Nexans S.A.: A High-Conviction Play in Electrification and AI-Driven Margin Expansion

In the race to decarbonize global energy systems, Nexans S.A. (Euronext: NX) has emerged as a standout player, combining electrification growth with a disciplined capital allocation strategy and a bold AI-driven operational transformation. With a revised 2025 EBITDA guidance of €810–860 million and a free cash flow outlook of €275–375 million, the company is not just surviving in the energy transition—it's thriving. For investors seeking a long-term bet on the convergence of industrial innovation and sustainability, Nexans offers a compelling case.

Electrification as a Growth Engine

Nexans' pivot to electrification is paying dividends. The Electrification segment, which includes power transmission and grid solutions, delivered 7.8% organic growth in H1 2025, outpacing the Group's overall 4.9% growth. This segment now accounts for a significant portion of Nexans' revenue and profitability, with an EBITDA margin of 13.7%—a structural improvement driven by high-value solutions and operational excellence.

The company's strategic divestment of Lynxeo, a non-core industrial cable business, and the acquisition of Cables RCT in Spain have sharpened its focus on electrification. These moves have not only streamlined operations but also expanded Nexans' footprint in high-growth markets. The Cables RCT acquisition, for instance, contributed seven months of sales in H1 2025, underscoring the power of targeted M&A to accelerate growth.

AI-Driven Margin Expansion: A Game Changer

While electrification provides the tailwinds, Nexans' AI-led operational transformation is the catalyst for margin resilience. The company has embedded artificial intelligence (AI) into its core processes, from dynamic pricing to predictive maintenance.

One standout innovation is EasyJoint, an AI-powered solution for the Power Grid segment. By reducing installation steps by five times and minimizing human error—a leading cause of grid failures—EasyJoint is expected to enhance grid reliability and reduce maintenance costs. Deployed in 40+ countries, this technology exemplifies Nexans' ability to turn data into actionable value.

Beyond product innovation, Nexans is leveraging AI for multi-variable costing simulations in real time, enabling rapid adjustments to raw material, labor, and energy costs. Machine learning models also optimize pricing elasticity across thousands of SKUs, identifying margin leakage and boosting profitability. These initiatives have already driven a 21.6% return on capital employed (ROCE) for the Group and 27.5% for the Electrification segment in Q2 2025.

Strategic Capital Allocation: Building a Resilient Balance Sheet

Nexans' capital allocation discipline is another pillar of its investment thesis. The company's net debt position has plummeted from €681 million at year-end 2024 to €48 million by June 2025, while liquidity surged to €2.84 billion. This financial flexibility allows Nexans to fund innovation, reward shareholders, and pursue accretive M&A.

The launch of the 11th employee share ownership plan (ACT 2025), with a 46% global participation rate, further aligns stakeholders with long-term value creation. Meanwhile, the absence of debt maturities until April 2027 provides a buffer against refinancing risks, ensuring stability as the energy transition accelerates.

Investment Rationale: A High-Conviction Play

Nexans' combination of electrification growth, AI-driven efficiency, and disciplined capital allocation positions it as a rare industrial stock with both top-line and margin upside. The company's revised 2025 guidance—now €810–860 million in adjusted EBITDA—reflects confidence in its strategic execution.

For investors, the key risks include macroeconomic headwinds in the energy sector and execution risks in AI integration. However, Nexans' strong liquidity, diversified customer base, and leadership in low-carbon technologies (e.g., 10% recycled aluminum cables) mitigate these concerns.

Conclusion: A Must-Own for the Energy Transition

Nexans S.A. is more than a cable manufacturer—it's a leader in the digital and sustainable transformation of energy infrastructure. With electrification demand surging and AI unlocking operational efficiencies, the company is poised to outperform peers in both growth and profitability. For long-term investors, Nexans represents a high-conviction play at the intersection of industrial innovation and the energy transition.

Investment Advice: Buy Nexans (NX) for its structural growth in electrification, AI-driven margin expansion, and robust capital allocation. A long-term hold is recommended, with a target price based on 12x 2025 EBITDA (€835 million midpoint) and a 25% discount to peer averages.