Atos SE has officially reported its full-year 2024 earnings (full report from them), and investors are now questioning whether this IT services giant is on the road to recovery or if further struggles lie ahead. With restructuring efforts, shifting market dynamics, and a mixed financial performance, let’s break down Atos SE’s latest results and whether its stock is a buy after earnings.
Atos SE Full-Year 2024 Earnings Highlights
Revenue Decline but Signs of Commercial Recovery
Atos SE reported full-year 2024 revenue of €9.58 billion, representing a 5.4% organic decline compared to 2023. This drop was mainly attributed to previously established contract terminations, scope reductions, and overall market softness in key geographies like North America and the UK.
- Eviden revenue fell 6.7% organically to €4.6 billion due to digital contract terminations and weak demand in several regions.
- Tech Foundations revenue dropped 4.1% organically to €4.97 billion, impacted by contract completions and lower sales in business process outsourcing (BPO) and value-added resale.
Despite the decline, Atos saw a commercial rebound in Q4 2024, with a book-to-bill ratio of 117%, signaling improved client confidence after the completion of its financial restructuring.
Profitability and Operating Margin
Atos achieved an operating margin of 2.1% (€199 million) for 2024, which was lower than 2023’s 4.4% margin. The primary reasons for the drop included:
- Higher SG&A costs previously categorized under other operating expenses
- Provisions of €40 million for underperforming contracts
- Revenue decline and lower workforce utilization
Breaking it down by division:
- Eviden: 2.0% operating margin (down 350 bps)
- Tech Foundations: 2.2% operating margin (down 70 bps)
Net Income and Free Cash Flow Woes
While Atos reported a net income of €248 million, this was largely driven by a €3.52 billion financial restructuring gain, which included a €2.77 billion debt-to-equity swap gain. However, impairments of €2.36 billion significantly impacted the overall financial health.
More concerning is Atos’s negative free cash flow of -€2.23 billion, reflecting:
- The end of one-off working capital optimizations
- Higher capital expenditures (€239 million) on High-Performance Computing (HPC) contracts
- Struggles with cash collection from clients, delaying incoming payments
Debt Situation and Liquidity
Atos successfully reduced its net debt to €1.24 billion (excluding IFRS 9 adjustments), down from €2.23 billion in 2023. The restructuring provided some relief, but challenges remain, particularly with a minimum liquidity requirement of €650 million starting from Q1 2025.
Atos SE Stock Performance and Market Sentiment
Stock Price Movement
As of March 5, 2025, Atos SE’s stock is trading at €0.0042, reflecting a slight improvement after the earnings release. Officially, the stock has duplicated its stock price in the last month. The stock remains highly volatile and you can see big swings of 10%-20%. Its long-term trajectory depends on the execution of the company’s mid-term strategy.
Analyst Ratings and Market Sentiment
- Some analysts recommend holding or accumulating Atos SE, noting that while financial risks remain, the company’s restructuring and Q4 commercial activity improvements are positive signs.
- Others remain cautious due to ongoing cash flow struggles and operational inefficiencies.
Key Takeaways from Atos’s Earnings Call
During the earnings call, CEO Philippe Salle emphasized the company’s focus on transformation and upcoming strategic initiatives:
- Capital Markets Day on May 14, 2025: Atos will present a mid-term strategy update outlining key initiatives and operational improvements. This is interesting, so we are looking forward for it.
- Divestment Plans: The company continues exclusive negotiations with the French state for the sale of its Advanced Computing division (€500-625 million value), aiming to further streamline operations.
- Operational Efficiency Focus: Emphasis on renegotiating underperforming contracts and improving cash flow management.
- New Client Wins: Atos highlighted major contract extensions and new deals in High-Performance Computing (HPC) and cybersecurity services, reinforcing its position in key markets. In spite of the challenges, new contracts keep coming to Atos SE.
Should You Buy Atos SE After Earnings?
Well, we own Atos since they hit the bottom (nice returns now, we know) and we believe in their long term recovery, however, we are giving some of the reason to be bullish and to be bearish too!
Reasons to Be Bullish on Atos SE
- Successful debt restructuring has alleviated short-term financial stress.
- Q4 commercial rebound suggests that Atos is regaining client trust.
- Upcoming strategy update (May 14) could provide clarity on long-term growth prospects.
- Divestment of non-core assets may help improve financial health.
- Strong demand for cybersecurity and HPC services, two areas where Atos has a competitive edge.
- Buyback programme, they bring normally buying pressure that tends to bring a higher stock price.
We did a little bit of a ‘realistic’ price prediction for Atos SE stock based on previous market cap if you fancy reading it too.
Reasons to Be Cautious About Atos SE
- Revenue decline and weak margins highlight ongoing operational challenges.
- Negative free cash flow (-€2.23 billion) is a significant concern.
- Uncertain market conditions could continue impacting future performance.
- Stock remains highly speculative, requiring careful risk assessment.
- Potential delays in client payments could further strain liquidity.
- Potential share issuance diluting further the stock, this would happen after a reverse stock split of Atos SE Stock though.
Final Veredict: High-Risk, High-Reward Play
Atos SE’s post-earnings outlook is a mix of positives and concerns. The company’s restructuring efforts and commercial momentum in Q4 offer some optimism, but persistent cash flow and revenue challenges mean this is still a high-risk investment. We as investors should wait for further clarity on May 14’s strategy update and on the announcement of the reverse stock split date and ratio for Atos SE before making a final decision.
Would You Buy Atos SE?
Let us know your thoughts in the comments! Are you bullish or bearish on Atos’s recovery, screenshots are welcome!
