Digital Workforce Q3’25 flash comment: A somewhat subdued quarter

Translation: Original published in Finnish on 10/23/2025 at 9:30 am EET.

The IT services company Digital Workforce, which utilizes software robotics for automation, published a Q3 report this morning that was slightly weaker than our expectations. Revenue was at the previous year's level and fell short of our expectations due to weaker development in Continuous Services. Adjusted earnings improved significantly year-on-year, supported by cost savings and a better gross margin, but were slightly below our forecast. The company is behind last year in terms of guidance for the first part of the year, but the fairly good outlook for the rest of the year and the recent e18 Consulting acquisition will, in our view, raise Q4 earnings and revenue significantly above last year's level.

Growth was disappointing, but there was no particular drama behind it

Digital Workforce's revenue was at the comparison period's level of 6.6 MEUR in Q3, falling short of our 6.9 MEUR estimate. We estimate that growth is somewhat better than the overall IT services sector (Q2 -4%), but slower than last year and the big picture potential. The decline came from "more valuable" Continuous Services, which decreased by 3% against our forecast of 5% growth. The disappointment is somewhat mitigated by the company's comment that the decline was due to a decrease in sales of less strategic licenses for the company, as well as normal seasonal variations. Professional Services, on the other hand, grew by 7% and performed slightly better than expected. Growth came particularly from automation services implemented as total outsourcing and healthcare projects. These projects are important fuel for Continuous Services in the future. The company commented that general market uncertainty is still reflected in customers' willingness to launch new projects in both the Nordic countries and the United States, but the UK government's investments in healthcare digitalization and automation are generating good demand. The Professional Services business, which aims to implement AI agent-based solutions and is very important for the future, grew significantly, but in our view, it is still an absolutely small business. The company commented that its Agent Workforce solution creates good and scalable growth opportunities for the first half of 2026.

Profitability improved relatively clearly year-on-year but remained somewhat below our expectations

Q3 earnings improved clearly from last year but were slightly below our expectations. EBITDA was 0.28 MEUR or 4.3% (Q3’24: 0.18 MEUR) of revenue, falling short of our 0.48 MEUR and 7.0% forecast. Adjusted for restructuring costs and other non-recurring expenses, EBITDA was quite close (0.44 MEUR or 6.7%) to our estimate. However, the company did not specify what these adjustment items consisted of. The improvement in profitability compared to last year is supported by several cost-saving measures and a shift in business focus towards more scalable operations. However, in the big picture, profitability is still constrained by strategic investments and, in our assessment, still low billing rates in Professional Services. In general, the earnings level and profitability at Digital Workforce are sensitive on a quarterly basis, as the scale is still small, and thus the start and end of individual larger projects and the timing of investments can clearly affect the profitability level of a single quarter. The company's key gross margin rose to 37% (Q3'24: 33%) of revenue, almost in line with our expectations, which is a good level considering that Continuous Services declined somewhat. This creates the conditions for future profitability improvement. The company does not report a detailed income statement in Q3, but other income statement lines did not seem to hold any major surprises, and thus EPS was at the comparison period's level of EUR 0.02 (unadjusted), falling short of our EUR 0.04 forecast. The effects of the e18 acquisition will start to be visible from Q4'25 onwards, including the expected one-off costs of the acquisition.

Guidance remained unchanged, although the company is behind schedule for the beginning of the year

Digital Workforce maintained its guidance and estimates that revenue will be higher and adjusted EBITDA will improve in 2025 from the comparison period. For the first nine months, the company is behind guidance in terms of revenue (-0.5%) and more clearly in terms of adjusted EBITDA (-0.2 MEUR or -27%). However, we estimate Q4 to be clearly better than last year, which suggests the company will achieve its guidance. Based on the company's comments, the improved development is supported by a good order book and sales pipeline, but especially by the e18 acquisition. Without the acquisition, the probability of a guidance cut would have been quite high, in our estimation. Prior to the Q3 results, we expected the company's revenue to grow by 8% and adjusted EBITDA to increase to 1.7 MEUR from the comparison period (2024 adj. EBITDA: 1.0 MEUR).