Begin with an update on our strategic and operational developments. Taco will then provide further insight into our financials and an updated outlook. After their prepared remarks, we will open the line for your questions. As always, please note that safe harbor applies. With that, Mike, let me hand it over to you.
Thank you, Claudia. Good afternoon, everyone, and thank you for joining our call. I will begin, as Claudia said, with a strategic and operational update on progress during the quarter before I hand over to Taco. Today we announced changes that sharpen our focus on the markets where we see the strongest opportunities for growth. We see significant growth potential in two specific industries, which is automated driving and location intelligence. Let me start with automated driving. There AI is helping us to innovate faster to support higher levels of vehicle automation by also having built that on a foundation which is highly scalable. In location intelligence for enterprises, AI is making it easier for customers to access our location data and derive insights from it, that intelligence layer. To capture these opportunities, we have reorganized TomTom around three divisions.
The first is automated driving, the second is location intelligence for enterprises, and the third is navigation. With this structure, we want to bring better and sharper focus on these areas and allowing the three divisions to build on our shared product foundation from maps, location technology and AI capabilities. The third division, navigation, remains the backbone of TomTom. It is where most of our revenue comes from. We have the strong backlog and where customers rely on us to deliver high-quality location technology every day. On the organizational design, by reducing management layers and bringing decision-making closer to the execution and to the outcome, we will be able to respond faster to customer needs and accelerate innovation. Unfortunately, these changes also impact approximately 200 roles, and we are committed to supporting these colleagues and our colleagues affected throughout the transition.
Overall, these changes are designed to make TomTom more focused, faster, and more scalable. This will help to expand our customer base, strengthen our position in growing markets, and drive sustainable growth over time. I would also like to give you a bit of an update on the commercial and the product progress, which is aligned to what I just explained. We continue to extend the role of our location technology in AI applications. Earlier this week, we announced a cooperation with DeepRoute.ai, covering our joint efforts on AI-based automated driving. We have integrated TomTom location data into DeepRoute.ai's AI automated driving stack and algorithm. The combined solution uses our location intelligence alongside the sensor information provided the road layouts, local rules and wider context needed to plan ahead and navigate unfamiliar roads.
The integrated demonstration vehicle is being showcased in the Paris Motor Show and driven by existing partners and new partners. The second thing I would like to stress is that we expanded our partnership and our collaboration with Microsoft further, bringing TomTom location intelligence to Microsoft Fabric, the Microsoft Foundry, through Microsoft's IQ Sharing preview. This actually allows enterprises to combine our geospatial data with their own business data. It enables AI agents to better understand real world conditions and support more informed decision-making. That's the second one, which is quite important and that ladders up in the location intelligence for enterprises. Also the product side, we launched the TomTom Maps MCP server in the Claude connector directory. This makes our maps routing and real-time traffic capabilities more easily accessible to AI and assistant and agents. It also enables location-aware experiences without the need for complex integration.
It accelerates that adoption of location data and location intelligence. Together, these initiatives strengthen our position as a provider of AI-ready location intelligence and really drives into our future strategy where we want to accelerate in those ecosystems. Overall, we are really sharpening our focus on the areas where we see the strongest growth, and we have a differentiating factor as well based on our unique position on our independent structure, our technology stack, and our data, which is auditable and traceable in highly governed industries.
We are organizing the company to accelerate innovation and deliver faster to our customers, future and existing. At the same time, we're making our location technology easier to access and integrate into AI applications and agentic applications. The commercial progress we made during the quarter demonstrates the relevance of our technology across a broad range of use cases. Now with that, I'll hand over to Taco, who will take you through the financial results and outlook in more detail. Thank you.
Thank you, Mike. I'll cover our financial performance and our outlook after which we'll take your questions. In the third quarter of 2026, group revenue was EUR 129 million, a 6% decrease versus last year. This decline was in line with expectations and guidance. Let me briefly break down our top line performance. Automotive revenue came in at EUR 78 million for the quarter. That's a 2% decrease year-on-year. Automotive operational revenue was EUR 68 million, down 19% year-on-year. The decline was partly driven by a phase-out of customer contracts. In addition, the same quarter last year benefited from royalty reports received relating to earlier periods, creating a higher comparison base. Enterprise revenue was EUR 37 million, down 4% year-on-year. Decline was mainly due to the phase-out of customer contract, partly offset by new customer wins. Taken together, our location technologies segment generated EUR 115 million.
Consumer revenue was EUR 14 million, down 24% year-on-year, reflecting the continued contraction of the PND market and memory supply constraints. Gross margin improved to 90%, up from 89% last year. This increase was driven by the higher proportion of high-margin content and software revenue in our mix. Operating expenses were EUR 111 million, a reduction of EUR 3 million compared with the same period last year.
As a result, our operating result was a profit of EUR 6 million. Our operating margin was 5% and came in above the level we anticipated, reflecting strong cost discipline. Free cash flow, excluding restructuring payments, was EUR 8 million. Net cash movement for the quarter was an inflow of EUR 5 million, compared with an inflow of less than EUR 1 million in the same quarter last year. We ended the quarter with a net cash position of EUR 239 million, with no outstanding borrowings.
Let's look at the outlook for the full year. Looking ahead, we are updating our full year to 2026 outlook. Revenue development is progressing in line with expectations, while profitability continues to benefit from strong gross margins and disciplined cost control. We are narrowing our revenue range and increasing our operating margin outlook, reflecting our performance year to date and the lower expected salary cost in the fourth quarter resulting from the organizational realignment announced today. For 2026, we now expect group revenue of EUR 505 million-EUR 530 million, with Location Technology revenue of EUR 450 million-EUR 470 million, and an operating margin of around 4%. This includes a restructuring charge of approximately EUR 15 million, which we expect to record in the fourth quarter. Excluding this one-off charge, we expect our operating margin to be around 7% for the full year.
We estimate the annualized savings for the organizational realignment at approximately EUR 21 million. For 2027, we reiterate our expectations of Location Technology revenue growth, supported by increasing gross margin and a more efficient cost base. We are well-positioned to deliver profitable growth. With that, we're ready to take your questions. Operator, please start the Q & A.
Thank you. We will now begin the question and answer session. As a reminder, if you wish to ask a question, you need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We will take our first question, and the question comes from the line of Marc Hesselink from ING. Please go ahead. Your line is open.
Thank you. Thanks for taking the question. I have a couple. Maybe to start, with automated driving in a sort of a separate category next to the navigation for the auto clients, what does that say on the go-to-market for automated driving? Is that really a different business model than what you had in the past with navigation? Also maybe the way that it works in the P&L. I can imagine that in the past it was really a price times quantity kind of story. Is that going to be different with automated driving now that you have made this change?
Thanks for the question, Marc. To a certain extent, it is automotive, right? In automotive, you can clearly see convergence with some car makers of what's happening in the cockpit and deeper in the vehicle with AD and navigation. But in many, it's also still separate. For us, the reason why we ring-fence both is because we want to go faster in AD and more deliberate. It's the same for location intelligence, by the way. We bring single-threaded leadership and a team that really wakes up and goes to bed with the same mission to drive innovation, delivery of those products in that growth market. Whereas I would say navigation is a bit of a different rhythm because we have a backlog and we deliver commitments. We also ring-fence that to make sure they don't get distracted.
But there is convergence on some technologies where you see visualization in the infotainment system, in the product stack, that the teams need to work together as well. I would say it's a mix, but the main reason why we do this with these divisions is to go faster and deliver faster solutions closer to our customers. That just explains now if you ring-fence AD, that team, again, has a very laser-focused mission to deliver solutions in the whole AD ecosystem. That ecosystem is quite extended, right? It's not just car makers, it's also the AI algorithm providers, the chip providers, the tier ones, and the OEMs. There's a clear focus from the team into that target audience. Does that answer your question?
Yes, it does. The second question that I have is, if you look at Microsoft contract or the collaboration that you expanded, again, how does that work? I think Microsoft, it's a client, but it's also a platform that enables you to reach other clients. This extension, is that on both sides, as in you have a bigger contract with Microsoft now? Or is it really about the extension to go via Microsoft to other clients?
One of the things we also want to do, maybe a step back, is for us, we want to focus on our core as well as a company. Our core is to deliver the best location data and best location intelligence in a scalable way. So at quality, at scale, and with the highest freshness. That feeds into location intelligence for enterprises, feeds into AD and navigation. That's why we want to be the best that we invest in. We want to scale through partners, and Microsoft is a good example. Microsoft is building capabilities, and I'm not talking about the two-way contract, I'm talking to how we can scale through Microsoft because they have the reach, and they also have the Fabric, the data lake.
What we do there is to make sure that our location data and location intelligence is available in their marketplace to be consumed by their customers, which gives us a bigger reach. That's the step now. There's many more steps in how you can expand with Microsoft, but that's what we're doing now in terms of specific areas like logistics with use cases. You can see a further path to expand that where you say, okay, there's more and more data being used and at scale as well. But this expansion is that we make our data available in their marketplace towards their customers, and then we go to market together. That's in this stage.
How is that then different than what you had before with Microsoft?
That brings me a little bit. I don't want to go too deep in detail, but Microsoft has also changed over the past months and quarters in terms of how they're structured, especially with Copilot and AI. Our current collaboration is more on the Bing side, and it moves to Azure. But Fabric and Foundry is a very big strategic bet for Microsoft, which is fairly new, I would say. The way we're structured today is more on the Bing side and specifically also on Azure. This is a new territory where they're expanding, and we want to be part of that expansion together. That's the difference.
Okay. That is clear. Then the final question. You said expectations still to grow again in 2027. If you then split that into those three building blocks, you said automated driving as well as location intelligence are growth areas. I think into 2027, you are also still going to benefit quite a bit on the navigation side with contracts that are going to ramp up. Is that correct? Should the growth come from all the three categories?
Maybe I can take this question. If you talk about growth, there is a difference between order intake and revenue reported. What you will see next year, and the main drive of that growth is indeed still coming from the navigation segment where we will launch certain programs or the SOPs of certain car lines. The distinction between what exactly automated driving is and what navigation is is not that black and white.
Often it is a bit of a hybrid on a revenue point of view, not so much on the product point of view. There it is more clear, but from a revenue point of view, it is often mixed. There are certain features that are required for safety, et cetera, that both benefit the car as the driver itself. B ut for the growth that we expect for the location technology segment as a whole, the main driver here is coming from navigation for next year. But again, the order intake is much more fueled by the other two segments.
It is clear. Thank you.
Thank you. Once again, if you wish to ask a question, please press star one one on your telephone and wait for your name to be announced. We will take our next question. Your next question comes from the line of Andrew Hayman, Independent Minds. Please go ahead. Your line is open.
Yes. In terms of this new divisions, will you be changing your reporting structure at all?
No, we will not. That is also quite linked to my previous answer, is that if you want to break up revenue in either automated driving or navigation, it is quite artificial. It is not that clear. Again, you can make the distinction from a product point of view, but not so much from a revenue point of view. So in very simple terms, automated driving and navigation combined is what we call the automotive segment, and location technology is what we call the enterprise segment.
Okay, thank you. Then, maybe looking out a bit, I was listening to an interview you did recently, Mike, and you highlight that TomTom has the strength of being independent and has a strong tech stack, and it is a trusted partner both on data accuracy and dealing with regulated sectors. If we look over the history of TomTom, you have had some very strong partnerships, whether it is Google, Apple, or Renault, but they have not always lasted. My impression is it is not that you have not necessarily performed in those partnerships, but those clients wanted to bring some of that technology internally. We can already see the next batch of partnerships coming through, such as VW. Do you have a sense, looking, let us say, five years out, who your key partners will be?
That's a good question. I think first of all, the existing partnerships that we have are quite important because some of those partners also have a very strong strategy and vision into what's happening around AI and the technology. There's quite a good foundation to build on, and Microsoft is a very strong example, but there's more. When you look at new potential partners, I would say a lot of our existing partners, which are where we have kind of a stable and static revenue monetization model, we're looking more and more in opening that up as well in a flexible way because they're building solutions in the agentic world, which also will expand their business, and we want to do that together. I would say that's the second category.
The third, we see a lot of new partnerships on the horizon, especially in the AI ecosystem, in automotive, but also in enterprises with LLMs across the globe that are looking for a very strong partner in location data and location intelligence. The key thing is what we've seen, of course, is some of our, in the history of our partnerships, some of our still current and older ex-partners, they tended to bring things in-house. But I see the opposite effect, where more and more of the big technology players are focusing on their core and their strength, and they rely more and more on partnerships because they don't want to duplicate or waste their resources and time on things that somebody else can do better.
That's a trend I really see across the board in enterprise, but also especially in automotive, where you can also see that in the narrative of car makers that are saying more and more, they're speaking the language of partnerships because they don't have the means. We've seen with a lot of examples around the globe that we're building up software houses in-house with tens of thousands of people, and that came back from a difficult journey. You see a trend, then more there's recognition of staying in your swim lane and partnering with each other to create a cascading effect. I think that's quite promising with what I've seen in existing partnerships and especially potentially the new ones.
Do you see those business models still evolving? Because one of the pressures you have is your partners are quite big. Sometimes I think getting properly paid for the work that you do is a challenge.
Yeah. We have to stay open-minded as well. You can already see that in the AI models in consumption. That is changing also as we speak, right? It is hard to put a stake in the ground and say, "This is exactly how it will look in five years from now," because it is evolving every day in terms of people that want to have predictability in their consumption. There are different, let's say, we have a kind of a portfolio on how we can monetize into license deals with our partners. You cannot have, there is not one-size-fits-all, right? You have companies that want to grow and have predictability, there are companies more established. They know exactly what they use and what they have. Those are different conversations, and we cater for all of them.
But I think one of the things I see is that we also want to grow together, and especially with partners that have potential to be very well positioned in the future, that we are open-minded to grow together instead of saying, "Well, we just do something for now, and it is kind of fixed." I am more open to see how we can explore new areas, new industries together, and then have a different go-to-market model. Again, one of the examples is in Microsoft, where we build solutions, test them in the market together, and then see how we evolve that further. We need to iterate. I think that is one of the changes as well, back to what we announced today in terms of organization.
It is what we need to do in what we see in the whole, let's say, ecosystem out there, is that we need to move faster and iterate faster instead of saying, "We build it, we finish it, and then we deploy it." It is a whole new territory that we need to be much more agile. We know how to do that to a certain extent in certain verticals, but we need to expand on that much faster. That is also one of the reasons why we changed our org design.
Okay. If we maybe just looking at, as an example, one partnership with Stellantis. I see that they are also now working quite closely with Wayve, which has a mapless approach. Does that worry you at all? Or, for example, can you counter that by highlighting just how useful it is to also have the map within the automated driving approach?
Yeah. That is why I call AD also an ecosystem. I do not see a clear company saying, "Well, I have figured it all out. I have a fleet on the road, and I can go from level zero to level three or level four." There is a lot of companies that can say that. The closest one right now is Tesla, and the Chinese domestic players are trying to get close to them as well. I see it as an ecosystem play where systems need to work together, the sensors, the hardware, the software, the algorithms, and the location data and the map in the cloud and on edge. To get to higher safety, it is not about, well, let me do that on my own because it is not going to work. To get to higher safety, there is a collaboration and a partnership model with everyone.
To answer more specifically on your question about map to a lesser extent, I have not come across anyone beyond the marketing, but when you sit around the table on the tech stack, there is nobody who will not use a map in their driving stack for AD. The map is always on the table. There is a difference between is it a full HD map, which is not used anymore, that term, it is more, SD+, HD Lite, SD Pro, and it is more about attributes and features to get to a completed model with longer drives, more kilometers without disengagement from the steering wheel. So that is the discussion. But a map is always on the table.
Perfect. Thank you very much.
Thank you. Once again, if you wish to ask a question, please press star one one on your telephone. We will take our next question. Your next question comes from the line of Johan Van Der Veen from ABN AMRO - ODDO BHF. Please go ahead. Your line is open. Johan Van Der Veen, your line is open. Please ask your question.
Yeah. Okay. Thank you. I had a little bit of difficulty with unmuting myself. Regarding location technologies, I would like to ask, regarding the phasing out of the customer contract, could you give a little bit of dynamic there going into Q4, how much revenues are still there?
Sorry. Are you asking for location technology, Johan ? I am just trying to
Yeah, for location and yeah, location technology and
Yeah. And the
the phasing out of the customer contract. Could you give a little bit of dynamic how significant it still is for Q4?
Yeah. In location technology, you have two segments. You have enterprise and you have automotive. Both have certain customers that are phasing out.
It is mainly regarding enterprise. So it is mainly regarding.
Okay. Yeah. That will take another three quarters to be fully phased out. But the exact quantity is not something that we can disclose.
Okay. Going forward, on the cost levels, could you say how Q4 will compare to Q3?
Yeah. We expect, apart from the EUR 15 million, of course
Yeah
we expect the full OpEx to be slightly lower than what we had reported in Q3 sequentially.
Okay. Those were the main questions I would like to ask. Other questions were already tackled by the predecessors. Of course, this reorganization and the new business, you are making clear that this is kind of alignment with current business and to improve your go-to-market strategy. Could you elaborate a little bit more on, I would say, the timing? Is this something which comes out of the, I would say, the head of the new CEO? Is it really more the market trends which are forcing this? Those were the only questions I would have on the new organizational set up and the reorganization.
Sorry, Johan, I just want to understand your question a bit better. You say, "Is it coming out of markets?" I missed that word, pressure for the timing of the changes? Could you repeat that?
Market trends related, which are really now changing that much that you had to adapt to those? Or is this something which is now coming from out of your head as new CEO and, I would say, a kind of a strategical move you want to make there to make the company, I would say, better positioned?
Okay. Now I understand.
or more efficient.
Yeah, I understand the question better. Well, first of all, whatever we do, it is related to, and I would say, market opportunity. What you see, especially around the opportunities with AI in location intelligence for enterprises, is that it is democratizing the access to location data. You see an acceleration of agentic models being built by our partners and by their customers, existing and new, that tap into location data, where it gets simplified, the access gets faster, cheaper, and simpler.
That is an opportunity we do not want to miss at all. If you look at how we, as a company, automotive is super relevant and important for us. But the beauty of the technology stack that we have built is that it is scalable in different industries. Therefore, we want to make sure, and that is more the organization design, that we design our org as well to go after those enterprise opportunities, what we see now with AI.
Therefore, we want to build and finalize, because we already launched products in that vertical, in that industry. But we want to double down there with a product portfolio and partnerships to accelerate and to capture that opportunity and that growth. We feel we are really strongly positioned, for the reasons we already mentioned, in terms of our independence, open standards, the trust, the trusted data as well, and in our technology stack, right? For us, is it coming out of my head or is it because of the market trend? This is clearly where I want with our whole company and the team to double down because we see that we have an edge. That is what I said in the beginning as well. You can say, "Well, that is an interesting market. It is growing. Let us jump into it." No.
It is because that market is growing, it is high margin, there is no incumbent with a 90% market share where you need to fight against, and we have an edge. If you combine all of that, and we are already having these strong partnerships, but we can expand them and deploy them faster and go after new business and customers together, building that portfolio out, that is something we really want to deploy next to the acceleration we see in AD, automated driving. So yeah, is it all brand new? To a certain extent, it is something we have the foundation and the basis, but it is choices we make as a company to capture that opportunity, which I think is more explicit than ever.
Okay, thank you. That is clear. Regarding this AI opportunity, was that something which you, because you mentioned that within the enterprise, you were already able to offset this phasing out of the contract. Was this already something which you saw back in your Q3 results and where you were already able to monetize? Related to that, because you highlighted this MCP server, which you now have in the Claude connector directory, and you already said, "Hey, AI models are evolving, and we don't have a one-size-fit-all." Could you maybe make clear a little bit how this, I would say, how your maps are being monetized within the Claude connector environment?
Yeah. Well, there is a couple of things there, right? So it is-
Yeah. Okay. First on Q3 of this was already partly recognizable that you had this, I would say, ability to monetize upon your AI opportunity.
No. But let me answer it in a different way. If you look at the whole expansion and the scale and the speed of AI, and capabilities that are being built out there, it is changing every day, right? It is not something that we already saw a long time ago. If you talk about Q3, it just passed us. The first thing you need to recognize is the opportunity by being those ecosystems and talking to those partners and recognizing the signals and the needs from the market. Then you start building capabilities. We already launched things in Q3, and now we really want to expand on that and double down.
Now, that also means that it does not happen overnight, right? It is not overnight that you already start monetizing. There is a go-to-market. There is building that portfolio, getting credibility in the market, and then you start gaining traction. That is the phase we are now, and we want to go faster and expand on that. Then, of course, we want to see traction and signals, wins in those segments, and eventually also the revenue. But there is a sequence in there.
Okay. That is clear. Related to this Claude MCP server launch you had, how would this, because you announced it already, how would this be more or less be monetized? What is the
Yeah
outlook there within this?
Well, the thing is, your data can be accessed through developers, right? You have a developer portal, and typically they consume your SDKs, your APIs, your products. What we see more and more is that agents are being built that tap into your data instead of a developer, because a developer uses multiple agents. What we do now is to build those capabilities with an MCP server that is a channel, a pathway to tap into your data that gets accessed by an agent. That is adapting to where the world is growing, and that is also, I would say, a multiplier of the access to your data because there is more and more agents being built. An MCP server, and also accessible through Claude, is one of the ways, but it is one of the many ways.
We are building more and more of a portfolio and ways, that is what I said, that semantic layer on top of our data that gets accessed to our customers that can tap into our, let us say, AI consumable location data. That is one of the products we are launching, but there is multiple more. That is how that fits in. But we also launched an Agent Toolkit in Q3 that you can talk to the map. There are multiple examples, and I think it is interesting to see where the industry is evolving. There will not be only one way to consume. There are different models through different LLMs, and we want to tap into that quite fast. We open up all those doors, and then we need to see where the traction is.
Okay. Thank you. Was clear. Good luck with that and to monetize upon your opportunities.
Thank you.
Thank you. We will take our next question. Your next question comes from Maarten Verbeek from The Idea. Please go ahead. Your line is open.
Good afternoon. It is Maarten Verbeek of The Idea. One question from my side. You talked about 2027, whereby you stated that sales growth will still be independent on the navigation. However, your order book and order intake, that will be much more geared towards automated driving. You also just stated that maps is always on the table. In the past, you could order, for example, real-time traffic separately. In the case of automated driving, is it something you can order separately as well, or is this always attached to a navigation or map order as well?
Thank you, Maarten. That is a specific question, but let me try to answer that. I think, yes, we have different. We have our data, and you have dynamic data, traffic, speeds, hazards are part of that dynamic data. What we can see more and more is when it comes to automated driving as well, those especially, and that is why I am packaging it together, not only traffic, but also speed. Dynamic speed is a very important component for automated driving, also. For the levels of autonomy, where you have dynamic speed on a highway and changing speed in rural environments. I think for us and for our customers, you see more and more some products converging into one technology stack because there are components that are indispensable. Having said that, there is also, of course, navigation. There is dynamic data as a standalone product.
There are different ways that you can package this. But we see a trend where we more and more see dynamic data and dynamic services becoming part of that map freshness and that quality where our customers are evaluating a map as a whole with all the components, especially on that freshness insight. Then traffic and speed are very important components.
So, more or less, the value per vehicle will increase for you.
Well, yes. Your value of the total package becomes bigger, especially when you have the freshness component inside of it. That is one of the differentiators we have as well, especially those dynamic services.
Great. Thanks.
As there seems to be no additional questions, I want to thank you all for joining us today. Operator, you may now close the call.