Revenue has returned to where it was in 2022, while its operating margin is experiencing a largely expected contraction, bringing it back to its historical average.
The situation could have been worse for the former subsidiary of Siemens, as half of its revenue depends on the automotive segment—with a product portfolio that confirms its position as world leader—which remains in crisis, with over a quarter of its revenue generated in China.
Infineon is maintaining ambitious targets for the coming cycle, targeting growth of 10% per year, with an operating margin of 25%. The intention is commendable, although inevitably subject to caution: over the last 10-year cycle, while annual sales growth has flirted with this pace, profitability has only reached such a level once – in 2023.
Moreover, 2025 has seen a normalization of its investment program after the peak of the previous two fiscal years. This brings free cash flow before acquisitions to €1.1bn, right on the average for the last five years—a period during which, in aggregate, Infineon generated free cash flow of €5.5bn.
Out of this amount, €2bn was paid in dividends, with the remainder mainly used to reduce debt, although net debt actually increased as it was also necessary to finance an external growth strategy, with the recent $2.5bn acquisition of Marvell Technology's automotive Ethernet business.
Net debt at this level represents the equivalent to twice EBITDA and four years of free cash flow. Free cash flow in 2026 will be identical to its level in 2025, at least according to management forecasts: this means that we will have to wait a while to verify the value creation resulting from the recent acquisition.
These figures should be viewed relative to a market capitalization of €47bn. Overall, the group is currently trading at valuation multiples above their historical averages.
