Alstom's Q1 2025/26 Organic Growth Surpasses 7%: A Strategic Case for Accelerating Exposure to a Resilient Industrial Growth Story

Alstom's Q1 2025/26 results have ignited a compelling narrative for industrial investors seeking long-term resilience in a cyclical sector. With organic sales growth of 7.2% and order intake surging 13.6% (€4.1 billion), the French rail infrastructure giant is outpacing macroeconomic headwinds and redefining its strategic positioning as a global mobility solutions leader. This performance, underpinned by geographic diversification, margin visibility, and product innovation, positions Alstom as a high-conviction play for investors prioritizing industrial resilience and growth.

Order Intake and Geographic Diversification: A Buffer Against Cyclical Volatility

Alstom's Q1 2025/26 order intake of €4.1 billion reflects a strategic pivot toward high-growth markets and diversified geographies. While Europe remains a core market (85% of total order intake), the Americas and Asia-Pacific are emerging as critical growth engines. For instance, the Americas secured a 6% share of global order intake (€258 million), driven by contracts like the Metrolinx overhaul of 181 commuter rail cars in Canada and a seven-year AirTrain maintenance extension at JFK Airport. Meanwhile, Asia-Pacific's order intake jumped 40% year-over-year to €330 million, fueled by a €700 million signaling contract in Perth, Australia, and expansion in the Philippines' North South Commuter Railway.

This geographic spread mitigates regional economic risks. While the Middle East/Africa saw a sharp decline in order intake (€15 million vs. €520 million in Q1 2024/25), stable sales in the region (€357 million) and ongoing projects in Saudi Arabia and Kazakhstan demonstrate Alstom's ability to maintain cash flow even during periods of low order capture.

Product Diversification: Rolling Stock and Systems as Growth Pillars

Alstom's product mix further strengthens its resilience. Rolling Stock, its largest segment, accounted for 59% of order intake in Q1 2025/26, with €2.4 billion in sales and 5% organic growth. Key wins, such as the €1.7 billion RER NG trainset expansion in France and the €600 million Bulgarian Coradia Stream contract, highlight its dominance in core markets. However, the Systems segment is the sleeper star, delivering 36% organic growth (€425 million in sales) as turnkey projects in Brazil, the Philippines, and Mexico ramp up. This segment's scalability—driven by modular infrastructure solutions—positions it to capitalize on global urbanization trends.

The Services segment, though less headline-grabbing, remains a steady contributor, with 2% organic growth and €1.07 billion in sales. Its focus on predictive maintenance and digital tools (e.g., condition-based monitoring) enhances fleet efficiency for clients, ensuring recurring revenue streams.

Margin Visibility and Operational Discipline: A Path to 7%+ EBIT Expansion

Alstom's FY2024/25 adjusted EBIT margin of 6.4% (up from 5.7% in FY2023/24) underscores its operational discipline. For FY2025/26, the company targets a 7% margin, supported by three key drivers:
1. Gross margin expansion: A 30-basis-point improvement in FY2024/25, driven by higher-margin order intake and project mix.
2. Cost savings: SG&A reductions and R&D phasing improvements contributed 60 and 30 bps, respectively, in FY2024/25.
3. Backlog quality: A €92.3 billion backlog (up from €95 billion in FY2024/25) with a 17.8% gross margin provides visibility for sustained profitability.

The Systems and Rolling Stock segments are particularly poised for margin gains. Systems' 36% organic growth in Q1 2025/26, coupled with its high-margin turnkey projects, and Rolling Stock's 3.7% organic sales growth in FY2024/25 (€9.5 billion in sales) suggest a trajectory toward the 8–10% EBIT margin target by FY2026/27.

Strategic Positioning: A High-Conviction Long-Term Play

Alstom's combination of geographic diversification, product innovation, and operational efficiency creates a compelling case for long-term investment. The company's focus on emerging markets (e.g., Brazil, Philippines) and its leadership in sustainable mobility (e.g., hydrogen-powered trains, digital signaling) align with global megatrends. Moreover, its €92.3 billion backlog acts as a buffer against cyclical downturns, ensuring steady cash flow even if near-term order intake slows.

Investment Thesis: Timing the Entry

While Alstom's FY2025/26 guidance (3–5% organic sales growth and 7% EBIT margin) may appear conservative, the stock's current valuation offers a compelling entry point. At a forward P/E of ~14x (as of July 2025), Alstom trades at a discount to its historical average of 16x, reflecting market skepticism about near-term free cash flow challenges. However, the €1.5 billion in projected free cash flow over FY2024/25–FY2026/27, coupled with a deleveraged balance sheet (net debt of €434 million as of March 2025), suggests undervaluation.

Actionable Insight: Investors should consider initiating positions in Alstom as a core holding in a diversified industrial portfolio. The company's strong order intake, margin visibility, and alignment with decarbonization and urbanization trends make it a resilient long-term play, particularly for those with a 3–5 year horizon.

In conclusion, Alstom's Q1 2025/26 results are more than a quarterly win—they signal a strategic repositioning that balances near-term execution with long-term growth. For investors seeking a cyclical yet resilient industrial name, Alstom's mix of organic growth, margin discipline, and global diversification is a rare and compelling proposition.