Alstom's Resilient Growth and Strategic Positioning in the Global Rail Sector

The global rail sector is undergoing a profound transformation, driven by the urgent need to decarbonize transportation and modernize aging infrastructure. At the forefront of this shift is Alstom, a French multinational leader in rail technology and services. With a robust order intake, accelerating organic sales, and a clear-eyed medium-term financial strategy, Alstom is not only navigating the challenges of a decarbonizing world but thriving within it. For investors, the company's alignment with global sustainability goals and its operational resilience present a compelling case for long-term value creation.

A Strong Foundation: Order Intake and Organic Sales Momentum

Alstom's fiscal year 2024/25 results underscore its ability to secure contracts at scale. The company reported a book-to-bill ratio of 1.1, with an impressive €19.8 billion in order intake surpassing its €18.5 billion in sales. This momentum is fueled by a €95 billion backlog—a reservoir of future revenue—and high-impact projects like the €3.6 billion S-Bahn Rheinland contract in Germany. Such wins, spread across Europe, the Americas, and emerging markets, highlight Alstom's global reach and its ability to capture market share in a sector where demand for green rail solutions is surging.

Organic sales growth of 6.6% further reinforces Alstom's strength. This outperformance stems from a diversified product portfolio, including high-margin services and digital solutions, which now contribute 45% of total revenue. The company's Services, Signalling, and Systems segments are particularly dynamic, benefiting from the global push to retrofit legacy infrastructure with energy-efficient technologies. For context, Alstom's adjusted EBIT (aEBIT) margin climbed to 6.4% in 2024/25, up from 5.7% the prior year, reflecting disciplined cost management and favorable pricing power.

Medium-Term Ambitions: Profitability, Cash Flow, and Strategic Priorities

Alstom's medium-term financial targets are both ambitious and achievable. By fiscal year 2025/26, the company aims to maintain a book-to-bill ratio above 1, with organic sales growth of 3-5% and an aEBIT margin of 7%. These metrics align with a broader industry trend: as governments pour capital into rail electrification and hydrogen-powered networks, Alstom's expertise in smart and sustainable mobility positions it to outgrow the sector's average.

Free cash flow is another critical focus. After reversing a negative €557 million in 2023/24, Alstom delivered €502 million in free cash flow in 2024/25. The company anticipates this figure to range between €200 million and €400 million in 2025/26, a result of improved operating margins and disciplined capital allocation. These funds will be directed toward deleveraging, maintaining its investment-grade credit rating, and funding R&D in low-carbon technologies.

Alstom's strategic priorities are equally clear. The company is accelerating digitalization—leveraging AI and IoT to optimize train performance—and expanding its services portfolio, which offers recurring revenue and higher margins. For example, the $2.4 billion MTA railcar deal in New York includes a $479 million maintenance component, mirroring the structure of its €720 million contract in Bulgaria. These long-term service agreements insulate Alstom from cyclical demand fluctuations while reinforcing its role as a partner for sustainable infrastructure.

Decarbonization as a Competitive Advantage

Alstom's decarbonization initiatives are not just ethical commitments—they are strategic imperatives. The company's science-based targets include a 40% reduction in scope 1 and 2 emissions by 2030 (vs. 2021 levels) and net-zero emissions by 2050. To achieve this, Alstom signed a 10-year Virtual Power Purchase Agreement (VPPA) in 2023, securing green energy from a Spanish solar asset to cover 80% of its European electricity consumption. This move not only reduces costs but also aligns with investor preferences for ESG-aligned companies.

Innovation is another pillar. Alstom's Coradia iLint hydrogen train and Hesop energy recovery systems exemplify its leadership in zero-emission mobility. These solutions are gaining traction in markets like Germany, California, and Japan, where regulatory tailwinds and public demand for cleaner transport are accelerating adoption. The company's 60% low-carbon revenue in 2023 and 35% of R&D investment directed toward green technologies further underscore its commitment.

Investment Considerations: Balancing Growth and Risk

Alstom's strategic positioning in a decarbonizing world offers a dual opportunity: capital appreciation from its high-growth segments and income from its services-driven margin expansion. The company's target of 5% average sales growth over the medium term, combined with a dividend payout ratio of 25-35% once it achieves zero net debt, makes it attractive for both growth and income-focused investors.

However, risks exist. Geopolitical tensions, supply chain bottlenecks, and regulatory shifts could delay projects in key markets like North America and Southeast Asia. Additionally, while hydrogen technology is promising, its scalability depends on government subsidies and infrastructure development, which remain uncertain.

For investors, patience is key. Alstom's backlog provides visibility for years, and its focus on innovation ensures it remains ahead of industry trends. The company's recent acquisition of Bombardier Transportation has also expanded its product portfolio and geographic reach, creating economies of scale.

Conclusion: A Rail to a Greener Future

Alstom's combination of strong order intake, organic sales growth, and a clear roadmap for decarbonization positions it as a leader in the global transition to sustainable mobility. As governments and corporations prioritize net-zero goals, Alstom's hydrogen trains, digital solutions, and green energy partnerships will be critical to achieving these targets. For investors seeking exposure to the energy transition, Alstom offers a resilient business model with long-term growth potential.

The train is already moving—and Alstom is engineering the tracks.