ATM Services Will Lead Digital Cash Management Evolution

Key Takeaways

• Accelerating demand for ATM-as-a-Service and advanced cash management is driving recurring, high-margin revenue growth and expanding the global customer base.
  
• Strategic wins, AI-enabled efficiencies, and a strong recurring revenue mix support robust margins, free cash flow, and increasing long-term earnings power.
  
• Accelerating digital banking, regulatory burdens, industry consolidation, and fintech competition threaten NCR Atleos' core ATM business model and long-term recurring revenue sustainability.

Catalysts

A financial technology company, provides self-directed banking solutions to financial institutions, merchants, manufacturers, retailers, and consumers in the United States, rest of the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

• The rapid growth and backlog in NCR Atleos' ATM-as-a-Service business (32% revenue growth in Q2, 105% YoY backlog increase) signals accelerating demand for outsourced, integrated cash management as banks digitize and automate cash operations, setting up recurring, high-margin revenue growth into 2026 and beyond.
  
• Rising adoption of cash recycling and smarter cash management, both in developed and emerging markets, is driving increased sales of more advanced ATM hardware and boosting attach rates for managed services-expanding the installed base by nearly 20% YoY and fueling future periods of services and software revenue growth.
  
• Financial institutions' need for secure, compliant, and resilient self-service infrastructure amid elevated cybersecurity and regulatory requirements is increasing demand for NCR Atleos' comprehensive secure transaction platforms, which supports margin expansion as banks turn to trusted vendors to manage cash and compliance risk.
  
• Large strategic wins with major global banks and retailers (e.g., ING Spain, State Bank of India, 7-Eleven, Casey's) coupled with new product integrations address international markets with low ATM penetration, unlocking multi-year hardware, software, and transaction growth and diversifying revenue streams.
  
• High recurring revenue mix (over 70% in Q2), significant productivity gains through AI-driven service optimization, and a rapidly scaling backlog are driving strong margin expansion and robust free cash flow, underpinning announced share buybacks and sustained EPS growth, suggesting current valuation does not reflect enhanced long-term earnings power.

NCR Atleos Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming NCR Atleos's revenue will grow by 4.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.0% today to 7.8% in 3 years time.
• Analysts expect earnings to reach $376.6 million (and earnings per share of $4.06) by about August 2028, up from $128.0 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 12.1x on those 2028 earnings, down from 22.2x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.4x.
• Analysts expect the number of shares outstanding to grow by 1.75% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.89%, as per the Simply Wall St company report.

NCR Atleos Future Earnings Per Share Growth

Risks

• The accelerated consumer shift to digital, contactless, and mobile banking reduces reliance on physical ATMs, posing a long-term risk to NCR Atleos' core recurring revenue streams and installed base growth, potentially leading to sustained top-line revenue pressure.
  
• Industry consolidation among banks and financial institutions may shrink the overall customer pool for outsourced ATM and network services, leading to increased competition for fewer contracts and putting downward pressure on revenue and earnings over time.
  
• Intensifying competition from fintechs and large technology companies can accelerate margin compression in payment and ATM services, making it difficult for NCR Atleos to maintain profitability and expand its higher-margin software and service offerings.
  
• Increased regulatory scrutiny and evolving data privacy, payment security, and cross-border compliance requirements could raise compliance costs and operating complexity, thereby impacting net margins and potentially eroding NCR Atleos' earnings growth.
  
• The ongoing hardware refresh cycle is highlighted as a key near-term revenue driver, but heavy reliance on cyclical hardware replacements combined with a modest long-term decline in cash usage creates risk of demand cliff in future periods, challenging recurring revenue sustainability and compressing future free cash flow.

Valuation

• The analysts have a consensus price target of $44.667 for NCR Atleos 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 $60.0, and the most bearish reporting a price target of just $34.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.9 billion, earnings will come to $376.6 million, and it would be trading on a PE ratio of 12.1x, assuming you use a discount rate of 9.9%.
  
• Given the current share price of $38.56, the analyst price target of $44.67 is 13.7% 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.