Siili Solutions Plc: Navigating AI-Driven Transformation Amid Revenue Decline—Is Now the Time to Buy?

In the volatile landscape of IT services, Siili Solutions Plc (HEL:SIILI) stands at a crossroads. The company reported a 2.8% year-on-year revenue decline in the first half of 2025, with organic revenue shrinking by 4.8%. While these numbers may raise red flags, a deeper analysis reveals a strategic pivot toward AI-driven digital transformation that could position Siili as a long-term winner in an industry undergoing consolidation and margin normalization.

The Revenue Decline: A Symptom of Broader Industry Shifts

Siili's revenue contraction in H1 2025 was driven by external factors: a 5.9% drop in Q2 revenue, reduced working days, and efficiency measures that trimmed capacity. However, the decline also reflects broader macroeconomic trends. Clients in the public and private sectors have delayed IT investments amid inflationary pressures and geopolitical uncertainties. For example, the company's international revenue share fell to 26.1% from 28.0%, signaling weaker demand in key markets like the UK and Germany.

Yet, these challenges are not unique to Siili. The IT services sector is experiencing a correction phase as companies recalibrate spending. According to Gartner, global IT spending growth slowed to 5.1% in 2025, down from 7.2% in 2024. This normalization of margins and industry consolidation creates opportunities for firms like Siili that are repositioning for AI-driven growth.

Strategic Restructuring: AI as the Core of Future Value

Siili's management has responded to these headwinds with a dual strategy: cost optimization and AI-focused innovation. The company reduced its workforce by 6.7% year-on-year (average employees: 921 vs. 987 in 2024) and cut non-recurring expenses tied to redundancies. However, the real differentiator lies in its AI-driven initiatives.

• AI Talent and Partnerships: Over 400 employees completed AI training in H1 2025, with a focus on large language models and RAG (Retrieval-Augmented Generation) systems. Strategic partnerships with tech giants like Microsoft Azure and AWS provide access to cutting-edge tools, while acquisitions of Integrations Group Oy and Supercharge Kft bolster its AI and data capabilities.
• Advisory Business Launch: The March 2025 launch of a new Advisory business area targets clients seeking AI-driven digital transformation, a $12.5 billion market projected to grow at 28% CAGR through 2030.
• Operational Model Renewal: A July 2025 announcement outlined a restructured operational model to align with AI priorities, including enhanced delivery capabilities in Eastern Europe (Poland, Hungary).

These moves align with a broader industry trend: AI is becoming the cornerstone of competitive advantage. McKinsey estimates that AI could generate $13 trillion in global economic value by 2030, with IT services firms capturing a significant share. Siili's early bets on AI expertise and infrastructure position it to capitalize on this wave.

Financial Resilience and Shareholder Returns

Despite the revenue decline, Siili's financials show resilience. Adjusted EBITA for H1 2025 stood at 4.5% of revenue (€2.6 million), down from 5.6% in 2024, but the company's net debt-to-EBITDA ratio remains at 0.45, well below its target of <2.0. A share buyback program in June–July 2025 repurchased 0.38% of shares at an average price of €6.38, signaling management's confidence in undervaluation.

The company's 2025–2028 roadmap is ambitious: 20% annual revenue growth (half organic), 12% adjusted EBITA margins, and a dividend policy of 30–70% of net profit. These targets hinge on successful AI adoption, but the potential rewards are substantial. For context, competitors like CGI (CGI.TO) and Capgemini (CAP.PA) are also investing heavily in AI, yet Siili's niche focus on AI-driven software development and its geographic expansion into Eastern Europe could give it an edge.

Risks and Mitigation

Siili's path is not without risks. The AI market is crowded, with larger players like IBM and Accenture (ACN) also vying for dominance. Additionally, macroeconomic volatility could delay client AI adoption. However, Siili's cost discipline, strategic acquisitions, and focus on high-margin advisory services mitigate these risks. The company's 49.9% equity ratio and €15.9 million in cash and equivalents provide financial flexibility to navigate uncertainties.

Investment Thesis: Buy for the Long Game

For investors, Siili presents a compelling case. The near-term revenue decline is a temporary setback in a sector recalibrating post-pandemic. The company's AI-driven restructuring, coupled with its share buybacks and disciplined capital allocation, suggests a focus on long-term value creation. While the stock trades at a discount to its intrinsic value (based on its 12% EBITA margin target), the path to profitability requires patience.

Key Metrics to Watch:
- AI Revenue Contribution: Track the growth of the new Advisory business and AI-related contracts.
- EBITA Margin Trajectory: A return to 5.6%+ margins by 2026 would validate the restructuring's success.
- Shareholder Returns: Monitor the impact of buybacks on earnings per share (EPS) and free cash flow.

In conclusion, Siili Solutions Plc is navigating a challenging environment with a clear-eyed focus on AI-driven transformation. For investors willing to ride out near-term volatility, the company's strategic positioning in a high-growth sector and its disciplined approach to capital allocation make it a compelling long-term play. Now may indeed be the time to buy—before the AI revolution reshapes the IT landscape.