Translation: Original published in Finnish on 10/26/2026 at 8:00 am EET.

Modulight’s Q3 revenue returned to growth and was in line with our estimate. The main takeaway from the report was profitability that was clearly better than our expectations, driven by low costs and partially one-off income. Order intake also developed positively and was more heavily weighted towards product sales than before. We are raising our earnings forecasts moderately due to a higher gross margin and lower costs. We revise our target price to EUR 1.15 (was EUR 1.10) in line with our revised estimates. In our view, the risk/reward ratio remains unsatisfactory, so we reiterate our Reduce recommendation.

Revenue grew driven by PPT sales

Modulight's Q3 revenue was 1.89 MEUR, which was in line with our forecast (1.88 MEUR) and represented a 7% increase year-on-year (Q3'25: 1.77 MEUR). Growth was driven by the PPT business, which grew by 110% to ~0.5 MEUR. Order intake was a strong 3.5 MEUR. A larger share of orders than before consisted of product sales rather than R&D, indicating the gradual maturation of the business. The product development pipeline grew to 37 projects (Q3'25: 32), and according to management, some customers are aiming to accelerate the transition to production. The 1.5 MUSD neuroscience pilot production order announced in September supports the figures for 2026–2027. January–September revenue was lower than in the comparison period, so the guidance requires revenue of over 2.1 MEUR in Q4.

Operating profit clearly exceeded our estimate

EBIT was -0.39 MEUR (Q3'25: -1.22 MEUR), clearly beating our estimate (-1.16 MEUR). EBITDA rose to 1.0 MEUR, whereas we expected a zero level. The improvement was driven by cost savings and non-recurring income. Personnel expenses decreased by 0.31 MEUR and other operating expenses by 0.35 MEUR year-on-year. We estimate that the costs partly reflect one-off savings, the impact of which will even out going forward. Earnings were also supported by the increase in inventories of finished goods (0.29 MEUR) and an item of other operating income (0.17 MEUR). Capitalizations of development costs (0.64 MEUR), on the other hand, were lower than in the comparison period. Depreciation and amortization increased to 1.40 MEUR, which ate into part of the EBITDA beat.

We raise our earnings estimates due to a lower cost level

We keep our revenue forecast unchanged, as the company's performance was in line with our expectations. Our current year forecast (7.2 MEUR) still corresponds to reaching the guidance, supported by a healthy order intake. Our earnings forecasts for the coming years are increasing based on our raised estimate for the gross margin and lower operating expenses. Our long-term forecasts remain unchanged. The cost savings resulting from Modulight's change negotiations last year have proven greater than we estimated over the course of the year, which has reduced losses and improved the outlook for cash sufficiency. Based on our current forecasts, the company's cash reserves are sufficient for cash flows to turn positive, although uncertainty remains due to limited visibility.

Risk/reward ratio remains unsatisfactory

We reiterate our recommendation (Reduce) and revise our target price to EUR 1.15 (prev. EUR 1.10) in line with our estimate revisions. Due to the loss-making nature of the business, our valuation relies on the EV/S ratio and DCF calculation. On our updated estimates, EV/S multiples are ~5.9x and 4.5x for 2026–2027, which is a rather high level and requires a clear pick-up in growth. The baseline case in our DCF calculation gives the stock a value of EUR 1.2. In our view, the risk/reward ratio remains unsatisfactory, even though the Q3 report was positive overall and took the company a step in the right direction.