Siemens: A fork in the road. New cycle or false dawn?

Research evidence excerpt

Siemens: A fork in the road. New cycle or false dawn?

rgest China Automation market in value terms, and given

diverging end market trends in China, the exposure of individual Automation

businesses starts to matter more. Bottom line, this will remain a debate through the

next period of MIR China Automation data and Siemens results for fiscal 3Q26.

Digital Industries from here. New cycle of False Dawn? The key debate for Digital

Industries is on sequential Automation hardware order development from the 2Q26

level of €3bn. It is also on converting EDA software orders in 4Q26, which will in

turn drive 2026 Digital Industries margins to the upper end of the 17-19% guided

range. From a cycle perspective, it is clearly encouraging to hear Siemens highlight

April orders were ahead of their expectations. We were encouraged by Rockwell's

comments of seeing some US Auto and Food and Beverage customer capex projects

starting to be unlocked. That said, the US is 25% of Digital Industries revenues,

while we estimate Europe remains 40% of the total Digital Industries revenues. We

acknowledge that the Automation data is holding up well, but for Europe there are

still multiple challenges for capex investments. Energy costs are rising, tariffs are in

place, and European Auto manufacturers are losing market share to Chinese

companies. German Industrial Production fell by -3% YOY in March, and the German

IFO is now declining. Bottom line, through Siemens fiscal 2Q and 3Q, we expect a

continued recovery in the US, but see risk that Europe deteriorates sequentially.

While we do not see a material downside risk for Siemens consensus estimates, we

do think this risks keeping a lid on sentiment and momentum in the equity story in

the next six months. For this reason, we remain Equal-weight.