PSI Software's Strategic Turnaround and Earnings Recovery: A Post-Transformation Industrial Software Firm with High-Growth Potential

In the ever-evolving industrial software sector, few companies have demonstrated the resilience and strategic clarity of PSI Software SE. Over the past year, the German firm has executed a transformative “PSI Reloaded” program that has not only stabilized its financials but also positioned it as a leader in high-growth areas like smart grids, industrial SaaS, and AI-driven logistics. For investors seeking a post-crisis turnaround story with a clear path to sustainable profitability, PSI Software offers a compelling case study.

The Strategic Transformation: From Crisis to Clarity

PSI's journey began with a painful but necessary reckoning. A cyberattack in 2024 left the company with a staggering €19.4 million EBIT loss in the first half of that year. However, the crisis catalyzed a rigorous transformation. By December 2024, PSI had restructured its organizational framework, divesting its non-core Mobility division and refocusing on segments with higher margins and long-term scalability. The new structure emphasized synergy across its four core business lines: Grid & Energy Management, Process Industries & Metals, Discrete Manufacturing, and Logistics.

A critical pillar of the transformation was the shift to cloud-based and SaaS (Software as a Service) solutions. This move, which began in earnest in 2025, has already driven a 35% increase in revenue for the Grid & Energy Management segment, with operating profit turning positive at €1.5 million. The company's AI-driven platforms, such as the award-winning PSIwms AI, have further enhanced margins by enabling premium pricing and operational efficiency. For example, the platform reduced picking distances by 31% and increased efficiency by 23% at LPP's warehouses, showcasing the tangible value of its technological edge.

Financial Recovery: Margins and Cash Flow on the Rise

The results of these strategic shifts are evident in PSI's 2025 H1 financials. New orders surged 36.4% to €210 million, with revenue climbing 18.3% to €132.9 million. The adjusted EBIT margin reached 2.6% (€3.5 million), a stark contrast to the -17.4% margin in the same period of 2024. Even more impressive is the recovery in cash flow: operating cash flow improved to €7.6 million, and cash and equivalents rose to €31.2 million, up from €26.5 million at year-end 2024.

Segmental performance underscores the breadth of the recovery. The Grid & Energy Management segment, now a €61.1 million revenue generator, achieved a 26.9% year-over-year growth and an operating profit of €2.2 million. Similarly, the Logistics segment's 19.6% revenue increase and €0.6 million operating profit highlight the power of AI and SaaS to transform traditionally low-margin industries.

Future Outlook: A Path to €400 Million in Revenue by 2028

PSI's management has set ambitious but achievable targets: 10% revenue growth in 2025 and an adjusted EBIT margin of 4%. These goals align with the company's long-term vision of reaching €400 million in revenue and a 15% EBIT margin by 2028. The roadmap includes accelerating the SaaS transition, with recurring revenue streams expected to dominate by 2026. Additionally, cost-cutting programs in the Grid & Energy Management segment—despite one-off expenses in 2025—will yield significant savings by 2026, further improving margins.

Geographically, PSI is leveraging its European stronghold while expanding into North America and Asia, where demand for smart grid and energy efficiency solutions is surging. Strategic partnerships, such as its collaboration with Google Cloud, will also enhance its technological agility.

Risks and Considerations

While the turnaround is impressive, investors should remain mindful of risks. The cost-cutting initiatives, though necessary, could temporarily strain liquidity. Additionally, the reliance on AI and cloud infrastructure exposes the company to cybersecurity threats and regulatory scrutiny. However, given PSI's recent focus on resilience and its diversified revenue streams, these risks appear manageable.

Investment Thesis

For long-term investors, PSI Software presents a rare opportunity: a company that has not only survived a crisis but is actively redefining its industry. Its strategic focus on high-margin SaaS, AI-driven innovation, and operational efficiency positions it to outperform peers in the industrial software sector. With a current valuation that reflects its post-crisis status but not its long-term potential, PSI offers an attractive risk-reward profile.

Key Takeaway: Investors should consider a core position in PSI Software for its transformational momentum and alignment with global trends in energy efficiency and digital industrialization. As the company executes its 2026–2028 roadmap, the path to a 15% EBIT margin and €400 million in revenue appears increasingly viable.