Another beat in the wall - Q3 review

BTS’s Q3 report showed that it remains among the clear beneficiaries of increasing AI adoption. We raise our fair value range to SEK200–285 (177–255) on the back of higher estimate revisions, reflecting our view that BTS offers an attractive investment into the ever-increasing role of AI.

Q3 results. Revenue in Q3 was SEK716m, up 13% organically and beating our expectation of 6% Y/Y%. Adj. EBITA was SEK81m, up 79% Y/Y and 44–48% above our estimate and Bloomberg consensus. The EBITA beat was mainly driven by BTS NA, with both growth and margins surprising positively. Given that the high-margin licence revenue in the region was fairly flat in the quarter, we view the margin trend in the region as encouraging for further progression. Other Markets grew 7% organically, with the margin expanding to 11.0% (8.8%). We view it as encouraging that organic growth has returned in a solid fashion, while earnings growth could improve further given management commentary about the yet-to-be seen full impact of recovering demand and efficiency measures.

Estimate changes. Following the Q3 report we raise our 2027–28e adj. EBITA by 9%, mainly on the back of higher margin expectations following the impressive earnings delivery in BTS NA.

Guidance reiterated. BTS reiterated its guidance of 2026 EBITA being “significantly better” than 2025. We forecast for the company to expand reported numbers by 36% Y/Y in 2026 driven by continued good AI-related revenue expansion and continued cost-savings from office consolidations, headcount adjustments, and AI workflow automation.

Valuation. At our updated fair value range, BTS would be trading at a 2027e EV/EBITA of 10–14x. The shares have outperformed the OMXSPI by 70% YTD, but we see further rerating potential given the continued good scale-up of the AI service revenue stream and as well as further positive surprises in the North American margin story.