Moore from Rothschild and Co Redburn. Please go ahead.

James Moore: Good morning, everybody, and thanks for the time. I wondered if I could ask about the DI automation orders in China, at the 17% growth, really in two dimensions. I think you mentioned a strong start to the quarter in April and May. I wonder if that is showing us that June has slowed in speed a little bit. Could you talk a little bit about the momentum in the quarter, the speed into July, and what is happening by end market and channel, and whether you see any sign of the strong Chinese cycle where you have grown 25% to 30% now for nine quarters slowing at all. The second dimension is really on the 17%. It might seem slow to some against some of the locals growing closer to 40%, but you do have a different premium versus value for money mix.

Speaker #4: Oh, good morning everybody and thanks for the time. I wondered if I could ask about the DI automation orders in China. at the 17% growth really in two dimensions.

Speaker #4: I think you mentioned a strong start to the quarter in April and May, so I wonder if that is showing us that June has slowed in speed a little bit.

Speaker #4: So could you talk a little bit about the momentum in the quarter, the speed into July, and what's happening by end market and channel, and whether you see any sign of the strong Chinese cycle—where you've grown 25 to 30 percent now for nine quarters—slowing at all?

Speaker #4: The second dimension is really on the 17%. It might seem slow to some, against some of the locals growing closer to 40%, but you do have a different premium versus value-for-money mix.

Speaker #4: Would it be possible just to remind us of the share of sales or orders from value for money? And I think you mentioned, Veronica, that the VFM segment grew in the mid-20s in revenue, but could you say what it grew at in terms of speed on orders?

James Moore: Would it be possible just to remind us of the share of sales or orders from value for money? I think you mentioned, Veronika, that the VFM segment grew in the mid-20s in revenue, but could you say what it grew at in terms of speed on orders? Thanks very much.

Speaker #4: Thanks very much.

Speaker #3: So your your observation that there was a little bit of a slowdown in June, it's right. However, in July we are picking up momentum again.

Roland Busch: Your observation that there was a little bit of a slowdown in June, it is right. However, in July, we are picking up momentum again. Therefore, I would say it is all intact. If it comes to China, also the local product and the 40% you are mentioning, this is the value for money portfolio. Now let us compare this value for money from our side, our China new products or smart products, as we call them. Year to date it is +30% from our side. You compare that April to June, I assume, 40% of Inovance. We know that Q1 in Inovance was also not that strong. I would say we are equally or even a little bit ahead compared to Inovance. If you compare us to international competitors at the same time, I would say in this segment, we are definitely outperforming.

Speaker #3: So therefore it's I would say it's it's all intact. if it comes to China also the local local products and the 40% you're mentioning this is the value for money portfolio.

Speaker #3: And now, let's compare value for money. With value for money from our side, our China new products – or smart products, as we call them here – year to date, it's plus 30% from our side.

Speaker #3: And you compare that April to June I'm assume 40% of invents. We know that Q1 and invents was also not that strong. So I would say we are equally or even a little bit ahead compared to invents.

Speaker #3: If you compare us to international competitors at the same time, I would say in this segment we are definitely outperforming. Last point is, we also see a pickup in the demand for, let's say, the higher-end automation devices, which we like very much, because this is a very strong position of ours, which we are also going to expand.

Roland Busch: Last point is we also see a pickup in the demand for the, let's say, the higher-end automation devices, which we like very much, because, again, this is a very strong position of ours, which we are also going to expand. Therefore, from that perspective, I would say we feel quite comfortable the way how we are working in and with our Chinese customers with our products.

Speaker #3: So, therefore, from that perspective, I would say we feel quite comfortable with the way we are working in and with our Chinese customers and with our products.

Speaker #4: Very helpful. Thanks.

James Moore: Very helpful. Thanks.

Roland Busch: Yep.

Speaker #3: Yep.

Speaker #1: Yeah. And and and really from from my side if we look at again at at the China portfolio really the the orders were up in Q3 up 20% and as well the the revenue the 17% I already mentioned and if we really look at the development and July for automation we could see in in China if we look at at our dailies really in the in the lower 20s in order entry the development so their ethics comparable so therefore we we are quite confident here for for the fourth quarter.

Veronika Bienert: Really from my side, if you look again at the China portfolio, really the orders were up in Q3, up 20%, as well the revenue, the 17% I already mentioned. If you really look at the development in July for automation, we could see in China, if you look at our dailies, really in the lower twenties in order entry, the development. The ethics comparable, therefore we are quite confident here for Q4, even though the entire environment is mixed. We definitely see the K-shaped development. We had a strong continuous growth in certain key verticals in Q3 in electronics and the like. For Q4, the outlook is really that the automation orders are expected to be clearly up the year-over-year.

Speaker #1: even though the entire environment is mixed so we definitely see at the key shape development. So we have a strong continued we had a strong continuous growth in certain key verticals in Q3 in electronics and the like.

Speaker #1: and in the fourth for the fourth quarter the outlook is really that the automation orders are expected to be clearly up year over year.

Speaker #1: Yeah.

James Moore: Thanks, Veronika.

Speaker #4: Thanks Veronica.

Speaker #2: Next question please.

Tobias Atzler: Next question, please.

Speaker #3: The next question comes from Ben Yuklo from Oxcab Analytics. Please go ahead.

Operator: The next question comes from Ben Uglow from Oxcap Analytics. Please go ahead.

Speaker #4: Oh, morning Roland, Veronica, and Toby. Thank you for taking the question. Just getting into the kind of sequential progress and the dynamics on the automation.

Ben Uglow: Morning, Roland, Veronika, and Toby. Thank you for taking the question. Just getting into the kind of sequential progress and the dynamics on the automation hardware side. Veronika, if we look at the margin, I think it is maybe a little bit lighter than some of us expected. Obviously, we are hearing from a number of companies now in the automation world about supply chain constraints, memory, shortage, lead times, et cetera. Can you give us your thoughts on if that is going to be a factor in the next couple of quarters? I guess a broader question maybe for Roland is if we look at this upcycle, if we look at the growth and the uptrend that we are seeing across a number of industries, not just electronics or semiconductor, how comparable is this with what we were seeing after COVID in that sort of 2021, 2022, 2023 period?

Speaker #4: Hardware side, Veronica, if we look at the margin, I think it's maybe a little bit lighter than some of us expected. And obviously we're hearing from a number of companies now in the automation world about supply chain constraints.

Speaker #4: You know memory shortage lead times etc. Can you give us your thoughts on you know if if that is going to be a factor in the next couple of quarters?

Speaker #4: And I guess a broader question maybe maybe for Roland is if we look at this upcycle if we look at the you know the the growth and the uptrend that we're seeing across a number of industries not just electronics or semiconductor how comparable is this with what we were seeing after COVID in that sort of 21 22 23 period and and if we looked at the supply chain situation today how does it compare with back then?

Ben Uglow: If we looked at the supply chain situation today, how does it compare with back then? Thank you.

Speaker #4: Thank you.

Speaker #1: So I I give it a start with regards to the commodity cost which we are seeing in in the DI business and and they they are having a drag on on DI margins.

Veronika Bienert: I give it a start with regards to the commodity costs, which we are seeing in the Digital Industries business, and they are having a drag on DI margins.

Veronika Bienert: I give it a start with regards to the commodity costs, which we are seeing in the Digital Industries business, and they are having a drag on DI margins. I think that is something we in a very diligent way work with it. As already mentioned, we contributed, the DI team contributed with a net positive economic equation in Q3. Productivity, we continued to contribute it and was really reinforcing the overall economic equation and was really significantly helping to offset cost pressure as well. If we look at more or less the entire fiscal year and from an overall outlook, we are as well confirming a net positive economic equation as well for the entire fiscal year and are very confident with our productivity measures and with a very continued high focus really to offset inflation and demand-related cost pressures from supply side.

Speaker #1: I think that is something we, in a very diligent way, work with, and as already mentioned, we contributed to the DI team economic equation in the third quarter.

Veronika Bienert: I think that is something we in a very diligent way work with it. As already mentioned, we contributed, the DI team contributed with a net positive economic equation in Q3. Productivity, we continued to contribute it and was really reinforcing the overall economic equation and was really significantly helping to offset cost pressure as well. If we look at more or less the entire fiscal year and from an overall outlook, we are as well confirming a net positive economic equation as well for the entire fiscal year and are very confident with our productivity measures and with a very continued high focus really to offset inflation and demand-related cost pressures from supply side.

Speaker #1: And productivity re continue to contributed and and was really reinforcing the overall economic equation and was really significantly helping to offset cost pressure as well.

Speaker #1: And if we look at more or less the entire fiscal year, and from an overall outlook, we are as well confirming a net positive economic equation as well for the entire fiscal year.

Speaker #1: and are very confident with our productivity measures. And with an very continued high focus really to offset inflation and demand related cost pressures from supply side.

Speaker #3: Good. Then the next question comes.

Tobias Atzler: Good. The next question comes.

Operator: Good. The next question comes.

Roland Busch: Sorry.

Speaker #5: Sorry sorry sorry.

Speaker #3: Yeah.

Roland Busch: Yeah.

Ben Uglow: Yeah.

Speaker #5: Ben to your question to your second part and comparing that that with with the COVID time there two dimensions. One is the go to market the the stocking on the one side and one the supply chain on the other.

Roland Busch: Ben, to your question, to your second part, comparing that with the COVID time, there are two dimensions. One is the go-to-market, the stocking on the one side and one is supply chain on the other.

Speaker #5: Let me start with the supply chain. this since this was a I mean the the up the uptick in the demand was so strong that there was a really a supply chain shortage in particular on international semiconductors less local Chinese ones.

Ben Uglow: Yeah.

Ben Uglow: Let me start with the supply chain. The uptick in the demand was so strong that there was really a supply chain shortage, in particular on international semiconductors, less local Chinese ones, which was raising lead times for supply to, I don't know, 10 weeks, 20 weeks, whatever. Completely off. We don't see that. We are looking at the supply chain. There are certain constraints, but there's no alarm at this point in time that the M2 will fall short. Could that be that there's a price increase? Yes, our economic equation is positive, as said, and it will stay positive. It's even increased a little bit, therefore that's good. If it comes to the sell-through, we don't see an increase in stocking. We are watching that closely.

Roland Busch: Let me start with the supply chain. The uptick in the demand was so strong that there was really a supply chain shortage, in particular on international semiconductors, less local Chinese ones, which was raising lead times for supply to, I don't know, 10 weeks, 20 weeks, whatever. Completely off. We don't see that. We are looking at the supply chain. There are certain constraints, but there's no alarm at this point in time that the M2 will fall short. Could that be that there's a price increase? Yes, our economic equation is positive, as said, and it will stay positive. It's even increased a little bit, therefore that's good. If it comes to the sell-through, we don't see an increase in stocking. We are watching that closely. There's no sign that this happens, but we have to stay tuned, and we do that in order to avoid any signals from this perspective.

Speaker #5: Which was raising lead times for supply to I don't know 10 weeks 20 weeks whatever. So completely off. We don't see that. we are we are looking at supply chain there are I mean certain constraints but we don't there's no alarm at this point in time that we we aim to fall short.

Speaker #5: Could that be that there's a a price increase? Yes, but we our economic equation is positive as said and it will stay positive. It even increased a little bit.

Speaker #5: So therefore, that's good. If it comes to the sell-through, we don't see an increase in stocking. We are watching that closely, so there's no sign that this happens.

Roland Busch: There's no sign that this happens, but we have to stay tuned, and we do that in order to avoid any signals from this perspective.

Speaker #5: But we have to stay tuned, and we do that in order to avoid any signals from this perspective.

Speaker #4: Understood. Thank thank you very much Roland. Very helpful.

Ben Uglow: Understood. Thank you very much, Roland. Very helpful.

Speaker #2: Next question please.

Tobias Atzler: Next question, please.

Speaker #3: Then the next question comes from Jonathan Monsey from BNB Paribas. Please go ahead.

Operator: The next question comes from Jonathan Mounsey from BNP Paribas. Please go ahead.

Speaker #1: thank you for fitting me in. maybe I'd like to ask one about software strategy. particularly in the context of what's been happening in the first half in terms of investor sentiment around software.

Jonathan Mounsey: Thank you, for fitting me in. I'd maybe like to ask one about software strategy, particularly in the context of what's been happening in H1 in terms of investor sentiment around software. Obviously, software revenue looks strong this quarter and SaaS transition is almost complete. I just want to understand, I think, is the market moving away and towards new ways that you'll have to adapt to? Investors have been worried about the revenue model of PLM competitors in H1, I know that's been traditionally linked to the number of seats as kind of a proxy for product usage, at least historically, when humans were doing the work. Going forward, AI may drive down the number of seats. How are you going to adapt to that future? Are you tokenizing your software?

Speaker #1: So obviously software revenue looks strong this quarter and SAS transition is almost complete. But I just want to understand I think is the market moving away and and towards new ways that you'll have to adapt to.

Speaker #1: Investors have been worried about the revenue model of PLM competitors in the first half, and I know that's been traditionally linked to the number of seats—that's kind of a proxy for product usage, at least historically, when humans were doing the work.

Speaker #1: But going forward, AI may drive down the number of seats, and how are you going to adapt to that future? Are you tokenizing your software?

Jonathan Mounsey: Are you able to charge for actual usage on outcomes, are you moving your customers towards that? If so, how are they responding? Are you having those conversations?

Speaker #1: are you able to charge for actual usage on outcomes and are you moving your customers towards that? And if so how are they responding?

Speaker #1: Are you having those conversations?

Speaker #5: So this is a this is a this is quite a bit. Let me start. yes we are we are seeing a strong demand in our on our software.

Roland Busch: This is quite a bit. Let me start. Yes, we are seeing a strong demand on our software, which underlines that what we are saying, that the software which we are selling, it's not a workflow-based, rule-based software. It's physics-based simulation. It's data center with a single source of truth, with a very structured way of storing your data with contextualization. This holds true for our PLM as well as EDA software. Therefore, good things here, firstly. Secondly, yes, our SaaS transition is, we are through. We see a higher growth rate. We see a very good picking up in the margins as well, which continues also in the next year. Whatever we planned at that point in time, when we pulled the trigger for this host transformation, happens, materializes as planned or even better.

Speaker #5: Which underlines that what we are saying that the software which we are selling it's not a workflow based rule based software. It's physics based simulation.

Speaker #5: It's data center with a single source of truth with a very structured way of of storing your data with contextualization. So and and this was true for PLM as well as EDA software.

Speaker #5: So therefore I mean good things here. Firstly. Secondly yes our SAS transition is we are through. We see in we see higher growth rate.

Speaker #5: We see a very good picking up in the margins as well which continues also in the next year. So whatever we planned at that point in time when we when we pulled the trigger for this SAS transformation happens materializes as planned or even better.

Speaker #5: even better. on the on the other point we you you know that we are rewriting and and and and and charging our software with AI capabilities.

Roland Busch: On the other point, you know that we are rewriting and charging our software with AI capabilities. We are taking care that, for example, in the future, our simulation software will be used by engineers and agents. The user interface changes. We have embedded functionality in our software, which already creates revenue. We are currently not charging tokens. We are running a license model and a SaaS model, pushing also for SaaS. We have the highest growth for SaaS, which plays out very well. We are ready from that perspective that we run software out of a SaaS model, out of the cloud. We can update a very short notice, which is super relevant for any kind of AI functionality which rolls in as we go forward.

Speaker #5: So we are taking care that for example in the future simulation was our simulation software was used by engineers in the future will be used by engineers and agents.

Speaker #5: So the user interface changes we have embedded functionality in in our software which already creates revenue and currently we are we are looking into we we are currently not charging tokens we are running a more we are running a license model and SAS model pushing also for SAS we have the highest growth for SAS which plays out very well.

Speaker #5: So we are we are ready for from that perspective that we ca we run software out of out of a SAS model out of the cloud.

Speaker #5: We can update very short notice which is super relevant for any kind of AI functionality which rolls in as we go forward. The more we are we are using AI models and and also underlying LLMs by the way we use all of them also open source model in particular those because once you have your model trained you can use cheaper tokens and and any kind of model on on the edge or in our software.

Roland Busch: The more we are using AI models and also underlying LLMs, by the way, we use all of them, and also open source model in particular those, because once you have your model trained, you can use cheaper tokens, and in any kind of model on the edge or in our software. We are also thinking about how we monetize. Would we then go into a token base? This is really more the future. We are looking into that. Let me give you one example where we did not do that. Our engineering agent, which is by design priced as what it is. It's an engineering tool. In that market, people used to pay license, so we are charging license fees. Customers are ready to pay. We have a doubling and tripling over the last weeks of customers.

Speaker #5: We are also thinking about how we monetize. Would we then go into a token-based model? But this is really more for the future. We are looking into that.

Speaker #5: For example, let me give you one example where we did not do that. Our Eigen Engineering agent, which we by design priced as what it is—it's an engineering tool.

Speaker #5: And in that market, people used to pay license fees. So we are charging license fees, and customers are ready to pay. We have a trend coupling and tripling over the last weeks of con customers.

Speaker #5: So, this is— I think this is one of the fastest-growing products which we, at least as long as I can look back, which we launched in the market.

Roland Busch: I think this is one of the fastest-growing products, at least as long as I can look back, which we launched in the market. It's a very dynamic environment, and we are definitely looking into how we can change our models going forward, pricing models. Of course, we are looking more and more for ARR-like models because they have a lot of advantage, again, in driving innovations fast because you can update. Last point is on this amount of seats going down. Yeah, we believe the usage goes up, which we eventually then charge via a usage of agents and/or engineers, because we have now much more powerful tools which can be used, thanks to AI, by many more people. We are democratizing our software away from scientists or physicists who are making models. Let me give you one example.

Speaker #5: So, it's a very dynamic environment, and we are definitely looking into how we can change our models going forward—pricing models.

Speaker #5: Of course we are looking more and more for ARR like models because they have a lot of advantage again in driving innovations fast because you can update last point is on this amount of seats going down yeah but there the use we believe the usage goes up which we eventually then charge via a usage of agents and or engineers.

Speaker #5: Because we have now much more powerful tools which we can be used thanks to AI by many many more people. We are democratizing our software away from scientists or or physicists who are making models and give you one example when currently when you when you simulate something you have to mesh your object our software avoids this whole cumbersome mashing exercise and you can start right away right away with simulations check out for our reinvent streamings and you can see that what what we offered there.

Roland Busch: Currently when you simulate something, you have to mesh your object. Our software avoids this whole cumbersome meshing exercise, and you can start right away with simulations. Check out for our re:Invent streamings, you can see that's what we offer there.

Speaker #1: Thank you.

Phil Buller: Thank you.

Jonathan Mounsey: Thank you.

Speaker #2: Next question please.

Tobias Atzler: Next question, please.

Speaker #3: The next question comes from Phil Buller from JP Morgan. Please go ahead.

Operator: The next question comes from Phil Buller from J.P. Morgan. Please go ahead.

Operator: The next question comes from Phil Buller from JPMorgan. Please go ahead.

Speaker #1: Good morning. Thank you. Just to clarify, firstly, if I may, Veronica, when your economic equation commentary—did you suggest or say you put two additional pricing actions in the quarter?

Phil Buller: Good morning. Thank you. Just to clarify, firstly, if I may, Veronika, on your economic equation commentary, did you suggest or say you put two additional pricing actions in the quarter? My question, though, is on SI margins. 20% is obviously very strong. I appreciate there's some tariff refund in there, but your performance is now at or around the high end of the medium-term guidance. You're booking huge orders. Is there any reason to believe that those orders are margin diluted by nature because of the data center dynamics, or should we anticipate further progression in 2027, or is there a need to step up investments? Thanks.

Speaker #1: My question, though, is on SI margins. Twenty percent is obviously very strong. I appreciate there's some tariff refund in there, but your performance is now at or around the high end of the medium-term guidance.

Speaker #1: Your booking of huge orders—is there any reason to believe that those orders are margin-dilutive by nature because of the data center dynamics, or should we anticipate further progression in 2027, or is there a need to step up investments?

Speaker #1: Thanks.

Veronika Bienert: With regards to the economic equation in this quarter, we could really compensate cost inflation as well with the relevant pricing measures. Therefore, we are here very well underway. With regards to the tariff refunds, I already mentioned that really a net, the impact out of tariff was only 50 basis points. Therefore, the tariff impact was really on a lower level here. Going forward, the teams are extremely committed to level out the relevant price increases and to, in a very diligent manner, steer that as well with the relevant pricing of our products. That's the current approach. Therefore, I confirmed as well that we are committed to a net positive economic equation for the entire fiscal year. Going forward, we will maintain this very ambitious productivity approach going forward in SI.

Speaker #3: So, with regard to the economic equation in this quarter, we could really compensate cost inflation as well with the relevant pricing measures.

Speaker #3: So therefore we are here very well underway. And with regards to the tariff refunds I already mentioned that really a net the impact are out of tariff was all only kind of 50 basis points.

Speaker #3: so therefore that the the tariff impact was really on a lower level here. and going forward the teams are extremely committed to level out the the relevant price increases and to in a very diligent manner steer that as well with the relevant kind of pricing of our product.

Speaker #3: Yeah that's the current approach. And therefore I confirmed as well that we are committed to a net positive economic equation for the entire fiscal year.

Speaker #3: And going forward, we will maintain this very ambitious productivity approach within SI.

Speaker #1: I guess I was I was asking as well in terms of the order momentum in SI is huge. Should we assume that there's a lot more investment to come or is that potentially higher margin activity that might be something to consider for 2027?

Phil Buller: I guess I was asking as well in terms of the order momentum in SI is huge. Should we assume that there's a lot more investment to come, or is that potentially higher margin activity that might be something to consider for 2027?

Speaker #3: So, in terms of capital allocation, we are of course very diligent, and we are adjusting our capacities within the SI, in particular EA, EA, and EP environment as needed.

Veronika Bienert: In terms of capital allocation, we are of course very diligent, and we are adjusting our capacities within the SI, in particular EA and EP environment as needed, and depending as well on the order intake and the relevant growth momentum we are having here. We are kind of streamlining that in such way that we adjust our capacities accordingly. As I already mentioned in another context, we look very much into our global footprint to as well further diversify our manufacturing footprint. Therefore, the focus besides Europe is really on Europe to adjust really step by step our manufacturing footprint, but in such way that it stays very modular in the approach so that we can, in a very fast manner, adjust as well our capacity.

Speaker #3: And depending as well on the order intake and the relevant growth momentum we are having here. So we are kind of streamlining that in such a way that we adjust our capacities accordingly.

Speaker #3: And as I already mentioned in another context, we look very much into our global footprint to further diversify our manufacturing footprint as well.

Speaker #3: So therefore, the focus—besides Europe—is really on Europe to adjust, really step by step, our manufacturing footprint, but in such a way that it stays very modular in the approach so that we can, in a very fast manner, adjust as well our capacities.

Speaker #1: Thank you.

Phil Buller: Thank you.

Speaker #2: Next question please.

Tobias Atzler: Next question, please.

Speaker #3: Next question comes from Martin Wilkie from Citi. Please go ahead.

Operator: Next question comes from Martin Wilkie from Citi. Please go ahead.

Speaker #1: Yeah thank you. Good morning. It's Martin at City. I just wanted to come back to the comments you made on profitability in in software.

Martin Wilkie: Yeah, thank you. Good morning. It's Martin at Citi. I just wanted to come back to the comments you made on profitability in software. You talk about a sharp improvement. I know there's a lot of moving parts, including some lower integration costs. Just to understand, to X that integration cost, what is driving that pickup? It looks like EDA was stronger, so potentially it's mixed. We're also going through probably the final part of the SaaS transition. Has that been a driver? Is it early synergies from the recent deals? Just if you could step through what's driven that pickup in software profitability. Thank you.

Speaker #1: You you talk about a a sharp improvement. I know there's a lot of moving parts including some lower integration costs. So just to understand the exact integration costs what's driving that pickup?

Speaker #1: It looks like ETA was stronger so potentially it's mixed. But what we're also going through probably the final part of the SaaS transition. You know has that been the driver?

Speaker #1: Is it early synergies from the recent deal? If you could just step through what's driven that pickup in software profitability. Thank you.

Speaker #3: so I go first. and and so with regards to to Altair and Dotmatics we are very happy with the integration performance. So if you look really at the the our synergies from a cost perspective but we see as well as well first indicators as well of revenue synergies so we are very confident that we can execute as planned and maybe even in certain areas faster than originally planned.

Veronika Bienert: I go first. With regards to Altair and Dotmatics, we are very happy with the integration performance. If you look really at our synergies from a cost perspective, you see as well as the first indicators as well of revenue synergies. We are very confident that we can execute as planned and maybe even in certain areas, faster than originally planned. Therefore that is, of course, something which is translating into our activities. Then if we look at our SaaS transition, we are at the end of the belly of the fish. Here as well, the performance and the conversion is increasing step by step. That is as well something which makes us very confident. If you look, I already mentioned, for Q3, the integration costs are 70 basis points.

Speaker #3: So, therefore, that is, of course, something which is translating into our activities. And then, if we look at our SaaS transition, we are at the end of the belly of the fish.

Speaker #3: So here as well the the performance and and the conversion is increasing step by step. That is as well something which makes us very confident.

Speaker #3: And if you look so I already mentioned for Q3 the integration costs are 70 basis points but since we are accelerating to our overall plan so we are very confident going forward that we will execute as expected.

Veronika Bienert: Since we are accelerating to our overall plan, we are very confident, going forward that we will execute as expected.

Speaker #3: Yeah.

Speaker #1: On on a on a general note regarding the the SaaS above and beyond our integration again with Altair and Dotmatics which we are really happy about.

Roland Busch: On a general note, regarding the SaaS, above and beyond our integration, again, with Altair and Mendix, which we are really happy about. It runs as planned and better. There's a couple of elements in there. Number one is if you want to cloudify your software, you have to rewrite some code, you have to bring it on the cloud, which has benefits as well because you can release features faster, which is obviously driving the usage. This is an investment in our software. Just to get it right, we do not write all the 100% of our code, it's only pieces of that, but we are rewriting this investment we took in the beginning of our SaaS transition. We still continue to rewrite software code, obviously, and again, now supported with AI technology. This major investment is behind us.

Speaker #1: It it runs as planned and and and better. you know there's there's a couple of elements in there. Number one is if if you want to cloudify your software you have to rewrite some code.

Speaker #1: You have to bring it on the cloud, which has benefits as well, because you can release features faster, which is obviously driving the usage.

Speaker #1: So, therefore, and this has to be—this is an investment in our software. Just to get it right, we do not write all the—100% of our code.

Speaker #1: It's only pieces of that which we are rewriting. This investment we took in the beginning of our SaaS transition. We still continue to rewrite software code, obviously.

Speaker #1: again now it's supported with AI technology. So therefore this major investment is is is behind us. Again still some some forward investment but this is the going concern as you as you once you have the SaaS transition.

Roland Busch: Again, still some forward investment, but this is the going concern once you have the SaaS transition. You have offerings, which we have SaaS offerings where we run the infrastructure. This comes with a higher margin. Some hybrid as well. You have the business mix. We have customers, new customers, small and medium-sized customers, and higher growth, of course. Growth drives also profitability. Remember, we have tens of thousands of small and medium-sized customers, which we didn't see before. This is the package, it really plays out as planned.

Speaker #1: Then you have offerings, which we—we have SaaS offerings where we run the infrastructure. This comes with a higher margin. Some hybrid as well.

Speaker #1: And then you have the business mix. We have customers, new customers, small and medium-sized customers, and higher growth, of course. Growth also drives profitability.

Speaker #1: Remember, we have tens of thousands of small and medium-sized customers which we didn't see before. So therefore, this is the package, and it really plays out as planned.

Speaker #1: Thank you. And is the SaaS transition, no, no, no, done? I mean, should we assume that the drag from that no longer repeats next year?

Martin Wilkie: Thank you. Is the SaaS transition now done? Should we assume that the drag from that no longer repeats next year?

Speaker #2: You know the saying, software is never ready. So, it's done as much as software is never ready.

Roland Busch: You know the saying, software is never ready. It's done as much as software is never ready.

Speaker #1: Great. Thank you.

Martin Wilkie: Great. Thank you.

Speaker #2: Next question please.

Tobias Atzler: Next question, please.

Speaker #3: The next question comes from Max Yates from Morgan Stanley. Please go ahead.

Operator: The next question comes from Max Yates from Morgan Stanley. Please go ahead.

Speaker #1: Hi, thank you. Good morning. I just wanted to ask about the SI division and a little bit around the revenue conversion.

Max Yates: Hi. Thank you. Good morning. I just wanted to ask about the SI division and a little bit around the revenue conversion as we go into 2027. There's maybe two ways to look at this. Your SI orders will be something around EUR 30 billion this year, your revenue's around EUR 25. Maybe zooming into your data center business where your orders may be EUR 3 billion or EUR 4 billion higher than your revenue. I guess what I'm just trying to understand, within the capacity constraints that you have, the duration of the backlog, how much of that additional data center orders, that EUR 3 billion or EUR 4 billion, do you think gets delivered in 2027? I guess what I'm really asking, it looks like based on your backlog, you should see quite a healthy acceleration in revenue growth next year.

Speaker #1: as we go into as we go into 2027. So you know there's maybe kind of two ways to look at this. Your your SI orders will be you know something around 30 billion this year.

Speaker #1: Your revenue is around 25. Or maybe, kind of zooming into your data center business, where your orders may be three or four billion higher than your revenue.

Speaker #1: So I guess what I'm just trying to understand, within the kind of capacity constraints that you have, the duration of the backlog—you know, how much of that additional data center orders, you know, that $3 or $4 billion—do you think gets delivered in 2027?

Speaker #1: And, you know, I guess what I'm really asking—you know, it looks like, based on your backlog, you should see quite a healthy acceleration in revenue growth next year.

Speaker #1: Is there anything we should consider in terms of timing of backlog constraints around capacity that wouldn't allow that to be possible? Thank you.

Max Yates: Is there anything we should consider in terms of timing of backlog constraints around capacity that wouldn't allow that to be possible? Thank you.

Speaker #3: Thanks for the question. So, with regards to capacity constraints, of course with such a steep order intake, the translation into revenue and the respective execution for the teams is always a challenge. However, the teams are very well prepared, and the respective ramp-up of capacity where needed is well underway.

Veronika Bienert: Thanks for the question. With regards to capacity constraints, of course, with such a steep order intake, the translation into revenue and the respective execution for the teams is always a challenge. However, the teams are very well prepared and the respective ramp-up of capacity where needed is well underway. Therefore, we don't see, as of now, any implications that we could not execute as planned in terms of revenue.

Speaker #3: So, therefore, we don't see, as of now, any implications that we could not execute as planned in terms of revenue.

Max Yates: And maybe.

Roland Busch: And maybe.

Speaker #1: maybe yeah.

Veronika Bienert: Maybe just to give you another indicator in terms of execution. We reported that we have a record quarter. If you look at SI and the last 6 quarters, the increase in revenue is really on a top level for this quarter. It shows that the teams are very capable to execute on the respective order backlog. You see it in the annex. Here we have the backlog for SI, so this is the EUR 23.7 billion. For next year, it is really close up to EUR 12 billion, which we intend to execute as of now. Yeah.

Speaker #3: And maybe just to to give you another indicator in terms of execution. we reported that we have a record quarter and if you look at SI and the last six quarters the increase in revenue was is really on a top level for this quarter.

Speaker #3: So it shows that the teams are very capable to execute on their respective order backlog. So, as you see in the annex here, we have the backlog for SI.

Speaker #3: So, this is the $23.7 billion, and for next year it is really up close to $12 billion, which we intend to execute. Yeah.

Speaker #3: As of now. Yeah.

Speaker #1: Okay, that's helpful. Thank you very much.

Max Yates: Okay. That's helpful. Thank you very much.

Speaker #2: Maybe a short comment. look in our our book to book to bill if you look at that our order intake last year revenue order intake projection and this year you will see that this is obviously it's building up.

Roland Busch: Maybe a short comment. Look in our book-to-bill. If you look at that, our order intake last year, revenue order intake projection in this year, you will see that this is obviously it's building up, and we convert it as we speak. We take care that we are fulfilling the demand of our customers in capacity expansions, driving productivity at the same time at our plants, that we are sure that we can take this momentum.

Speaker #2: And we converted as we speak, and we take care that we are fulfilling the demand of our customers in capacity expansions.

Speaker #2: Driving productivity at the same time in our plans, so that we assure that we can take this momentum.

Speaker #1: Great. Thank you very much.

Max Yates: Great. Thank you very much.

Speaker #2: Next question please.

Tobias Atzler: Next question, please.

Speaker #3: The next question comes from Alex Virgo from Evercore ISI. Please go ahead.

Operator: The next question comes from Alex Virgo from Evercore ISI. Please go ahead.

Speaker #2: Yeah. Morning Roland

Alex Virgo: Yeah. Morning, Roland and Veronika. Thanks for taking the question. I wondered if you could just help me a little bit with the margins in Q4 in DI. Given the guidance on the top line in terms of software and automation mix, I would have expected a more positive mix benefit from that software strength. If you could just give us a sense of why the margins are flat Q on Q. Then if I could just follow up on SI margins. Is there any tariff impact or tariff refund impact implicit in the guidance for SI margins? Thank you.

Speaker #1: and Veronica. Thanks for taking the question. I wondered if you could just help me a little bit with the margins in Q4 in DI.

Speaker #1: Given the guidance on the top line in terms of software and automation mix, I would have expected a more positive mix benefit from that software strength.

Speaker #1: So if you could just give us a sense of why the margins are flat quarter-on-quarter. And then, if I could just follow up on SI margins.

Speaker #1: Are there any— is there any tariff impact in, or tariff refund impact implicit in the guidance for SI margins? Thank you.

Speaker #3: So first, to SI with regards to our guidance for the entire fiscal year: here, what we have reflected is really the net benefit of 50 basis points in the third quarter.

Veronika Bienert: First, to SI, with regards to our guidance for the entire fiscal year. Here, what we have reflected is really the net benefit of 50 basis points in Q3. In Q4, it is just in the regular refunds we have from a daily operation, but there are no major implications baked into our outlook. That's with regards to SI. It's really coming from the operational execution within SI. As of now, there are no special effects baked in out of tariff. For DI, there's as well, in terms of profitability, we always need to look at the mix between automation and software. Therefore, that really plays as well a role and in particular in the discrete industry. Yeah, that is something we take into consideration and as well in certain markets.

Speaker #3: In the fourth quarter it is just in a kind of the regular re refunds we have from a from a kind of daily operation but there are no major implications baked in in into our outlook.

Speaker #3: So that's with regard to SI. So it's really coming from the operational execution within SI. As of now, there are no special effects baked in out of tariffs.

Speaker #3: And for DI, there's as well, in terms of profitability, we always need to look at the mix between automation and software.

Speaker #3: So therefore that really plays as well a role and in particular in the yeah in the discrete industry. Yeah. So that is something we take into consideration and as well in certain markets in if you further even drill down so what is within the discrete industry what is more tied to the machinery so Roland and myself we reported that we have a strong growth in the machinery environment.

Veronika Bienert: If you further even drill down, within the Digital Industries, what is more tied to the machinery. Roland and myself, we reported that we have a strong growth in the machinery environment, therefore that is as well reflected in the overall mix.

Speaker #3: So, therefore, that is also reflected in the overall mix.

Speaker #1: Okay. Thank you.

Alex Virgo: Okay. Thank you.

Speaker #2: We will take one last question.

Tobias Atzler: We will take one last question.

Speaker #3: Today's last question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Operator: Today's last question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Speaker #4: Hi. Good morning. Thank you for taking my question. I'll try to be quick. we have seen several of your your peers embarking in in larger M&A in the in in the last couple of weeks.

Daniela Costa: Hi. Good morning. Thank you for taking my question. I'll try to be quick. We have seen several of your peers embarking in larger M&A in the last couple of weeks. Just wondering if you could give us an update in terms of digital versus product and sort of what are the areas where you think it might be interesting to strengthen your portfolio. Thank you.

Speaker #4: Just wondering if you could give us an update in terms of digital versus product, and sort of what are the areas where you think it might be interesting to strengthen your portfolio.

Speaker #4: Thank you.

Speaker #2: Yeah. We are we are watching these acquisitions also with interest. so we are we are looking definitely in the in the software space but in not only in the core software pieces in our PLM EDA we have some bolt on EDA acquisitions which we talked about recently which are super interesting small though but very interesting in complement our portfolio.

Roland Busch: Yeah, we are watching these acquisitions also with interest. We are looking definitely in the software space, but not only in the core software pieces in our PLM EDA. We have some bolt-on EDA acquisitions, which we talked about recently, which are super interesting. Small, though, but very interesting and complement our portfolio. We are looking into also the infrastructure space, if there's our grid control, grid automation infrastructure, and software is still in our focus. We're expanding our focus, as I said in the last calls, also in operation software. Now software coming from design space now into the operation space on the ground, but also in the maintenance space. Another dimension is the whole data layer environment.

Speaker #2: We are looking into the infrastructure space as well, if there's our grid, grid control, grid automation infrastructure. And software is still in our focus.

Speaker #2: We're expanding our focus, as I said in the last course, also in operation software. So not software coming from design space, now into the operation space on the ground, but also in the maintenance space.

Speaker #2: Another dimension is the data—the whole data layer environment. This goes a little bit also with our organic development, looking into our Intelligence Center X portfolio.

Roland Busch: This goes a little bit also with our organic development, looking to our Intelligence Center X portfolio, with the products which we have also via Altair with RapidMiner, but also Graph Studio. We're looking into ontologies and databases, which is a little bit a kind of a cross-reading to Cognite, but Cognite is very focused on upstream business. We are looking into that space, too. We are also having a view on, since you maybe refer also to the acquisition, which is done by ABB on just solid instruments. I think they come with good margins. If we find assets where we have data creating assets which are connected, which are supporting our strategy, or again, supporting our strong EA or EP portfolio, we would definitely look into this space, too.

Speaker #2: Where we with with the products which we have also wire Altair with rapid minor but also Graph Studio we're looking into ontologies and and databases which is a little bit a kind of a a a cross reading to Cognite but but Cognite is very focused on on upstream business.

Speaker #2: We are looking into that space, too. But we are also having a view, since maybe you refer also to the acquisition which was done by ABB on just Solid Instruments, which I think they come with good margins.

Speaker #2: if we find assets where we have data creating assets which are connected which are supporting our strategy or again supporting our strong EA or EP portfolio we would definitely look into this space too.

Speaker #4: Very clear. Thank you.

Daniela Costa: Very clear. Thank you.

Speaker #1: Thanks a lot to everyone for participating today. As always, the team and I will be available for further questions. We wish you a relaxing summer break and look forward to meeting many of you in September on various occasions.

Tobias Atzler: Thanks a lot to everyone for participating today. As always, the team and I will be available for further questions. We wish you a relaxing summer break and look forward to meeting many of you in September on various occasions. Have a nice day and goodbye.

Speaker #1: Have a nice day and goodbye.

Operator: Ladies and gentlemen, that will conclude today's conference call, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye. Please stand by. We are about to begin. Good morning, ladies and gentlemen, and welcome to the Siemens Q3 2026 Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on page two of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Operator: Ladies and gentlemen, that will conclude today's conference call, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

Speaker #3: Goodbye. Please stand by. We're about to begin. Good morning, ladies and gentlemen, and welcome to the Siemens 2026 third-quarter conference call. As a reminder, this call is being recorded.

Speaker #3: Before we begin, I would like to draw your attention to the safe harbor statement on page 2 of the Siemens presentation. This conference call may include forward-looking statements.

Speaker #3: These statements are based on the company's current expectations and certain assumptions, and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, Head of Investor Relations.

Speaker #3: Please go ahead, sir.

Speaker #2: Good morning, ladies and gentlemen, and welcome to our fiscal Q3 2026 conference call. All documents were released this morning and can also be found on our IR website.

Tobias Atzler: Good morning, ladies and gentlemen, and welcome to our fiscal Q3 2026 conference call. All documents were released this morning and can be found also on our IR website. I am here today with our CEO, Roland Busch, and our CFO, Veronika Bienert. Both will review the Q3 results. After the presentation, we will have time for Q&A. With that, I hand it over to you, Roland.

Speaker #2: I'm here today with our CEO, Roland Busch, and our CFO, Veronica Binat. Both will review the Q3 results. After the presentation, we will have time for Q&A.

Speaker #2: With that, I hand it over to you, Roland.

Speaker #1: Thank you, Tobias, and good morning, everyone. Thank you for joining us to discuss our third quarter results. Siemens delivered another record third quarter with strong performance across all metrics.

Roland Busch: Thank you, Tobias, and good morning, everyone, and thank you for joining us to discuss our Q3 results. Siemens delivered another record Q3 with strong performance across all metrics, despite a persistently volatile geopolitical environment. We have been making good progress in driving customer value and fast innovation by executing our ONE Tech program. Our technological leadership across all our businesses, our focus on driving industrial AI, and our strong position in attractive markets provide a solid basis for sustained value creation. Let me now turn to the highlights. Book-to-bill reached an outstanding 1.34, lifting order backlog to a record €132 billion. Group orders surged to an all-time high of €27.9 billion, up 14% on the prior year. Smart Infrastructure topped the €8 billion order intake mark for the first time.

Speaker #1: Despite a persistently volatile geopolitical environment, we have been making good progress in driving customer value and fast innovation by executing our One-Tech program. Our technological leadership across all our businesses, our focus on driving industrial AI, and our strong position in attractive markets provide a solid basis for sustained value creation.

Speaker #1: Let me now turn to the highlights. Book-to-bill reached an outstanding 1.34, lifting order backlog to a record €132 billion. Group orders surged to an all-time high of €27.9 billion, up 14% on the prior year.

Speaker #1: Smart Infrastructure topped the €8 billion order intake mark for the first time. SI's data center vertical showed exceptional momentum again, with triple-digit order growth over the prior year and exceeding our excellent Q2.

Roland Busch: SI's data center vertical showed exceptional momentum, again with triple-digit order growth over the prior year and exceeding our excellent Q2. Customer demand remains dynamic, driven by the rapid build-out of cloud and AI infrastructure. With +9%, Digital Industries stayed on its path to healthy growth. Its market environment was supportive in industries such as electronics, semiconductors, aerospace, and defense. Besides the beneficiaries of the AI infrastructure build-out, DI also saw some improvements in the broader manufacturing space. Mobility achieved one of its highest quarterly order volumes ever, close to the prior year's exceptional level. Looking ahead, several high-profile contracts for improving rail services in Germany are already on the books for the Q4. Overall, broad-based revenue growth reached 8%, fueled by Digital Industries and Smart Infrastructure. All regions contributed to growth. The Americas led the way, up 11%, fueled by strong momentum in the United States.

Speaker #1: Customer demand remains dynamic, driven by the rapid build-out of cloud and AI infrastructure. With plus 9%, Digital Industries stayed on its path to healthy growth.

Speaker #1: Its market environment was supportive in industries such as electronics, semiconductors, aerospace, and defense. Besides the beneficiaries of the AI infrastructure build-out, DI also saw some improvements in the broader manufacturing space.

Speaker #1: Mobility achieved one of its highest quarterly order volumes ever, close to the prior year's exceptional level. Looking ahead, several high-profile contracts for improving rail services in Germany are already on the books for the fourth quarter.

Speaker #1: Overall, broad-based revenue growth reached 8%, fueled by Digital Industries and Smart Infrastructure. All regions contributed to growth. The Americas led the way, up 11%, fueled by strong momentum in the United States.

Speaker #1: EMEA grew 6%, and Asia, Australia was up 10%, driven by India, which was up 13%. Industrial business profit reached a record €3.5 billion, resulting in a profit margin of 17.3%, on operational strength of Digital Industries and Smart Infrastructure.

Roland Busch: EMEA grew 6%, and Asia Australia was up 10%, driven by India, which was up 13%. Industrial business profit reached a record EUR 3.5 billion, resulting in a profit margin of 17.3% on operational strengths of Digital Industries and Smart Infrastructure. Effects from tariff refunds in the US, primarily at Siemens Healthineers, also supported profitability. Margin expansion resulted into higher earnings per share pre PPA of EUR 3.14. Free cash flow was a standout achievement, reaching EUR 4.1 billion. After a strong year-to-date performance, we raise our earnings outlook for fiscal 2026 on the group level. Veronika will give you some more color later. To drive future success, we have continued investing organically in switchgear capacity in Frankfurt, as well as in bolt-on acquisitions to strengthen our portfolio in the real and digital worlds.

Speaker #1: Effects from tariff refunds in the US, primarily at Siemens Healthineers, also supported profitability. Margin expansion resulted into higher earnings per share pre-PPA, of 3 euros and 14 cents.

Speaker #1: Free cash flow was a standout achievement, reaching €4.1 billion. After a strong year-to-date performance, we raised our earnings outlook for fiscal 2026 on the Group level. Veronica will give you some more color later.

Speaker #1: To drive future success, we have continued investing organically in switchgear capacity in Frankfurt, as well as in bolt-on acquisitions to strengthen our portfolio in the real and digital worlds.

Speaker #1: We made progress regarding the plan to deconsolidate Siemens Healthineers, and Veronica will give you an update on the tax authority's decision and the timeline.

Roland Busch: We made progress regarding the plan to deconsolidate Siemens Healthineers, Veronika will give you an update on the tax authority's decision and the timeline. In addition to contractual topics that we discuss in a constructive dialogue with Siemens Healthineers, we plan to reduce our supervisory board mandates from Siemens AG managing board members from three to one, effective as of Siemens Healthineers next AGM in February 2026. Veronika and I will drop our mandates. Over recent years, three companies have developed from Siemens roots into market and technology leaders in their respective fields. We understand Siemens Healthineers' and Siemens Energy's considerations regarding the use of independent brands in the future. We are pursuing a clear strategy in this respect to ensure an orderly process with both companies in line with existing agreements and for the benefit of all stakeholders involved.

Speaker #1: In addition to the contractual topics that we discussed in a constructive dialogue with Siemens Healthineers, we plan to reduce our Supervisory Board mandates from Siemens AG Managing Board members from three to one, effective as of Siemens Healthineers' next AGM in February 2026.

Speaker #1: Veronica and I will drop our mandates. Over recent years, three companies have developed from Siemens' roots into market and technology leaders in their respective fields.

Speaker #1: We understand Siemens Healthineers' and Siemens Energy's considerations regarding the use of independent brands in the future. We are pursuing a clear strategy in this respect to ensure an orderly process with both companies, in line with existing agreements and for the benefit of all stakeholders involved.

Speaker #1: Siemens will sharpen its image as the trusted technology partner for the AI age—a company with a unique ability to combine the real and the digital worlds.

Roland Busch: Siemens will sharpen its image as the trusted technology partner for the AI age, a company with a unique ability to combine the real and the digital worlds. Now, let's look at the four key levers for driving our growth ambitions as one tech company. First, we start with grow digital. During the first nine months of fiscal year 2026, we grew our digital business revenue by 18% on a nominal basis, well ahead of the ambition level of 15% that we set last November. With Vectron X, we welcome a new member to the Siemens Xcelerator family. Vectron X is a highly digitalized next-generation locomotive that builds on our best-selling Vectron platform. Its digital driver's cab features a smart screen, app functionalities with standardized interfaces, and near real-time connectivity. The result, enhanced driver experience, higher operational efficiency, and optimized data-driven maintenance. Second, grow regions.

Speaker #1: Now, let's look at the four key levers for driving our growth ambitions as one tech company. And first, we start with grow digital. During the first nine months of fiscal year 2026, we grew our digital business revenue by 18% on a nominal basis, well ahead of the ambition level of 15% that we see last November.

Speaker #1: Set last November, with Vectronics we welcome a new member to the Siemens accelerator family. Vectronics is a highly digitalized, next-generation locomotive that builds on our best-selling Vectron platform.

Speaker #1: Its digital driver's cap features a smart screen, app functionalities with standardized interfaces, and near real-time connectivity. The result? Enhanced driver experience, higher operational efficiency, and optimized, data-driven maintenance.

Speaker #1: Second, grow regions. With a landmark agreement, we have deepened our collaboration with HD Hyundai to create a scalable blueprint for digital shipyards. The agreement includes a low triple-digit million contract for a broad range of industrial software and automation offerings.

Roland Busch: With a landmark agreement, we have deepened our collaboration with HD Hyundai to create a scalable blueprint for digital shipyards. The agreement includes a EUR low triple-digit million contract for a broad range of industrial software and automation offerings. By connecting data, software, and automation technologies across the shipyard, we are creating the operating system for industrial AI. These capabilities will help shipbuilders increase capacity, improve quality, and reduce rework. We will support the launch of the US-Korea Shipbuilding Technology Cooperation Center. It will be a platform for exploring modernization strategies and strengthening maritime competitiveness in the US and allied markets. Third, grow verticals. The semiconductor industry showed strong growth momentum driven by the AI flywheel. We capitalized on this demand with attractive orders across our entire portfolio. Among them was a wide-ranging electrification win for a major new fab project in the US.

Speaker #1: By connecting data, software, and automation technologies across the shipyard, we are creating the operating system for industrial AI. These capabilities will help shipbuilders increase capacity, improve quality, and reduce rework.

Speaker #1: We will support the launch of the US-Korea Shipbuilding Technology Cooperation Center. It will be a platform for exploring modernization strategies and strengthening maritime competitiveness in the US and allied markets.

Speaker #1: Third, grow verticals. The semiconductor industry showed strong growth momentum driven by the AI flywheel. We capitalized on this demand with attractive orders across our entire portfolio.

Speaker #1: Among them was a wide-ranging electrification win for a major new fab project in the US. At Computex, we announced an expansion of our partnership with Intel across the entire value chain, from design to chip manufacturing.

Roland Busch: At Computex, we announced an expansion of our partnership with Intel across the entire value chain, from design to chip manufacturing. Fourth growth lever, grow AI. Our IGEM engineering agent continues to demonstrate our ability to rapidly translate advances in AI into commercial industrial software. We have expanded the product globally while continuously introducing new capabilities based on direct customer feedback. Adoption has been strong. Hundreds of customers from across more than 30 countries and ranging from small system integrators to global industrial OEMs have signed on. With the launch of this agent in China at the World AI Conference, we were the only global company to receive the prestigious Super AI Leader Star Award. The PAC, the PAC INNOVATION RADAR, recognized Siemens IGEM engineering agent as the leading platform for GenAI advanced industrial engineering in Europe 2026.

Speaker #1: Fourth growth lever: Grow AI. Our Eigen engineering agent continues to demonstrate our ability to rapidly translate commercial industrial software. We have expanded the product globally, while continuously introducing new capabilities based on direct customer feedback.

Speaker #1: Adoption has been strong. Hundreds of customers from across more than 30 countries, ranging from small system integrators to global industrial OEMs, have signed on.

Speaker #1: With the launch of this agent in China at the World AI Conference, we were the only global company to receive the prestigious Super AI Leader Star Award.

Speaker #1: The PAC Innovation Radar recognized Siemens' Eigen Engineering Agent as the leading platform for Gen AI advanced industrial engineering in Europe for 2026. Another example: at our global customer reference conference, Realize LIVE, we launched Intelligent Center X, a powerful new offering to orchestrate industrial AI.

Speaker #1: Available as part of Siemens Xcelerator. Our customers run plenty of AI pilots, but they usually get stuck in the testing phase. Intelligent Center X breaks that pattern.

Speaker #1: This system enables experts to orchestrate AI agents and bring industrial AI into live operations at scale. The system features four capabilities that work together seamlessly.

Speaker #1: First, it pulls together customer data from across the entire lifecycle in a knowledge graph. Graph Studio puts individual data into their overall context, live and in real time, from design to engineering, manufacturing, and maintenance.

Speaker #1: But also from supply chains and customers, for example. Second, and this is crucial, Intelligent Center X comes with industrial ontologies right out of the box.

Speaker #1: They map how assets, products, and processes in industrial engineering and manufacturing relate to each other. The result is codified, industry-specific knowledge ready to use.

Roland Busch: They map how assets, products, and processes in industrial engineering and manufacturing relate to each other. The result is codified industry-specific knowledge ready to use. The ontologies are linked to our Siemens Xcelerator portfolio. For example, to our market-leading most secure PLM software Teamcenter. Third, AI comes into play. AI Studio delivers machine learning and AI models trained on real operational data. It continuously monitors model quality and established rules, giving AI agents and LLMs access to advanced machine learning and data science to make more reliable predictions and decisions. This approach makes AI explainable and predictable, and thus ready to move into production at industrial scale. Fourth, and finally, Mendix. Customers use this AR-augmented low-code platform to develop their own AI agents and connect them to existing systems and external agents.

Speaker #1: And the ontologies are linked to our Siemens Xcelerator portfolio—for example, to our market-leading, most secure PLM software, Teamcenter. Third, AI comes into play.

Speaker #1: AI Studio delivers machine learning and AI models trained on real operational data. It continuously monitors model quality and establishes rules, giving AI agents and LLMs access to advanced machine learning and data science to make more reliable predictions and decisions.

Speaker #1: This approach makes AI explainable and predictable, and thus ready to move into production at industrial scale. And fourth, and finally, Mendix. Customers use this AR-augmented low-code platform to develop their own AI agents and connect them to existing systems and external agents.

Speaker #1: They govern their AI agents with workflows based on clear roles, where humans continue to have oversight and make critical decisions. As a result, the power of automated AI delivers measurable outcomes in business processes.

Roland Busch: They govern their AI agents with workflows based on clear roles, where humans continue to have oversight and make critical decisions. As a result, the power of automated AI delivers measurable outcomes in business processes. In short, Intelligence Center X makes AI scalable for industry. Early customers are already seeing real successes. It's further proof that Siemens is using AI to deliver unique value to customers. These applications show that industrial AI is becoming real and will continue to drive exceptional growth opportunities for data center infrastructure and compute power. Market fundamentals remain strong, and we are a trusted partner across the entire spectrum, from hyperscalers to colos to enterprise customers. Nine of the global top 10 data centers providers rely on Siemens. The first nine months, order volume reached close to EUR 6 billion, up triple digit over the prior year.

Speaker #1: So in short, Intelligent Center X makes AI scalable for industry. Early customers are already seeing real successes. It's further proof that Siemens is using AI to deliver unique value to customers.

Speaker #1: These applications show that industrial AI is becoming real and will continue to drive exceptional growth opportunities for data center infrastructure and compute power. Market fundamentals remain strong, and we are a trusted partner across the entire spectrum—from hyperscalers to colos to enterprise customers.

Speaker #1: Nine of the global top ten data center providers rely on Siemens. In the first nine months, order volume reached close to $6 billion, up triple digits over the prior year.

Speaker #1: Similarly impressive, the team grew our revenue by more than 50% to $3.1 billion. Our backlog and customer framework agreements provide visibility well into fiscal year 2027 and even beyond, while the sales pipeline looks healthy.

Roland Busch: Similarly impressive, the team grew our revenue by more than 50% to EUR 3.1 billion. Our backlog and customer framework agreements provide visibility well into fiscal year 2027 and even beyond, while the sales pipeline looks healthy. Looking ahead, we might see some volatility in order intake due to lumpiness of large orders. Our strong position today is based on several long-term success factors, such as a comprehensive portfolio across disciplines, including prefabricated, modular, and standardized solutions. Our reliable track record of execution with the ability to grow global delivery capacities and supply chains accordingly. Proven global domain knowhow available in regional hubs. A strong ecosystem of partners across the full value chain. Building on this strength, we are shaping the roadmap towards 800-volt direct current architecture, which will be required to deal with high rack density in AI factories in an efficient and reliable way.

Speaker #1: Yet, looking ahead, we might see some volatility in order intake due to the lumpiness of large orders. Our strong position today is based on several long-term success factors.

Speaker #1: Such as a comprehensive portfolio across disciplines, including prefabricated, modular, and standardized solutions. Our reliable track record of execution, with the ability to grow global delivery capacities and supply chains accordingly.

Speaker #1: Proven global domain know-how, available in regional hubs, and a strong ecosystem of partners across the full value chain. Building on these strengths, we are shaping the roadmap towards 800-volt direct current architecture, which will be required to deal with high rack density in AI factories in an efficient and reliable way.

Speaker #1: Rather than being a wholesale shift, adoption of 800-volt DC is likely to progress in stages over the next four to five years, with hybrid architectures dominating the early phases.

Speaker #1: As technologies mature and operational requirements and standards evolve, a centralized DC distribution architecture will become viable. However, we expect that AC and DC will also coexist, with mixed topologies in brownfield retrofits and greenfield installations.

Speaker #1: We are helping major data center providers to design, test, and deploy safe and reliable DC power distribution to tackle the high-density challenge they are facing.

Speaker #1: And we expect the first pilots in 2027. At Siemens, we know how to handle a DC environment, based on our experience in other areas such as marine applications, battery storage, and industrial campuses.

Speaker #1: With our proven capabilities in digital twin, automation, and electrification, we can deliver a holistic approach—from designing and simulating systems to innovating at the component level.

Roland Busch: With our proven capabilities in digital twin, automation, and electrification, we can deliver a holistic approach from design and simulating systems to innovating on the component level. We are driving organic innovation partnerships and a broadening of the ecosystem. Let me highlight some recent innovation examples to show our progress. We developed a reference architecture together with NVIDIA, nVent, and Fluence across compute, cooling, power, and control systems for the latest DGX VeraRubin platform. The goal, maximizing tokens per watt and ensure predictable, scalable operations. Building on this architecture, we have developed a modular and scalable automation framework with ready-to-use SIMATIC libraries. Our POCs are already automating critical OT infrastructure in several megawatt-scale data centers. In the electrification area, we are continuously optimizing our factory-assembled pre-tested kits and are working on new DC products.

Speaker #1: We are driving organic innovation partnerships and a broadening of the ecosystem. Now, let me highlight some recent innovation examples to show our progress. We developed a reference architecture together with NVIDIA, nVent, and Fluence across compute, cooling, power, and control systems for the latest DSX Vera Rubin platform.

Speaker #1: The goal? Maximizing tokens per watt and ensuring predictable, scalable operations. Building on this architecture, we have developed a modular and scalable automation framework with ready-to-use SIMATIC libraries.

Speaker #1: Our PLCs are already automating critical OT infrastructure in several megawatt-scale data centers. In the electrification area, we are continuously optimizing our factory-assembled, pre-tested kits and are working on new DC products.

Speaker #1: One great example is our collaboration with Infineon, where we are integrating their silicon carbide power modules into our latest solid-state circuit breakers—a critical enabler for safe and reliable distribution of DC power.

Roland Busch: One great example is our collaboration with Infineon, where we are integrating their silicon carbide power modules into our latest solid-state circuit breakers, a critical enabler for safe and reliable distribution of DC power. Summing up, we are very well positioned to win in traditional and hybrid architectures and on the way forward to 800-volt DC. I'm very pleased with the momentum and performance of our DI software business. At 11% over the prior year quarter, organic ARR growth remained at a very healthy level. Integration of our Altair and Dotmatics acquisitions is progressing very well. We are bringing our simulation products together and are launching new products. Early revenue synergies are materializing as well. Strategic partnerships, such as those with IFS and Xometry, complement our industrial AI offerings.

Speaker #1: Summing up, we are very well positioned to win in traditional and hybrid architectures and on the way forward to 800-volt DC. I'm very pleased with the momentum and performance of our DI software business.

Speaker #1: At 11% over the prior-year quarter, organic ARR growth remained at a very healthy level. Integration of our Altair and Dotmatics acquisitions is progressing very well.

Speaker #1: We are bringing our simulation products together and are launching new products. Early revenue synergies are materializing well. Strategic partnerships, such as those with IFS and Xometry, complement our industrial AI offerings.

Speaker #1: With IFS, we are offering a digital twin to connect design, production, and asset performance in order to deliver productivity and adaptability for manufacturers. The software business is moving fast.

Speaker #1: Strategically and in operations. You know, over to you, Veronica. Thank you, Roland, and good morning, everyone. Let me share further details on our record Q3 and our outlook for fiscal 2026.

Veronika Bienert: Thank you, Roland. Good morning, everyone. Let me share further details on our record Q3 and our outlook for fiscal 2026. Orders for Digital Industries at EUR 4.9 billion were 9% above the prior year, with a book-to-bill of 0.98. Orders in automation were up 11%, with a book-to-bill of 1.01, driven by the short cycle business. As Roland mentioned, overall market dynamics have been further improving. In addition, I want to point out that DI saw an upswing in its core vertical of machinery driven by China, but improving elsewhere as well. Yet, capacity utilization in some of our key industrial markets, particularly in Europe, is still on a relatively low level. DI software business delivered 5% growth over the prior year, with orders close to EUR 1.7 billion. A key driver was the PLM business, including a major order with a large automotive OEM modernizing its entire system landscape.

Speaker #1: Orders for digital industries at $4.9 billion were 9% above the prior year with a book to bill of $0.98. Orders in automation were up 11% with a book to bill of $1.01 driven by the short cycle business.

Speaker #1: As Roland mentioned, overall market dynamics have been further improving. In addition, I want to point out that DI saw an upswing in its core vertical of machinery, driven by China but improving elsewhere as well.

Speaker #1: A key driver was the PLM business, including a major order with a large automation automotive OEM modernizing its entire system landscape. The EDA business was soft, as expected.

Veronika Bienert: The EDA business was softer as expected. Our backlog at Digital Industries was stable at around EUR 10 billion. Revenue for DI increased 10%. The software business was up a strong 15%, driven by the EDA business growing more than 30%. DI's automation revenue was up 7% to EUR 3.1 billion on broad-based growth in discrete and process automation. DI's profitability improved sharply to 18.7% with a strong contribution from its software business. A high share of accretive EDA revenue and the successful integration of Altair and Dotmatics drove margin expansion. Economies of scale and a clearly net positive economic equation supported margin improvement in the automation business. Sustainable productivity gains more than compensated for cost inflation and increasing pressure from rising prices for selected electronic components. Integration-related costs for Altair and Dotmatics accounted for 70 basis points in Q3, in line with expectations.

Veronika Bienert: I'm very pleased with Digital Industries' extraordinary free cash flow performance of almost EUR 1.5 billion, which is an all-time quarterly high. Cash conversion was excellent in both software and automation. Looking at the regional top-line perspective, Digital Industries' automation businesses grew strongly across most regions. China showed good momentum with orders up 17%, and revenue grew 9% on healthy sequential revenue dynamics fueled by motion control. Our local China portfolio was accretive to revenue growth, up by a rate in the mid-20s. The picture in Europe remains somewhat mixed. Order recovery is on the way, with a book-to-bill above one and healthy growth. Revenue in Germany was still muted due to discrete automation, while the latter drove clear growth elsewhere in Europe. The US continued its growth path. The AI-driven investment boom also supported core manufacturing industries. This benefited our discrete automation business.

Speaker #1: Looking at the regional top-line perspective, DI’s automation businesses grew strongly across most regions. China showed good momentum, with orders up 17% and revenue growing 9% on healthy, sequential revenue dynamics.

Speaker #1: Fueled by motion control, our local China portfolio was accretive to revenue growth, up by a rate in the mid-20s. The picture in Europe remains somewhat mixed.

Speaker #1: Order recovery is on the way, with a book-to-bill above 1 and healthy growth. Revenue in Germany was still muted due to discrete automation, while the latter drove clear growth elsewhere in Europe.

Speaker #1: The US continued its growth path. The AI-driven investment boom also supported core manufacturing industries. This benefited our discrete automation business. Based on delivering a strong performance after nine months, we confirm our DI guidance for fiscal year 2026 in all aspects.

Veronika Bienert: Based on delivering a strong performance after 9 months, we confirm our Digital Industries guidance for fiscal year 2026 in all aspects. Revenue growth is expected in the range of 7% to 10%, and profit margin is expected to reach 17% to 19%. For Q4, we see Digital Industries orders around the prior year level on very tough comps due to an exceptionally high volume of EDA bookings. Automation orders are expected to be clearly up, while the software order volume will be below the prior year's record level. Nevertheless, the software sales funnel is promising. We anticipate that Digital Industries' revenue growth will be in the range of 5% to 7%, supported by growth in automation and software. We expect Digital Industries' profit margin to be flat sequentially because of the business mix.

Speaker #1: Revenue growth is expected in the range of 7% to 10%, and profit margin is expected to reach 17% to 19%. For the fourth quarter, we see DI orders around the prior year level on very tough comps, due to an exceptionally high volume of EDA bookings.

Speaker #1: Automation orders are expected to be clearly up, while the software order volume will be below the prior year's record level. Nevertheless, the software sales funnel is promising.

Speaker #1: We anticipate that DI's revenue growth will be in the range of 5% to 7%, supported by growth in automation and software. We expect DI's profit margin to be flat sequentially because of the business mix.

Speaker #1: Now, let's turn to Smart Infrastructure, which once again delivered an outstanding performance across all businesses and key metrics. Orders were up to a new record level of $8 billion.

Veronika Bienert: Now, let's turn to Smart Infrastructure, which once again delivered an outstanding performance across all businesses and key metrics. Orders were up 42%, reaching a new record level of EUR 8 billion. This increase was driven by massive growth of 58% in Smart Infrastructure's electrical products business and 55% in its electrification business. Both businesses benefited again from a high volume of large order wins with data center customers in the US, but also in Europe, where we won, for example, a large project in the Nordics. Even without the data center-related business, order growth was strong and reached the high teens. Book-to-bill came in at an outstanding 1.25. Smart Infrastructure's record order backlog of EUR 23.7 billion gives us a lot of confidence for sustained growth momentum into fiscal year 2027. Revenue growth was broad-based and reached 13%.

Speaker #1: This increase was driven by massive growth of 58% in SI's Electrical Products business and 55% in its Electrification business. Both businesses benefited again from a high volume of large order wins with data center customers in the US, but also in Europe, where we won, for example, a large project in the Nordics.

Speaker #1: Even without the data center-related business, order growth was strong and reached the high teens. Book-to-bill came in at an outstanding 1.25.

Speaker #1: Siemens’ record order backlog of €23.7 billion gives us a lot of confidence for sustained growth momentum into fiscal year 2027. Revenue growth was broad-based and reached 13%.

Veronika Bienert: The largest contribution, again, came from the electrification business, up 20%, and the electrical products business up 18%. Consistent backlog conversion led to further operational margin expansion. Smart Infrastructure's margin was up 120 basis points year over year to 20%. An impairment related to the e-mobility charging business partly offset positive effects from tariff refunds in the US. The net effect amounted to 50 basis points, implying an operational margin of 19.5%. Structurally, Smart Infrastructure's business continued to benefit from economies of scale due to higher revenue, combined with improved capacity utilization and from sustained productivity improvement. Pricing measures in Smart Infrastructure's product business compensated increasingly, but not yet fully, for higher commodity costs. Free cash flow showed consistent cash conversion at 0.94, with a seasonal increase in operating working capital well below the top-line growth trajectory.

Speaker #1: SiS margin was up 120 basis points year over year to 20%. An impairment related to the e-mobility charging business, partly offset by positive effects from tariff refunds, amounted to 50 basis points, implying an operational margin of 19.5%.

Speaker #1: Structurally, SI's business continued to benefit from economies of scale due to higher revenue combined with improved capacity utilization and from sustained productivity improvement. Pricing measures in SI's product business compensated increasingly, but not yet fully, for higher commodity costs.

Speaker #1: Free cash flow showed consistent cash conversion at 0.94, with a seasonal increase in operating working capital well below the top-line growth trajectory. Looking at the regional top-line development, orders were up double digit across the board, and stringent backlog execution drove revenue in all geographies.

Veronika Bienert: Looking at the regional top-line development, orders were up double-digit across the board and stringent backlog execution drove revenue in all geographies. The US again showed exceptional order momentum, up 81%, led by data center and semiconductor wins. Bookings and buildings saw growth in the low double digits. Germany recorded substantial order growth in buildings. Electrification and electrical products grew around 10%. The Europe and Middle East region also benefited from large data center orders in Finland and Spain. SI's top line in China recovered further, with order strength in buildings ahead of price increase while electrical products drove revenue. The service business delivered 7% growth, clearly up in Asia and in Europe. Our SI teams continue to expect very healthy end market dynamics with data centers and power utilities as key engines for growth.

Speaker #1: The US again showed exceptional order momentum, up 81%, led by data center and semiconductor wins. Bookings in buildings saw growth in the low double digits.

Speaker #1: Germany recorded substantial order growth in buildings. Electrification and electrical products grew around 10%. The Europe and Middle East region also benefited from large data center orders in Finland and Spain.

Speaker #1: Si’s top line in China recovered further with order strengths in buildings ahead of the price increase, while electrical products drove revenue. The service business delivered 7% growth, clearly up in Asia and in Europe.

Speaker #1: Our SI teams continue to expect very healthy market dynamics, with data centers and power utilities as key engines for growth. After delivering 11% revenue growth in the first nine months of fiscal year 2026, and given high visibility from order backlog, we raise SI's guidance for the full fiscal year.

Veronika Bienert: After delivering 11% revenue growth in the first nine months of fiscal year 2026, and given high visibility from order backlog, we raise SI's guidance for the full fiscal year. For comparable revenue growth, we now expect a range of 10% to 11%, up by 150 basis points at the midpoint. Building on a very consistent margin expansion trajectory, we lift SI's profit margin outlook by 50 basis points to a range of 18.5% to 19.5%. For Q4, we anticipate that SI's revenue growth will approach the lower end of the full-year range and that the profit margin will be in line with full-year expectations. Mobility recorded a robust set of results in Q3. Orders at EUR 7.6 billion included a high share of attractive service contracts and topped our expectations with an excellent book-to-bill ratio of 2.35.

Speaker #1: For comparable revenue growth, we now expect a range of 10% to 11%, up by 150 basis points at the midpoint. Building on a very consistent margin expansion trajectory, we lift SI’s profit margin outlook by 50 basis points to a range of 18.5% to 19.5%.

Speaker #1: For the fourth quarter, we anticipate that SI's revenue growth will approach the lower end of the full-year range and that the profit margin will be in line with full-year expectations.

Speaker #1: Order backlog increased to $58 billion with an attractive gross margin profile. As Roland noted, we see a very promising sales outlook for 2026, including the booking of the majority of a $3 billion contract with Italo Holding.

Speaker #1: The contract includes rolling stock as well as a 30-year service agreement. Revenue in Q3 was up 6% over the prior year, fueled by low double-digit growth in the rail infrastructure business.

Speaker #1: After a consistent Q3 performance, we confirm Mobility's full-year outlook for revenue growth in the range of 5 to 7%. We continue to anticipate that Mobility's full-year margin will come in within the range of 8 to 10%, with the expected outcome towards the lower end.

Veronika Bienert: After a consistent Q3 performance, we confirm Mobility's full-year outlook for revenue growth in the range of 5% to 7%. We continue to anticipate that Mobility's full-year margin will come in with the range of 8% to 10%, with the expected outcome towards the lower end. For Q4, we expect Mobility's revenue growth to accelerate on strong backlog execution and achieve a level between 9% and 11%. Profit margin is expected to be within Mobility's full-year guidance. Page 17 in the appendix shows our below IB performance. The results included a strong SFS contribution, fueled by a gain of EUR 156 million from the sale of a stake in an equity investment in the UK. Free cash flow of more than EUR 4.1 billion in Q3 was up more than 40% over the prior year, driven by all industrial businesses.

Speaker #1: Free cash flow of more than €4.1 billion in the third quarter was up more than 40% over the prior year, driven by all industrial businesses.

Veronika Bienert: Free cash flow return on revenue stood at 11% after nine months, we are firmly on track to achieve a double-digit return again for the full year. We further deleveraged our capital structure to 0.6 for industrial net debt over EBITDA, which gives us the entrepreneurial freedom to act from a position of strength. Our leadership team remains fully committed to delivering strengthened capital allocation and strong shareholder return. As Roland already mentioned, we made good progress with our plan to deconsolidate Siemens Healthineers. Meanwhile, as expected, we have now received binding decisions from the tax authorities clarifying the relevant tax topics. As a result, we can proceed with the spin-off of Siemens Healthineers as planned. We confirm the timeline for receiving the shareholders' approval at the annual shareholders' meetings of both companies in February 2027. Currently, we are working on contractual details.

Speaker #1: Execution started swiftly, with a buy-back volume of €400 million in the first month. Finally, here is our group outlook and expectations for our core business at a glance.

Speaker #1: Following the strong first nine months, we raise our fiscal 2026 outlook for EPS pre PPA to a range of 11 euros 20 cents to 11 euros 50 cents up by 45 cents at the midpoint.

Speaker #1: We continue to expect to reach the upper half of our group revenue growth guidance of 6% to 8%. In a time of highly volatile geopolitics, we are leveraging market opportunities and delivering strong earnings performance, with healthy growth and excellent free cash flow.

Veronika Bienert: In a time of highly volatile geopolitics, we are leveraging market opportunities and are delivering strong earnings performance with healthy growth and excellent free cash flow. With that, I hand it back to Tobias for Q&A.

Speaker #1: With that, I hand it back to Tobias for Q&A.

Speaker #2: Thank you, Veronica. We are now ready for Q&A. Please limit yourselves to one question per person. We want to give as many of you as possible the opportunity to raise your questions.

Speaker #2: Operator, please open the Q&A now.

Speaker #3: Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star followed by one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two.

Operator: Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star, followed by one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selection. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question comes from James Moore from Rothschild & Co Redburn. Please go ahead.

Speaker #3: If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star, followed by one, at this time.

Speaker #3: One moment for the first question, please. And the first question comes from James Moore from Rothschild & Co Redburn. Please go ahead.

James Moore: Oh, good morning, everybody, and thanks for the time. I wondered if I could ask about the DI automation orders in China, at the 17% growth, really in two dimensions. I think you mentioned a strong start to the quarter in April and May. I wonder if that is showing us that June has slowed in speed a little bit. Could you talk a little bit about the momentum in the quarter, the speed into July, and what's happening by end market and channel, and whether you see any sign of the strong Chinese cycle, where you've grown 25% and 30% now for nine quarters, slowing at all? The second dimension is really on the 17%. It might seem slow to some against some of the locals growing closer to 40, but you do have a different premium versus value-for-money mix.

Speaker #4: Oh, good morning everybody, and thanks for your time. I wanted to ask about the DI automation orders in China. At the 17% growth—really in two dimensions.

Speaker #4: I think you mentioned a strong start to the quarter in April and May, so I wonder if that is showing us that June has slowed in speed a little bit.

Speaker #4: So could you talk a little bit about the momentum in the quarter, the speed into July, and what's happening by end market and channel? And whether you see any sign of the strong Chinese cycle—where you've grown 25–30% now for nine quarters—slowing at all?

James Moore: Would it be possible just to remind us of the share of sales or orders from value-for-money? I think you mentioned, Veronika, that the VFM segment grew in the mid-20s in revenue, but could you say what it grew at in terms of speed on orders? Thanks very much.

Speaker #4: Thanks very much.

Speaker #3: So, your observation that there was a little bit of a slowdown in June is right. However, in July, we are picking up momentum again.

Roland Busch: Your observation that there was a little bit of a slowdown in June, it's right. However, in July, we are picking up momentum again. Therefore, I would say it's all intact.

Speaker #3: So therefore, it's I would say it's it's all intact. If it comes to China, also the local local products and the 40% you're mentioning, this is the value for money portfolio.

Roland Busch: If it comes to China, also the local product and the 40% you're mentioning, this is the value for money portfolio. Now let's compare this value for money from our side, our China new products or smart products, as we call them. Year to date, it's +30% from our side. You compare that April to June, I assume, 40% of Inovance. We know that Q1 in Inovance was also not that strong. I would say we are equally or even a little bit ahead compared to Inovance. If you compare us to international competitors at the same time, I would say in this segment, we are definitely outperforming.

Speaker #3: And now let's compare value for money with value for money from our side—our China new products, or smart products as we call them.

Speaker #3: Here, year to date, it's plus 30% from our side. And if you compare that April to June, I'm assuming 40% of innovators.

Speaker #3: We know that Q1 in Innovants was also not that strong. So I would say we are equally or even a little bit ahead compared to Innovants.

Speaker #3: So therefore, from that perspective, I would say we feel quite comfortable with the way we are working in and with our Chinese customers with our products.

Speaker #4: Very helpful. Thanks.

James Moore: Very helpful. Thanks.

Speaker #3: Yep.

Roland Busch: Yep.

Speaker #1: Yeah. And and and really from from my side, if we look at again at at the China portfolio, really the the orders were up in Q3 up 20% and as well the the revenue, the 17% I already mentioned.

Veronika Bienert: Really from my side, if you look again at the China portfolio, really the orders were up in Q3, +20%, as well, the revenue, the 17% I already mentioned. If we really look at the development in July for automation, we could see in China, if you look at our dailies, really in the lower 20s in order entry, the development. The ethics comparable, therefore we are quite confident here for the Q4, even though the entire environment is mixed. We definitely see the K-shaped development. We had a strong continuous growth in certain key verticals in Q3, in electronics and the like. For the Q4, the outlook is really that the automation orders are expected to be clearly up year-over-year.

Speaker #1: And if we really look at the development and July for automation, we could see in in China, if we look at at our dailies really in the in the lower 20s in order entry, the development.

Speaker #1: So their ethics are comparable. So therefore, we are quite confident here for the fourth quarter. Even though the entire environment is mixed, we definitely see the key shape development.

Speaker #1: So we have a strong continued or we had a strong continuous growth in certain key verticals in Q3, in electronics and the like. And in the fourth for the fourth quarter, the outlook is really that the automation orders are expected to be clearly up year over year.

Speaker #1: Yeah.

James Moore: Thanks, Veronika.

Speaker #4: Thanks, Veronica.

Speaker #2: Next question, please.

Tobias Atzler: Next question, please. The next question comes from Ben Uglow from Oxcap Analytics. Please go ahead.

Speaker #3: The next question comes from Ben Uklow from Oxcab Analytics. Please go ahead.

Speaker #5: Oh, morning, Roland, Veronica, and Toby. Thank you for taking the question. Just getting into the kind of sequential progress and the dynamics on the automation hardware side, Veronica, if we look at the margin, I think it's maybe a little bit lighter than some of us expected.

Ben Uglow: Morning, Roland, Veronika, and Toby. Thank you for taking the question. Just getting into the kind of sequential progress and the dynamics on the automation hardware side. Veronika, if we look at the margin, I think it's maybe a little bit lighter than some of us expected. Obviously we're hearing from a number of companies now in the automation world about supply chain constraints, memory shortage, lead times, et cetera. Can you give us your thoughts on if that is going to be a factor in the next couple of quarters? I guess a broader question maybe for Roland is if we look at this upcycle, if we look at the growth and the uptrend that we're seeing across a number of industries, not just electronics or semiconductor, how comparable is this with what we were seeing after COVID in that sort of 2021, 2022, 2023 period?

Speaker #5: And obviously, we're hearing from a number of companies now in the automation world about supply chain constraints—memory shortages, lead times, et cetera.

Speaker #5: Can you give us your thoughts on, you know, if if that is going to be a factor in the next couple of quarters? And I guess a broader question, maybe maybe for Roland, is if we look at this upcycle, if we look at the, you know, the the growth and the uptrend that we're seeing across a number of industries, not just electronics or semiconductor, how comparable is this with what we were seeing after COVID in that sort of 21, 22, 23 period?

Speaker #5: And if we look at the supply chain situation today, how does it compare with back then? Thank you.

Ben Uglow: If we looked at the supply chain situation today, how does it compare with back then? Thank you.

Speaker #1: So I I give it a start with regards to the commodity cost, which we are seeing in in the DI business and and they they are having a drag on on DI margins.

Veronika Bienert: I give it a start with regards to the commodity cost, which we are seeing in the DI business, and they are having a drag on DI margins.

Speaker #1: I think that is something we in a very diligent way work with it. And as already mentioned, we are we contributed the DI team contributed with a net positive economic equation in the third quarter.

Veronika Bienert: I think that is something we, in a very diligent way, work with it. As already mentioned, the DI team contributed with a net positive economic equation in Q3. Productivity really continued to contribute it, and was really reinforcing the overall economic equation, and was really significantly helping to offset cost pressure as well. If we look at more or less the entire fiscal year and from an overall outlook, we are as well confirming a net positive economic equation as well for the entire fiscal year, and are very confident with our productivity measures and with a very continued high focus really to offset inflation and demand related cost pressures from supply side.

Speaker #1: And productivity really continue to contributed and and was really equation. And was really significantly helping to offset cost pressure as well. And if we look at the more or less the the entire fiscal year and and from an overall outlook, we are as well confirming a net positive economic equation as well for the entire fiscal year.

Speaker #1: And are very confident with our productivity measures, and with a very continued high focus, really to offset inflation and demand-related cost pressures from the supply side.

Speaker #3: Good.

Tobias Atzler: Good. The next question comes.

Speaker #2: Then the next question comes.

Speaker #3: Sorry, sorry. Sorry. Ben, to your question, to your second part, and comparing that that with with the COVID time, there are two dimensions: one is the go-to-market, the the stocking on the one side and one the supply chain on the other.

Roland Busch: Sorry.

Ben Uglow: Yeah.

Roland Busch: Ben, to your question, to your second part and comparing that with the COVID time, there are two dimensions. One is the go-to-market, the stocking on the one side, and one is supply chain on the other.

Speaker #3: Let me start with the supply chain. This since this was a I mean, the the up the uptick in the demand was so strong that there was a really a supply chain shortage in particular on international semiconductors, less local Chinese ones.

Ben Uglow: Yeah.

Ben Uglow: Let me start with the supply chain. The uptick in the demand was so strong that there was really a supply chain shortage, in particular on international semiconductors, less local Chinese ones, which was raising lead times for supply to, I don't know, 10 weeks, 20 weeks, whatever. Completely off. We don't see that. We are looking at supply chain. There are certain constraints, but there's no alarm at this point in time that we immediately fall short. Could that be that there's a price increase? Yes, our economic equation is positive, as said, and it will stay positive. It even increased a little bit, therefore that's good. If it comes to the sell-through and we don't see an increase in stocking, we are watching that closely.

Speaker #3: Which was raising lead times for supply to, I don't know, 10 weeks, 20 weeks, whatever—so completely off. We don't see that. We are looking at the supply chain.

Speaker #3: There are, I mean, certain constraints, but we don't—there's no alarm at this point in time that we aim to fall short. Could that be that there's a price increase?

Speaker #3: Yes, but our economic equation is positive, as said, and it will stay positive. It even increased a little bit, so therefore, that's good.

Speaker #3: If it comes to the sell-through, we don't see an increase in stocking. We are watching that closely, so there's no sign that this is happening.

Roland Busch: There's no sign that this happens, but we have to stay tuned, and we do that in order to avoid any signals from this perspective.

Speaker #3: But we have to stay tuned, and we do that in order to avoid any signals from this perspective.

Speaker #5: Understood. Thank you very much, Roland. Very helpful.

Ben Uglow: Understood. Thank you very much, Roland. Very helpful.

Speaker #2: Next question, please.

Tobias Atzler: Next question, please.

Speaker #3: Then the next question comes from Jonathan Mountsey from BNP Paribas. Please go ahead.

Operator: The next question comes from Jonathan Mounsey from BNP Paribas. Please go ahead.

Speaker #4: Thank you for fitting me in. Maybe I'd like to ask one about software strategy, particularly in the context of what's been happening in the first half in terms of investor sentiment around software.

Jonathan Mounsey: Thank you, for fitting me in. I'd maybe like to ask one about software strategy, particularly in the context of what's been happening in the H1 in terms of investor sentiment around software. Obviously software revenue looks strong this quarter. SaaS transition is almost complete. I just want to understand, I think, is the market moving away and towards new ways that you'll have to adapt to? Investors have been worried about the revenue model of PLM competitors in the H1, and I know that's been traditionally linked to the number of seats as kind of a proxy for product usage, at least historically when humans were doing the work. Going forward, AI may drive down the number of seats. How are you going to adapt to that future? Are you tokenizing your software?

Speaker #4: So, obviously, software revenue looks strong this quarter and the SaaS transition is almost complete. But I just want to understand—is the market moving away and towards new ways that you'll have to adapt to?

Speaker #4: Investors have been worried about the revenue model of PLM competitors. In the first half, and I know that's been traditionally linked to the number of seats—that's kind of a proxy for product usage, at least historically, when humans were doing the work.

Speaker #4: But going forward, AI may drive down the number of seats, and how are you going to adapt to that future? Are you tokenizing your software?

Speaker #4: Are you able to charge for actual usage on outcomes? And are you moving your customers towards that? If so, how are they responding?

Jonathan Mounsey: Are you able to charge for actual usage on outcomes, and are you moving your customers towards that? If so, how are they responding? Are you having those conversations?

Speaker #4: Are you having those conversations?

Speaker #3: So this is a this is a this is quite a bit. Let me start. Yes, we are we are seeing a strong demand in our on our software, which underlines that what we are saying that the software which we are selling, it's not a workflow-based rule-based software.

Roland Busch: This is quite a bit. Let me start. Yes, we are seeing a strong demand on our software, which underlines that what we are saying, that the software which we are selling, it's not a workflow-based, rule-based software. It's physics-based simulation. It's data-centric with a single source of truth, with a very structured way of storing your data with contextualization. This holds true for our PLM as well as EDA software. Therefore, good things here, firstly. Secondly, yes, our SaaS transition is we are through. We see a higher growth rate. We see a very good picking up in the margins as well, which continues also in the next year. Whatever we planned at that point in time, and when we pulled the trigger for this SaaS transformation, happens, materializes as planned or even better.

Speaker #3: It's physics-based simulation. It's a data center with a single source of truth, with a very structured way of storing your data with contextualization. And this was true for PLM as well as EDA software.

Speaker #3: So therefore, I mean, good things here. Firstly. Secondly, yes, our SaaS transition is we are through. We see in we see higher growth rate.

Speaker #3: We see a very good pick-up in the margins as well, which continues also in the next year. So, whatever we planned at that point in time when we pulled the trigger for this SaaS transformation happens—materializes as planned or even better.

Speaker #3: Even better. On the on the other point, we you you know that we are rewriting and and and and and charging our software with AI capabilities.

Roland Busch: On the other point, you know that we are rewriting and charging our software with AI capabilities. We are taking care that, for example, in the future, simulation software was used by engineers, in the future will be used by engineers and agents. The user interface changes. We have embedded functionality in our software, which already creates revenue. We are currently not charging tokens. We are running a license model and a SaaS model, pushing also for SaaS. We have the highest growth for SaaS, which plays out very well. We are ready from that perspective, that we run software out of a SaaS model, out of the cloud. We can update at very short notice, which is super relevant for any kind of AI functionality which rolls in as we go forward.

Speaker #3: So we are taking care that, for example, in the future, our simulation software will be used by engineers. In the future, it will be used by engineers and agents.

Speaker #3: So the user interface changes. We have embedded functionality in in our software which already creates revenue and currently we are we are looking into we are we are currently not charging tokens.

Speaker #3: We are running a license model and a SaaS model, pushing also for SaaS. We have the highest growth for SaaS, which plays out very well.

Speaker #3: So we are we are ready for from that perspective that we we run software out of out of a SaaS model, out of the cloud.

Speaker #3: We can see this is super relevant for any kind of AI functionality, which rolls in as we go forward. The more we are using AI models and also underlying LLMs.

Roland Busch: The more we are using AI models and also underlying LLMs, by the way, we use all of them, and also open source model in particular those, because once you have your model trained, you can use cheaper tokens, and in any kind of model on the edge or in our software. We are also thinking about how we monetize. Would we then go into a token base? This is really more the future. We are looking into that. Give you one example where we did not do that, our engineering agent, which is by design priced as what it is. It's an engineering tool. In that market, people used to pay license. We are charging license fees. Customers are ready to pay. We have doubling and tripling over the last weeks of customers.

Speaker #3: By the way, we use all of them. Also open source models, in particular those, because once you have your model trained, you can use cheaper tokens and any kind of model on the edge.

Speaker #3: Or in our software. We are also thinking about how we monetize. Would we then go into a token-based model? But this is really more for the future.

Speaker #3: We are looking into that. For example, let me give you one example where we did not do that. Our eigen engineering agent, which we by design priced as what it is.

Speaker #3: It's an engineering tool, and in that market, people used to pay licenses. So we are charging license fees; customers are ready to pay. We have a doubling and tripling over the last weeks of customers.

Speaker #3: So this is a I think this is one of the fastest growing products which we at least as long as I can look back, which we which we launched in the market.

Roland Busch: I think this is one of the fastest-growing products, at least as long as I can look back, which we launched in the market. It's a very dynamic environment, and we are definitely looking into how we can change our models going forward, pricing models. Of course, we are looking more and more for ARR-like models because they have a lot of advantage, again, in driving innovations faster because you can update. Last point is, on this amount of seats going down. Yeah, we believe the usage goes up, which we eventually then charge via a usage of agents and/or engineers, because we have now much more powerful tools which can be used, thanks to AI, by many more people. We are democratizing our software away from scientists or physicists who are making models. Give you one example.

Speaker #3: So, it's a very dynamic environment, and we are definitely looking into how we can change our models going forward, pricing models.

Speaker #3: Of course, we are looking more and more for ARR-like models because they have a lot of advantage, again, in driving innovations fast because you can update. Last point is on this amount of seats going down.

Speaker #3: Yeah, but there, we believe the usage goes up, which we eventually then charge via a usage of agents and/or engineers, because we now have much more powerful tools which can be used, thanks to AI, by many, many more people.

Speaker #3: We are democratizing our software away from scientists or physicists who are making models, and I'll give you one example. Currently, when you simulate something, you have to mesh your object. Our software avoids this whole cumbersome meshing exercise, and you can start right away, right away with simulations.

Roland Busch: Currently, when you simulate something, you have to mesh your object. Our software avoids this whole cumbersome meshing exercise, you can start right away with simulations. Check out for our re:Invent streamings, you can see that's what we offer there.

Speaker #3: Check out our re:Invent streamings, and you can see what we offered there.

Speaker #4: Thank you.

Jonathan Mounsey: Thank you.

Speaker #2: Next question, please.

Tobias Atzler: Next question, please.

Speaker #3: The next question comes from Phil Buller from JP Morgan. Please go ahead.

Operator: The next question comes from Phil Buller from J.P. Morgan. Please go ahead.

Speaker #4: Good morning. Thank you. And just to clarify, firstly, if I may, Veronica, when you made your economic equation commentary, did you suggest or say you put two additional pricing actions in the quarter?

Speaker #4: My question, though, is on SI margins. 20% is obviously very strong. I appreciate there's some tariff refund in there, but your performance is now at or around the high end of the medium-term guidance.

Speaker #4: You're booking huge orders. Is there any reason to believe that those orders are of the data center dynamics, or should we anticipate further progression in 2027?

Speaker #4: Or is there a need to step up investments? Thanks.

Veronika Bienert: With regards to the economic equation in this quarter, we could really compensate cost inflation as well with the relevant pricing measures. Therefore, we are here very well underway. With regards to the tariff refunds, I already mentioned that really a net, the impact out of tariff was only kind of 50 basis points. Therefore, the tariff impact was really on a lower level here. Going forward, the teams are extremely committed to level out the relevant price increases and to, in a very diligent manner, steer that as well with the relevant kind of pricing of our products. Yeah, that's the current approach. Therefore, I confirmed as well that we are committed to a net positive economic equation for the entire fiscal year. Going forward, we will maintain this very ambitious productivity approach going forward within Smart Infrastructure.

Speaker #1: So, with regard to the economic equation in this quarter, we could really compensate cost inflation as well with the relevant pricing measures.

Speaker #1: So, therefore, we are here very well underway. And with regards to the tariff refunds, I already mentioned that, really, net, the impact out of tariff was only kind of 50 basis points.

Speaker #1: So therefore, the tariff impact was really on a lower level here. And going forward, the teams are extremely committed to leveling out the relevant price increases and to, in a very diligent manner, steer that as well with the relevant kind of pricing of our product.

Speaker #1: Yeah, that's the current approach. And therefore, I confirmed as well that we are committed to a net positive economic equation for the entire fiscal year.

Speaker #1: And going forward, we will maintain this very ambitious productivity approach within SI.

Speaker #4: I guess what I was asking as well, in terms of the order momentum in SI, is huge. Should we assume that there's a lot more investment to come, or is that potentially higher-margin activity that might be something to consider for 2027?

Phil Buller: I guess I was asking as well in terms of the order momentum in Smart Infrastructure is huge. Should we assume that there's a lot more investment to come, or is that potentially higher margin activity that might be something to consider for 2027?

Speaker #1: So in terms of capital allocation, we are of course very diligent, and we are adjusting our capacities within the SI, in particular EA and EP environments, as needed.

Veronika Bienert: In terms of capital allocation, we are, of course, very diligent, and we are adjusting our capacities within the Smart Infrastructure, in particular, EA and EP environment as needed. Depending as well on the order intake and the relevant growth momentum we are having here. We are kind of streamlining that in such way that we adjust our capacities accordingly. As I already mentioned in another context, we look very much into our global footprint to as well further diversify our manufacturing footprint. Therefore, the focus besides Europe is really on Europe to adjust really step by step our manufacturing footprint, but in such way that it stays very modular in the approach so that we can, in a very fast manner, adjust as well our capacity.

Speaker #1: And depending as well on the order intake and the relevant gross momentum we are having here, so in such a way that we adjust our capacities accordingly.

Speaker #1: And as I already mentioned in another context, we look very much into our global footprint to further diversify our manufacturing footprint as well.

Speaker #1: So therefore, the focus, besides Europe, is really on Europe to adjust, really step by step, our manufacturing footprint, but in such a way that it stays very modular in the approach, so that we can, in a very fast manner, adjust as well our capacity.

Speaker #4: Thank you.

Phil Buller: Thank you.

Speaker #2: Next question, please.

Tobias Atzler: Next question, please.

Speaker #3: Next question comes from Martin Wilkie from Citi. Please go ahead.

Operator: Next question comes from Martin Wilkie from Citi. Please go ahead.

Speaker #4: Yeah, thank you. Good morning, it's Martin at Citi. I just wanted to come back to the comments you made on profitability in software.

Martin Wilkie: Yeah, thank you. Good morning. It's Martin at Citi. I just wanted to come back to the comments you made on profitability in software. You talk about a sharp improvement, and I know there's a lot of moving parts, including some lower integration costs. Just to understand, to X that integration cost, what's driving that pickup? It looks like EDA was stronger, potentially it's mix. We're also going through probably the final part of the SaaS transition. Has that been the driver? Is it early synergies from the recent deal? Just if you could step through what's driven that pickup in software profitability. Thank you.

Speaker #4: You talk about a sharp improvement. I know there's a lot of moving parts, including some lower integration costs. So, just to understand the exact integration costs—what's driving that pickup?

Speaker #4: It looks like EDA was stronger, so potentially it's mixed. But we're also probably going through the final part of the SaaS transition. Has that been the driver?

Speaker #4: Is it early synergies from the recent deal? Just, if you could step through what's driven that pickup in software profitability. Thank you.

Speaker #1: So I go first. And and so with regards to to Altair and Dotmatics, we are very happy with the integration performance. So if you look really at the the our synergies, from a cost perspective, but we see as well as well first indicators as well of revenue synergies, so we are very confident that we can execute as planned and maybe even in certain areas faster than originally planned.

Veronika Bienert: I go first. With regards to Altair and Dotmatics, we are very happy with the integration performance. If you look really at our synergies from a cost perspective, we see as well as the first indicators as well of revenue synergies. We are very confident that we can execute as planned and maybe even in certain areas, faster than originally planned. Therefore, that is, of course, something which is translating into our activities. Then if we look at our SaaS transition, we are at the end of the belly of the fish. Here as well, the performance and the conversion is increasing step by step. That is as well something which makes us very confident. If you look, I already mentioned, for Q3, the integration costs are 70 basis points.

Speaker #1: So, therefore, that is, of course, something which is translating into our activities. And then if we look at our SaaS transition—so we are at the end of the belly of the fish.

Speaker #1: So here as well, the performance and the conversion is increasing step by step. That is also something which makes us very confident.

Speaker #1: And if you look so I already mentioned for Q3, the integration costs are 70 basis points. But since we are accelerating to our overall plan, so we are very confident going forward that we will execute as expected.

Veronika Bienert: Since we are accelerating to our overall plan, so we are very confident going forward that we will execute as expected. Yeah.

Speaker #1: Yeah.

Speaker #4: On on a on a general note, regarding the the SaaS above and beyond our integration, again with Altair and Dotmatics, which we are really happy about, it it runs as planned and and and better.

Roland Busch: On a general note, regarding the SaaS, above and beyond our integration, again, with Altair and Dotmatics, which we are really happy about. It runs as planned and better. There's a couple of elements in there. Number one is if you want to cloudify your software, you have to rewrite some code, you have to bring it on the cloud, which has benefits as well because you can release features faster, which is obviously driving the usage. This is an investment in our software. Just to get it right, we do not write all the 100% of our code. It's only pieces of that, but we are rewriting this investment we took in the beginning of our SaaS transition. We still continue to rewrite software code, obviously. Again, now supported with AI technology. This major investment is behind us.

Speaker #4: You know, there are a couple of elements in there. Number one is, if you want to cloudify your software, you have to rewrite some code—you have to bring it on the cloud.

Speaker #4: Which has benefits as well, because you can release features faster, which is obviously driving the usage. So therefore, and this has to be—this is an investment in our software.

Speaker #4: Just to get it right, we do not write all 100% of our code. It's only pieces of that which we are rewriting.

Speaker #4: This investment, which we made at the beginning of our SaaS transition, continues as we still rewrite software code, obviously. Now, this effort is additionally supported with AI technology.

Speaker #4: So therefore, this major investment is is is behind us. Again, still some some forward investment, but this is the going concern as you as you once you have the SaaS transition.

Roland Busch: Again, still some forward investment, this is the growing concern once you have the SaaS transition. You have offerings, which we have SaaS offerings where we run the infrastructure. This comes with a higher margin. Some hybrid as well. You have the business mix. We have customers, new customers, small and medium-sized customers, and higher growth, of course. Growth drives also profitability. Remember, we have tens of thousands of small and medium-sized customers, which we didn't see before. This is the package, and it really plays out as planned.

Speaker #4: Then you have offerings, which—we have SaaS offerings where we run the infrastructure. This comes with a higher margin. Some hybrid as well.

Speaker #4: And then you have the business mix. We have customers, new customers, small- and medium-sized customers, and higher growth, of course. And growth also drives profitability.

Speaker #4: Remember, we have tens of thousands of small and medium-sized customers which we didn't see before, so therefore, this is the package. And it really plays out as planned.

Speaker #4: Thank you. And is the SaaS transition now done? I mean, it should be assumed that the drag from that no longer repeats next year.

Martin Wilkie: Thank you. Is the SaaS transition now done? Should we assume that the drag from that no longer repeats next year?

Speaker #4: You know the saying, "Software is never ready." So, it's done as much as software is never ready. Great. Thank you.

Roland Busch: You know the saying, software is never ready. It's done as much as software is never ready.

Martin Wilkie: Great. Thank you.

Speaker #2: Next question, please.

Tobias Atzler: Next question, please.

Speaker #3: The next question comes from Max Yates from Morgan Stanley. Please go ahead.

Operator: The next question comes from Max Yates from Morgan Stanley. Please go ahead.

Speaker #4: Hi, thank you. Good morning. I just wanted to ask about the SI division and a little bit around the revenue conversion.

Max Yates: Hi. Thank you. Good morning. I just wanted to ask about the Smart Infrastructure division and a little bit around the revenue conversion as we go into 2027. There's maybe two ways to look at this. Your Smart Infrastructure orders will be something around EUR 30 billion this year. Your revenue's around EUR 25 billion. Or maybe zooming into your data center business where your orders may be EUR 3 or 4 billion higher than your revenue. I guess what I'm just trying to understand, within the capacity constraints that you have, the duration of the backlog, how much of that additional data center orders, that EUR 3 or 4 billion, do you think gets delivered in 2027? I guess what I'm really asking, it looks like based on your backlog, you should see quite a healthy acceleration in revenue growth next year.

Speaker #4: As we go into— as we go into 2027. So, you know, there's maybe kind of two ways to look at this. Your SI orders will be, you know, something around $30 billion this year.

Speaker #4: Your revenue is around 25. Or maybe kind of zooming into your your data center business where your orders may be kind of 3 or 4 billion higher than your revenue.

Speaker #4: So I guess what I'm just trying to understand, within the kind of capacity constraints that you have, the duration of the backlog—how much of that additional data center orders, you know, that $3 or $4 billion, do you think gets delivered in 2027?

Speaker #4: You know, I guess what I'm really asking is, it looks like, based on your backlog, you should see quite a healthy acceleration in revenue growth next year.

Speaker #4: Is there anything we should consider in terms of timing of backlog, or constraints around capacity, that wouldn't allow that to be possible? Thank you.

Max Yates: Is there anything we should consider in terms of timing of backlog constraints around capacity that wouldn't allow that to be possible? Thank you.

Speaker #1: Thanks for the question. So, with regards to capacity constraints, of course, with such a steep order intake, the translation into revenue and the respective execution for the teams is always a challenge.

Veronika Bienert: Thanks for the question. With regards to capacity constraints, of course, such as steep order intake, the translation into revenue and the respective execution for the teams is always a challenge. However, the teams are very well prepared and the respective ramp-up of capacity where needed is well underway. Therefore, we don't see, as of now, any implications that we could not execute as planned in terms of revenue.

Speaker #1: However, the teams are very well prepared, and the respective ramp-up of capacity where needed is well underway. So, therefore, we don't see, as of now, any implications that we could not execute as planned in terms of revenue.

Speaker #4: And and maybe.

Max Yates: Maybe-

Veronika Bienert: Yeah. Maybe just to give you another indicator in terms of execution. We reported that we have a record quarter, and if you look at Smart Infrastructure and the last 6 quarters, the increase in revenue is really on a top level for this quarter. It shows that the teams are very capable to execute on the respective order backlog. You see it in the annex. Here we have the backlog for Smart Infrastructure. This is the EUR 23.7 billion, and for next year, it is really close up to EUR 12 billion, which we intend to execute. Yeah. As of now. Yeah.

Speaker #1: Yeah. And maybe just to give you another indicator in terms of execution: we reported that we have a record quarter. And if you look at SI and the last six quarters, the increase in revenue is really at a top level for this quarter.

Speaker #1: So, it shows that the teams are very capable of executing on their respective order backlog. You can see it in the annex.

Speaker #1: Here we have the backlog for SI. So this is the $23.7 billion. And for next year, it is really up close, up to $12 billion, which we intend to execute.

Speaker #1: Yeah. As of now. Yeah.

Speaker #4: Okay, that's helpful. Thank you very much.

Max Yates: Okay. That's helpful. Thank you very much.

Speaker #3: Maybe a short comment. Look in our our book to book to bill. If you look at that, our order intake last year, revenue order intake projection this year, you will see that this is obviously it's building up.

Roland Busch: Maybe a short comment. Look in our book-to-bill. If you look at that, our order intake last year, revenue order intake projection in this year, you will see that obviously it's building up, and we convert it as we speak, and we take care that we are fulfilling the demand of our customers in capacity expansions, driving productivity at the same time in our plants so that we are sure that we can take this momentum.

Speaker #3: And and we converted as we speak. And we take care that we we are we are fulfilling the demand of our customers in capacity expansions, driving productivity at the same time in our plans so that we we are we assure that we can take this momentum.

Speaker #4: Great. Thank you very much.

Max Yates: Great. Thank you very much.

Speaker #2: Next question, please.

Tobias Atzler: Next question, please.

Speaker #3: The next question comes from Alex Virgo from Evercore ISI. Please go ahead.

Operator: The next question comes from Alex Virgo from Evercore ISI. Please go ahead.

Speaker #4: Yeah. Good morning, Rowan and Veronica. Thanks for taking the question. I wondered if you could just help me a little bit with the margins in Q4 in DI.

Alex Virgo: Yeah. Morning, Roland and Veronika. Thanks for taking the question. I wondered if you could just help me a little bit with the margins in Q4 in Digital Industries. Given the guidance on the top line in terms of software and automation mix, I would have expected a more positive mix benefit from that software strength. If you could just give us a sense of why the margins are flat Q on Q. Then if I could just follow up on Smart Infrastructure margins. Is there any tariff impact or tariff refund impact implicit in the guidance for Smart Infrastructure margins? Thank you.

Speaker #4: Given the guidance on the top line in terms of software and automation mix, I would have expected a more positive mix benefit from that software strength.

Speaker #4: So, if you could just give us a sense of why the margins are flat quarter on quarter. And then, if I could just follow up on SI margins.

Speaker #4: Are there any— is there any tariff impact or tariff refund impact implicit in the guidance for SI margins? Thank you.

Speaker #1: So first, to SI, with regards to our guidance for the entire fiscal year, what we have reflected here is really the net benefit of 50 basis points in the third quarter.

Veronika Bienert: First, to Smart Infrastructure, with regards to our guidance for the entire fiscal year. Here, what we have reflected is really the net benefit of 50 basis points in Q3. In Q4, it is just in the regular refunds we have from a daily operation, but there are no major implications baked into our outlook. That's with regards to Smart Infrastructure. It's really coming from the operational execution within Smart Infrastructure. As of now, there are no special effects baked in out of tariff. For Digital Industries, in terms of profitability, we always need to look at the mix between automation and software. Therefore, that really plays a role as well, and in particular in the discrete industry. That is something we take into consideration, and as well in certain markets.

Speaker #1: In the fourth quarter, it is just in a kind of the regular refund we have from a from a kind of daily operation. But there are no major implications baked in in into our outlook.

Speaker #1: So that's with regards to SI. So, it's really coming from the operational execution within SI. As of now, there are no special effects baked in, out of tariffs.

Speaker #1: And for DI, there's as well, in terms of profitability, we always need to look at the mix between automation and software.

Speaker #1: So, therefore, that really plays a role as well, in particular in the discrete industry. Yeah. So that is something we take into consideration.

Speaker #1: And as well, in certain markets, if you further even drill down—so, what is within the discrete industry, what is more tied to the machinery?

Veronika Bienert: If you further even drill down, so within the discrete industry, what is more tied to the machinery. Roland and myself, we reported that we have a strong growth in the machinery environment, so therefore that is as well reflected in the overall mix.

Speaker #1: So Roland and myself, we reported that we have strong growth in the machinery environment. So therefore, that is also reflected in the overall mix.

Speaker #4: Okay. Thank you.

Alex Virgo: Okay, thank you.

Speaker #2: We will take one last question.

Tobias Atzler: We will take one last question.

Speaker #3: Today's last question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Operator: Today's last question comes from Daniela Costa from Goldman Sachs. Please go ahead.

Speaker #5: Hi. Good morning. Thank you for taking my question. I'll try to be quick. But we have seen several of your your peers embarking in in larger M&A in the in in the last couple of weeks.

Daniela Costa: Hi. Good morning. Thank you for taking my question. I'll try to be quick. We have seen several of your peers embarking in larger M&A in the last couple of weeks. Just wondering if you could give us an update in terms of digital versus products and sort of what are the areas where you think it might be interesting to strengthen your portfolio. Thank you.

Speaker #5: Just wondering if you could give us an update in terms of digital versus product, and sort of what are the areas where you think it might be interesting to strengthen your portfolio.

Speaker #5: Thank you.

Speaker #3: Yeah. We are we are watching this acquisitions also with interest. So we are we are looking definitely in the in the software space. But and not only in the core software pieces in our PLM EDA, we have some bolt on EDA acquisitions which we talked about recently, which are super interesting.

Roland Busch: We are watching these acquisitions also with interest. We are looking definitely in the software space, but not only in the core software pieces in our PLM EDA. We have some bolt-on EDA acquisitions, which we talked about recently, which are super interesting. Small, though, but very interesting and complement our portfolio. We are looking into also the infrastructure space, if there's grid control, grid automation infrastructure. Software is still in our focus. We are expanding our focus, as I said in the last call, also in operation software. Software coming from design space now into the operation space on the ground, but also in the maintenance space. Another dimension is the whole data layer environment.

Speaker #3: Small, though, but very interesting in complementing our portfolio. We are looking into also the infrastructure space, if there is—our grid, grid control, grid automation infrastructure.

Speaker #3: And software is still in our focus. We're expanding our focus, as I said in the last course, also into operation software. So not software coming from the design space now into the operation space on the ground, but also in the maintenance space.

Speaker #3: Another dimension is the data—the whole data layer environment. This also ties in a bit with our organic development. Look into our Intelligence Center X portfolio.

Roland Busch: This goes a little bit also with our organic development, looking to our Intelligence Center X portfolio, with the products which we have also via Altair, with RapidMiner, but also Graph Studio. We are looking into ontologies and databases, which is a little bit a kind of a cross-reading to Cognite. Cognite is very focused on upstream business. We are looking into that space, too. We are also having a view on, since you maybe refer also to the acquisition which is done by ABB on just solid instruments, which I think they come with good margins. If we find assets where we have data creating assets which are connected, which are supporting our strategy, or again, supporting our strong EA or EP portfolio, we will definitely look into this space, too.

Speaker #3: Where we with with the products which we have also wire Altair with rapid miner, but also Graph Studio, we're looking into ontologies and and databases, which is a little bit a kind of a a a cross reading to Cognite but but Cognite is very focused on on upstream business.

Speaker #3: We are looking into that space, too. But we are also having a view on—since you're—maybe you refer also to the acquisition which is done by ABB on Just Solid Instruments, which I think they come with good margins.

Speaker #3: If we find assets where we have data, creating assets which are connected, which are supporting our strategy, or again supporting our strong EA or EP portfolio, we would definitely look into this space too.

Speaker #5: Very clear. Thank you.

Daniela Costa: Very clear. Thank you.

Speaker #2: Thank you all very much for participating today. As always, the team and I will be available for further questions. We wish you a relaxing summer break and look forward to meeting many of you in September on various occasions.

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