Unisys Shares: A Year of Contrasts and Cautious Forecasts

Unisys ended FY 2025 with strong Q4 profits and a reduced pension deficit, but projects a revenue decline for 2026, leaving investors cautious.

The IT services firm Unisys concluded its 2025 fiscal year with a powerful final quarter, surpassing profitability expectations. However, management has adopted a guarded stance for the current year, projecting declining revenues despite a solid order backlog. This outlook raises questions about whether recent efficiency gains will be sufficient to cushion what the company anticipates will be a transitional 2026.

Balance Sheet Strengthened by Pension Reduction

A significant milestone for Unisys was the substantial improvement of its balance sheet. Through targeted actions, including the purchase of annuities to transfer obligations, the company drastically cut its pension deficit. By the end of 2025, this shortfall stood at approximately $450 million, marking a sharp decline from the $750 million recorded a year earlier.

This reduction in long-term liabilities significantly bolsters the firm's financial stability. Coupled with a growing order backlog that reached $3.16 billion, Unisys enters the coming period with a notable buffer. The critical factor for its share price trajectory will be whether stabilized profit margins can offset the revenue decline projected for 2026.

Profitability Surges in Q4

The company's fourth-quarter performance provided a bright spot. Revenue increased by 5.3% year-over-year to $574.5 million. More impressively, the non-GAAP operating margin expanded by 640 basis points to 18.0%, reflecting a markedly improved cost structure and greater efficiency in project execution.

Cash generation also saw a notable uptick as the year closed. Operating cash flow in the final quarter rose to nearly $105 million, compared to about $77 million in the prior-year period. This enhanced liquidity affords Unisys flexibility to continue advancing its business model transformation, even as the broader IT sector undergoes a shift driven by investments in artificial intelligence and cloud solutions.

A Cautious Stance for the Year Ahead

Despite the strong quarterly finish, the full year 2025 still registered a slight revenue decline of 2.9%, underscoring the challenging market environment. For the ongoing 2026 fiscal year, executives have expressed pronounced caution. They forecast a currency-adjusted revenue decrease of between 4.5% and 6.5%. A primary driver of this outlook is the Software Licenses and Support (L&S) business, for which Unisys estimates annual revenue of around $415 million.

Investors have recently reacted with restraint to these prospects. Despite operational progress, the shares continue to trade at €2.05, remaining well below the 52-week high of €3.31. A Relative Strength Index (RSI) reading of 22.5 indicates the stock is currently in technically oversold territory.