SOP: Buy Rating Will Remain Backed By Modestly Reduced Revenue Expectations

Analysts have trimmed their fair value estimate for Sopra Steria Group from EUR 201.90 to EUR 197.60, citing slightly softer revenue growth and margin expectations in line with recent Street price target reductions, while maintaining a positive long term view.

Analyst Commentary

Bullish Takeaways

Bullish analysts continue to see upside potential to the current share price, as the latest price target remains comfortably above spot levels despite the modest cut.
The maintained positive rating signals confidence in Sopra Steria Group's ability to execute on its strategy and defend margins in a more challenging demand environment.
Valuation is viewed as attractive on a medium term basis, with analysts expecting earnings growth and cash generation to support a gradual rerating.
Exposure to digital transformation and public sector IT spending is seen as a structural growth driver that can underpin revenue resilience over the cycle.

Bearish Takeaways

Bearish analysts highlight that the reduction in the price target reflects a more cautious stance on near term revenue momentum and project ramp ups.
There are concerns that cost inflation and wage pressures could limit margin expansion, putting pressure on valuation multiples if growth slows further.
Execution risks around large scale contracts and integration of prior acquisitions are cited as potential sources of earnings volatility.
Some analysts see limited scope for significant multiple expansion in the short term, given macro uncertainty and rising competition in the European IT services market.

What's in the News

A Board meeting is scheduled for December 11, 2025 to consider the appointment of Rajesh Krishnamurthy as Sopra Steria Group’s new Chief Executive Officer (Key Developments).
The Board of Directors appoints Rajesh Krishnamurthy as the new CEO, effective February 2, 2026, bringing three decades of international technology and transformation experience across Europe, Asia, and the Americas (Key Developments).
Outgoing CEO Cyril Malargé steps down to pursue a new opportunity. The Board launches a formal process to identify his successor, overseen by a transition team led by the Chief Operating Officer (Key Developments).
An October 8, 2025 Board meeting is convened to review and acknowledge Cyril Malargé’s decision to resign as Chief Executive Officer (Key Developments).

Valuation Changes

Fair Value Estimate reduced modestly from €201.90 to €197.60, reflecting slightly softer medium term assumptions.
Discount Rate edged down from 10.09 percent to 9.87 percent, implying a marginally lower required return for equity holders.
Revenue Growth trimmed from 2.18 percent to 1.93 percent, indicating a slightly more cautious outlook on top line expansion.
Net Profit Margin lowered fractionally from 5.81 percent to 5.79 percent, signaling a near unchanged but marginally tighter profitability profile.
Future P/E eased from 13.79x to 13.57x, pointing to a small downward adjustment in the valuation multiple applied to forward earnings.

Expansion in defense, cybersecurity, and AI-powered services is boosting high-margin revenue streams and positioning the company for resilient, long-term earnings growth.
Operational improvements and strategic M&A in key sectors are expected to enhance profitability, drive recurring revenue, and improve cash flow over the medium term.
Structural revenue stagnation, margin pressures from rising costs, weak cash generation, sector overexposure, and disruptive technology trends threaten future stability and profitability.

Catalysts

About Sopra Steria Group

Provides consulting, digital, and software development services in France and internationally.What are the underlying business or industry changes driving this perspective?

Increased investment in European defense, security, and sovereignty-amplified by geopolitical tensions and digital threats-is driving demand for Sopra Steria's cybersecurity, mission-critical systems, and sovereign cloud solutions. This is already evidenced by new contracts and ramp-ups with major government and defense clients, supporting stronger, higher-margin revenue streams and improved long-term earnings.
Acceleration of digital transformation initiatives in both the public sector (e.g., NHS, SNCF, Swiss Railways) and regulated verticals (e.g., financial services, aerospace), combined with Sopra Steria's established presence and multi-country frameworks, positions the company for resilient project inflows, higher contract renewal rates, and consistent revenue growth into 2026 and beyond.
The rapid scaling and integration of AI-powered digital services-evidenced by client projects across finance, logistics, and automotive-coupled with a mature, in-house AI adoption strategy, supports Sopra Steria's transition to higher-value, higher-margin offerings, which is anticipated to enhance both margins and long-term profitability.
Successful implementation and cross-selling of recent large contracts (such as the NS&I in the UK, major French financial institutions, and multi-year aerospace frameworks with Airbus) are expected to drive recurring revenue growth and margin expansion in the coming quarters, especially as more of these contracts ramp up in late 2025 and 2026.
Ongoing progress in operating model transformation, working capital improvement (DSO reduction), and strategic M&A in high-value verticals (defense, financial services, aerospace) should enhance operational leverage, boost free cash flow conversion, and lift net margins over the medium term.

Sopra Steria Group Earnings and Revenue Growth

Sopra Steria Group Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Sopra Steria Group's revenue will grow by 2.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 5.0% today to 6.1% in 3 years time.
Analysts expect earnings to reach €373.6 million (and earnings per share of €19.0) by about September 2028, up from €282.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.1x on those 2028 earnings, up from 10.5x today. This future PE is lower than the current PE for the GB IT industry at 14.5x.
Analysts expect the number of shares outstanding to decline by 1.28% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.58%, as per the Simply Wall St company report.

Sopra Steria Group Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent negative organic revenue growth in key markets (France, UK, and Europe all reported contractions in H1 2025, with only a small solutions segment showing growth) highlights structural challenges and exposes the company to potential long-term stagnation or decline in overall revenue.
Rising employee costs, high attrition rates (16.1%), and increased social charges in both major markets are compressing margins, and management notes that improvements will depend on savings plans and cost discipline, indicating ongoing difficulty in sustainably improving net margins.
Delays in reducing Days Sales Outstanding (DSO) and negative free cash flow (-€145.9 million in H1 2025) reflect challenges in working capital management, signaling risk to cash generation and potentially weakening the company's ability to invest, acquire, or weather downturns, ultimately affecting earnings.
Overreliance on public sector, defense, and financial services (68% of revenue concentrated in three verticals) exposes Sopra Steria to sector-specific budget cuts, political volatility, and changing government procurement, increasing the risk of revenue volatility and limiting diversification opportunities.
Management acknowledges that broader market trends such as AI adoption and cloud-based standardization may, in the long term, cannibalize traditional IT services and systems integration (the company's core), creating structural headwinds for revenue growth and placing downward pressure on blended profit margins.

Valuation

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

The analysts have a consensus price target of €222.0 for Sopra Steria Group 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 €262.0, and the most bearish reporting a price target of just €168.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €6.1 billion, earnings will come to €373.6 million, and it would be trading on a PE ratio of 14.1x, assuming you use a discount rate of 9.6%.
Given the current share price of €154.0, the analyst price target of €222.0 is 30.6% 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.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Lower Sopra Steria Price Target as CEO Steps Down and Forecasts Adjusted