Rising Global Scam Protection Demand Will Support Long Term Cybersecurity Tailwinds

Catalysts

About F-Secure Oyj

F-Secure Oyj provides consumer cybersecurity and scam protection solutions through security apps and embedded services delivered with global partners.

What are the underlying business or industry changes driving this perspective?

• Rising global scam activity, including SMS, instant messaging and deep fake attacks, is driving telcos, banks and insurers to add premium scam protection into core offerings. This should support higher embedded security volumes and partner channel revenue growth.
• Growing demand for embedded security from Tier 1 partners in telecommunications, financial services and digital platforms, combined with a strong pipeline and recent Tier 1 wins in Asia, the U.S. and Nordics, points to a multi year ramp up in high volume contracts that can re accelerate top line growth.
• Expansion of AI powered products such as Horizon for partners and the Halo mobile scam protection app is set to deepen partner engagement, broaden the addressable customer base and improve scalability. This supports both revenue growth and operating leverage.
• Industry shift toward differentiated, branded cybersecurity bundles rather than standalone antivirus is pushing large partners to expand their security portfolios with F-Secure’s Total and modular scam protection. This should lift ARPU and stabilize user numbers, supporting margin resilience.
• Company wide adoption of AI tools in development, customer service and sales operations is improving productivity and speeding product cycles. This can help offset embedded’s structurally lower gross margin and protect EBITDA margins as revenue scales.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming F-Secure Oyj's revenue will grow by 2.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 14.0% today to 17.9% in 3 years time.
• Analysts expect earnings to reach €28.7 million (and earnings per share of €0.17) by about December 2028, up from €20.6 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as €31.8 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 14.9x on those 2028 earnings, down from 15.1x today. This future PE is lower than the current PE for the FI Software industry at 24.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.78%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Tier 1 embedded contracts are ramping more slowly than planned and management has already issued a profit warning due to delays. If large partners continue to postpone activations or under invest in marketing, the expected acceleration in embedded volumes may not materialize and would weigh on revenue growth and operating leverage over the medium term, putting pressure on earnings.
• The direct business is shrinking as F-Secure intentionally withholds customer acquisition spending, and management guides that a mid single digit annual decline is likely to continue into 2026 and 2027. If partner channel growth does not fully offset this structural erosion, total revenue could stagnate or fall and fixed costs could dilute net margins.
• Growing price competition and churn among European communications service providers, compounded by the significant decline of at least one major German partner and other legacy customers that have not converted to Total, could lead to ongoing user losses that offset wins elsewhere. This could limit ARPU driven gains and keep overall revenue growth and EBITDA margins below expectations.
• The strategic shift toward embedded services, which structurally carry lower gross margins than the legacy security suite, has already contributed to a drop in gross margin to 83.9%. If volumes do not scale fast enough to secure better vendor terms or if mix continues to tilt toward embedded, profitability could trend down despite modest top line growth and compress net margins.
• AI powered platforms like Horizon and the Halo scam protection app are positioned to support scalable growth and partner expansion, but they also require higher ongoing R&D investment and introduce execution and security risks. If adoption is slower than anticipated or development costs stay elevated, the payback period could lengthen and constrain future earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of €1.9 for F-Secure Oyj 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 €2.0, and the most bearish reporting a price target of just €1.6.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be €160.5 million, earnings will come to €28.7 million, and it would be trading on a PE ratio of 14.9x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of €1.78, the analyst price target of €1.9 is 6.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.