Earnings call transcript: Indosat Q2 2025 sees revenue dip, AI focus emphasized

Indosat Tbk reported mixed Q2 2025 results, with revenue slightly down 0.3% quarter-on-quarter to 13.5 trillion IDR and normalized net profit declining 11.5%, leading to a 1.76% stock price dip. Despite a modest 0.4% increase in EBITDA, the company revised its 2025 EBITDA growth guidance to low single-digits, citing prolonged challenging market conditions impacting consumer spending. However, Indosat remains strategically focused on AI initiatives, projecting 35 million CHF in net new AI revenue for 2025 and 70-75 million CHF in 2026 with strong 60% EBITDA margins, alongside ongoing cost leadership and market stabilization efforts.

Analysis

Indosat Tbk (ISAT) presented a mixed financial picture for Q2 2025, reflecting significant operational shifts amid a challenging Indonesian consumer market. The company reported a marginal 0.3% quarter-on-quarter revenue decline to 13.5 trillion IDR, which management attributed to prolonged weakness in lower middle-class consumption. This top-line pressure directly led to a downward revision of full-year 2025 EBITDA growth guidance to a "low single-digit range." Despite the revenue dip, Indosat demonstrated cost discipline, reducing total costs by 1% QoQ and achieving a slight 0.4% QoQ increase in EBITDA with a resilient margin of 47.6%. Strategically, the company is pivoting towards two key levers for future growth: market rationalization and a high-margin AI business. Management has initiated price increases on starter packs and a 10% hike on entry-level rebuy plans, with the full impact expected in the second half of the year. Concurrently, its new sovereign AI cloud business is a critical forward-looking catalyst, projected to generate 35 million CHF in new revenue in 2025 and annualize at 70-75 million CHF in 2026, with an attractive EBITDA margin profile of approximately 60%. This dual strategy of shoring up core telecom profitability while incubating a high-growth AI segment appears to be the central plank of its response to near-term macroeconomic headwinds.

Key Decisions for Investors

• Investors should monitor H2 2025 ARPU and revenue figures closely to validate the effectiveness of recent price increases and confirm that the company is on track to meet its revised, lower EBITDA guidance.
• The primary long-term value driver is the high-margin AI business; track the company's execution against its stated AI revenue targets of 35 million CHF for 2025 and an annualized 70-75 million CHF for 2026.
• Given that weak consumer spending is the core reason for the guidance cut, any further deterioration in Indonesian macroeconomic indicators presents a key risk that could undermine the company's recovery narrative.
• While near-term sentiment is cautious due to the guidance revision, the proactive market stabilization efforts and the emerging AI growth story could present a value opportunity for investors with a longer-term horizon.