Cloud Migration And Global Expansion Will Unlock Long-Term Value

Key Takeaways

• Accelerated transition to cloud services and integration with Crayon will boost margins, earnings visibility, and diversification of revenue streams, especially as integration synergies are realized.
  
• Investment in AI, cybersecurity, and expanding managed services positions the company to capture growing demand and achieve more resilient, predictable cash flows.
  
• Dependence on major vendors, industry shifts, and evolving business models expose SoftwareOne to revenue, margin, and financial stability risks amid rising competition and integration challenges.

Catalysts

Provides software and cloud solutions in Switzerland, Germany, Austria, rest of Europe, Mauritius, South Africa, the United States, Canada, Latin America, the Asia Pacific, Dubai, and Qatar.

• The transition from Microsoft enterprise agreements (EA) to cloud solution provider (CSP) contracts is accelerating due to Microsoft's changes in incentive structures and upcoming EA price hikes, positioning SoftwareOne to benefit from higher-margin CSP sales and increased demand for associated advisory and managed services; this is likely to have a positive impact on revenue growth and EBITDA margins from 2026 onwards.
  
• The integration with Crayon is expected to unlock substantial cost and revenue synergies, including CHF 80–100 million in run-rate cost savings and enhanced cross
• and upsell opportunities through a combined marketplace and expanded global reach; these synergies support margin expansion and higher earnings visibility over the medium to long term.
  
• Growth in global digital transformation and the rising complexity of software licensing and compliance continue to drive enterprise demand for third-party expertise in advisory, cloud migration, and managed services. SoftwareOne's investment in AI, cybersecurity, and cloud offerings positions it well to capture incremental revenue and profitability as businesses increase IT and software spend.
  
• Strategic expansion into underserved regions and strengthened go-to-market execution-especially in North America, where corrective measures are yielding early signs of growth-are likely to diversify revenue streams, reduce geographic concentration risk, and enable topline growth acceleration from 2026 as integration with Crayon reaches full value realization.
  
• Increasing penetration of recurring managed cloud and software services, supported by new joint sales initiatives in security, AI, and channel distribution, will boost gross margin and earnings resilience, resulting in more predictable cash flows and enhanced net margins in the post-integration phase.

SoftwareOne Holding Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SoftwareOne Holding's revenue will grow by 22.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from -2.0% today to 16.2% in 3 years time.
• Analysts expect earnings to reach CHF 289.9 million (and earnings per share of CHF 0.9) by about September 2028, up from CHF -19.6 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 7.9x on those 2028 earnings, up from -79.5x today. This future PE is lower than the current PE for the CH Electronic industry at 32.5x.
• Analysts expect the number of shares outstanding to grow by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.04%, as per the Simply Wall St company report.

SoftwareOne Holding Future Earnings Per Share Growth

Risks

• Heavy reliance on Microsoft and a few large software vendors exposes SoftwareOne Holding to significant vendor concentration risk; changes in Microsoft's partner programs, such as the enterprise agreement (EA) incentive cuts and increased direct sales by Microsoft to large customers, have already caused revenue declines and threaten to erode future topline growth and gross margins.
  
• Intensifying competition from large IT consultancies, global systems integrators, and digital marketplaces could further compress advisory and marketplace margins, while also limiting SoftwareOne's ability to differentiate its services, impacting net margins and long-term EBITDA growth.
  
• Execution risk associated with integrating Crayon-along with transitioning the business from traditional licensing to recurring cloud and managed services-could result in inconsistent earnings, margin volatility, and potential customer attrition, especially if cost synergies are not fully realized or staff fluctuations increase.
  
• Increased use of nonrecourse factoring and recent refinancing add financial risk and elevate interest expense; the dependence on short-term balance sheet management tools could pressure future operating cash flows and increase exposure to volatile financing conditions, affecting net profit and financial stability.
  
• Rapid evolution of SaaS, cloud models, and automation in software procurement enables end customers to bypass intermediaries for licensing and asset management, potentially reducing the long-term relevance of SoftwareOne's traditional business model and leading to structural pressure on revenue and profitability.

Valuation

• The analysts have a consensus price target of CHF9.25 for SoftwareOne Holding based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CHF14.0, and the most bearish reporting a price target of just CHF7.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CHF1.8 billion, earnings will come to CHF289.9 million, and it would be trading on a PE ratio of 7.9x, assuming you use a discount rate of 5.0%.
  
• Given the current share price of CHF7.28, the analyst price target of CHF9.25 is 21.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.