Original-Research: NFON AG (von NuWays AG): BUY

Classification of NuWays AG to NFON AG

Company Name:	NFON AG
ISIN:	DE000A0N4N52
Reason for the research:	Update
Recommendation:	BUY
Target price:	EUR 8.3
Target price on sight of:	12 months
Last rating change:
Analyst:	Philipp Sennewald

Q1 in line with muted expectations

Yesterday, NFON published its Q1'26 figures. Revenue and profitability came in soft, as widely expected given the subdued macro backdrop. In detail:

Another transitional quarter. Q1 sales were down 2.3% yoy to € 21.6m (eNuW: € 22.4m). This was primarily attributable to continued seat erosion, with the base declining 3.1% yoy to 641k, as weak order intake and selective customer losses in the legacy PBX segment more than offset growth in AI solution. Importantly, the revenue mix held up well with recurring revenues remaining strong at 93.8% of total, and blended ARPU edged up to € 10.04 (Q1'25: € 10.02), reflecting the positive mix shift towards premium and AI-based solutions as well as prior pricing measures. What is particularly notable from the earnings call are the geographic differences: while Germany and the UK remain under pressure, Austria and Italy are showing significantly positive trends in both seats and revenues, suggesting the weakness is not broad-based.

Margin compression is a deliberate investment, not a cost control failure. Adj. EBITDA of € 1.8m (eNuW: € 2.6m) was down 32% yoy, with the margin compressing to 8.3% (-3.5pp yoy). The gap is explained by two concurrent forces. One being the declining top line and the other an intentional step-up in personnel costs (+3.9% yoy) as NFON continues to build out its AI and product development capabilities under the NFON Next 2027 programme. In our view however, the company is well equipped to absorb this investment phase given a solid liquidity base and continued FCF generation (€ 1.6m in Q1). Further, we expect communicated cost measures to become increasingly visible from H2 onwards.

AI traction is building. Customer Engagement and Intelligent Assistant together now account for c. 10% of sales, both growing at more than 10% yoy. This is a meaningful step up yet underappreciated by the market given the headline seat decline. The productive release of NFON's own Text-to-Speech AI service, built on the botario team's expertise and featuring EU-only data processing, is a further tangible proof of innovation speed and technological independence. While management was explicit on yesterday's call that growth is expected to return from Q3, a broader monetisation of AI solutions remains challenging, which is however not NFON specific but observed across the industry. Q2 is expected to remain muted, with H2 likely showing first tangible effects. We view FY26 as transitionary year, with the commercial and financial payoff of the AI build-out to materialise meaningfully from 2027 onwards.

FY guidance confirmed at low-to-mid single-digit growth and >€ 12m adj. EBITDA. Growth looks reasonable despite the weak Q1 based on an expected normalisation of order intake in the partner channel, and the progressive contribution from AI-driven upsell as penetration of the existing customer base deepens. The EBITDA target requires a meaningful H2 step-up, which we regard as ambitious, yet achievable.

Valuation remains attractive at 5.3x FY26e EV/adj. EBITDA for a cash generating business with strong recurring revenues. 
BUY, € 8.30 PT.

You can download the research here: nfon-ag-2026-05-22-previewreview-en-5175e
For additional information visit our website: https://www.nuways-ag.com/research

Contact for questions:
NuWays AG - Equity Research
Web: www.nuways-ag.com
Email: research@nuways-ag.com
LinkedIn: https://www.linkedin.com/company/nuwaysag
Adresse: Mittelweg 16-17, 20148 Hamburg, Germany
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Offenlegung möglicher Interessenkonflikte nach § 85 WpHG beim oben analysierten Unternehmen befindet sich in der vollständigen Analyse.
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