Siemens Restructuring Gamble Meets Soaring Software Revenue as JPMorgan Lifts Target to €335

Siemens announces radical division overhaul as software subscriptions surge. JPMorgan raises price target to €335, citing strong earnings momentum toward fiscal 2027.

Siemens is navigating two narratives at once. On one side, management has unveiled a radical internal overhaul that will dissolve its two largest divisions. On the other, surging software subscriptions and a record order haul at Smart Infrastructure have prompted JPMorgan to boost its price target on the stock to €335, up from €325, while maintaining an “Overweight” rating. Analyst Phil Buller sees stronger earnings momentum building toward fiscal 2027, a year when the industrial giant’s shift toward predictable, high-margin revenue should crystallise.

The shares recently changed hands at €261.15, a whisker below the all-time high of €272.20 set on May 14. The 14-day relative strength index sits at 81.1, flashing an overbought signal that has contributed to a 3% decline over the past seven trading days. Yet the longer-term picture remains robust: the stock has gained nearly 17.5% so far this year, supported by a €124-billion order backlog and insatiable demand for industrial AI and data-centre infrastructure.

JPMorgan’s confidence is grounded in a set of second-quarter numbers that highlight the growing importance of recurring revenue. Group turnover reached €19.756 billion, with organic growth of 6%. Software revenue jumped 14% to €1.6 billion, while annualised recurring revenue expanded 11% and total recurring billings climbed to €5.5 billion. The resulting margin in that segment hit 18.5%, underscoring the earnings leverage of subscription-based models. Digital Industries, the automation and software powerhouse, saw orders rise 12% to €4.8 billion and revenue increase 8%. Management tightened its guidance for the division, now aiming for sales growth of 7–10% and a margin of 17–19%.

Smart Infrastructure delivered the quarter’s loudest headline. Order intake surged 35% to €7.5 billion, a record, driven by large-scale contracts from data centres, semiconductor fabs and electrification projects. Regionally, the Americas grew 10%, Asia-Australia added 8%, and India posted a blistering 21% advance. The flip side was margin compression: the industrial margin slipped to 15.4% from 16.9% a year earlier, and diluted earnings per share fell to €2.58. Nonetheless, Siemens reaffirmed its full-year targets – comparable revenue growth of 6–8% and earnings per share before purchase price allocation of €10.70–€11.10 – signalling confidence that the second half will absorb currency headwinds and base effects.

Against this operational backdrop, the planned reorganisation is a bold structural bet. The two biggest divisions – Digital Industries and Smart Infrastructure – are to be carved into six or seven smaller, more agile units that will report directly to the group board. The Mobility division, by contrast, will remain untouched. For board members Cedrik Neike and Peter Körte, the reshuffle means a significant rejig of their portfolios. Talks with the supervisory board and employee representatives are scheduled for this month, though it remains uncertain whether a final agreement will be reached as early as May.

Deutsche Bank is watching the process with caution. Analyst Gael de-Bray maintains a “Hold” rating and a €255 price target, acknowledging that a simpler structure is fundamentally positive but stressing that execution will take time. He notes that roughly half of Siemens’ business areas missed consensus estimates in the latest quarter, leaving the group with a lot to prove.

In the meantime, the share buyback programme rolls on. Last week alone, Siemens repurchased almost 120,000 of its own shares. Since the programme was launched in February 2024, the company has bought back a total of more than 27 million shares. The buyback, combined with the rollout of the Xcelerator digital platform and a new minority investment of around $50 million in Xometry – a partnership aimed at embedding manufacturability, pricing and sourcing directly into the design process – underscores the strategic push toward higher-margin software and services.

The real test of the transformation will come once the new divisional structure is up and running and clear accountability is established. For now, software and Smart Infrastructure are doing the heavy lifting, but the narrowing industrial margins mean the second half of the year will be the proving ground.