Good day and thank you for standing by. Welcome to Prysmian Q1 2026 Integrated Results webcast and conference call. At this time all participants are in listen only mode. After the speaker's presentations there will be a question-and-answer session. To answer a question during the session you need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star one and one again. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Massimo Battaini, Chief Executive Officer of Prysmian. Please go ahead, sir.
Thank you. Good morning to everyone, and welcome to the earnings call for Q1 2026. We're very excited to share our Q1 result that is well ahead of our expectation. When I say well ahead, I mean almost EUR 50 million upside over what we budgeted for Q1 2026. What is mostly settling is that the growth in EBITDA between Q1 2025, 2026 has been mainly achieved organically. If you take this EUR 80 million increase and you harmonize and neutralize the Forex, this will lead to a EUR 120 million growth in EBITDA, out of which China representing only EUR 40 millions of this EUR 120 million. Also outstanding is the EBITDA margin in the quarter, 14.2%. 1.1 percentage point higher than what we recorded for last year.
With this set of result, can confirm that we are well on track to achieve the 2028 Capital Markets Day target of EUR 3 billion and plus, and also very confident to be able to hit the upper part of our guidance for 2026. Namely, well above the EUR 2.7 billion, EUR 2.7 billion of the midpoint. Before moving to the usual business by business review, I like to share with you some exciting news about the further expansion that we can have in the data center space through striking long-term agreements with the hyperscale's. These agreements are going to be finalized in the coming weeks. Instrumental and fundamental to achieving this agreement is our footprint in terms of product and asset that we have in U.S.
We are among the few with a fiber plant located in U.S. with multiple optical fiber plants located in U.S. We also very satisfied of being the only player worldwide that can offer data solution and power solution to hyperscalers. The demand has grown to the roof in terms of fiber and optical cables, not only coming from a strong data center expansion, but also coming from the famous and well-known case of military fiber utilized for drones application. We are well-positioned to take advantage of the growth of the market in terms of volume, profitability, and long-term supply agreement that will confirm how sizable this opportunity is for Prysmian. Being unique means also that we participate in all the steps of the data and power flows of cables to feed optical solution and electricity data center.
You see that all our business Transmission with submarine telecommunications and submarine power have a grid with medium voltage enhancement to the grid, electrification cables, and finally Digital Solutions cables will intercept opportunity with data center. The last one that we want to capture is to be a player, not only with a long-haul connection, connecting data center campus and cluster of campus with other cluster of campus, but to be a player also inside the building, inside where the racks, the servers are, which is where most of the volume of cables and fiber is going to be deployed due to the AI expansion. Let me move to the business review. Transmission supported the Q1 with EUR 22 million upside over Q1 2025. The organic growth is not that visible.
In fact, we had a flattish organic growth, made of two components. Strong growth in the cable space, the capacity coming online that bring an additional volume to this business. We had slower installation, third-party installation Q1 than we due to the phasing of specific project. Bear in mind that we have also a tough comparison to Q1 2025, where we had a 60% organic growth in that quarter. Look at the EBITDA margin. We are consolidating for the Q2 in a row, 20% plus EBITDA margin for this business. I confirm that we will see between 20% and 21% EBITDA margin in 2026 full year, which is well ahead of the target we set for the Capital Markets Day, which was a range between 18% and 20%.
More importantly, I confirm our commitment to achieving at least EUR 170 -EUR 180 million incremental EBITDA in 2026 over 2025. Confirming that we are well ahead of our trajectory for achieving the EUR 1 billion goal for 2028. Moving to Power Grid, we have an exceptionally and extraordinarily high organic growth driven by volume and price. In terms of EBITDA margin, you see what we anticipated last quarter. We still have Midwest premium and cost inflation that we are passing on to the market because we are formula across all the agreements. Bear in mind, those formulas are structured in a way that give us an upside only after a certain time lag.
There's a time lag for the implementation of the formula, whereby the cost increase today in the market in our production is something we can pass on to the market in basically three months. This is, for the time being, is preventing us from restoring the 15% of the margin that we achieved in the past quarters. Don't worry, the market is buoyant in Power Grid, U.S. and Europe. There is no price pressure at all. Should the cost inflation soften coming quarter, you will see the positive benefit of this time lag related to the cost price adjustment formula. Moving to I&C, here we had a significant performance in terms of EBITDA, EUR 196 million in the quarter, which is EUR 20+ million over last year if you add the Forex impact, it is EUR 17.
This is a EUR 40 million increase quarter-over-quarter. North America drives the growth, certainly with the non-residential business, also, and mainly, I would say, with the data center expansion. We had been reported as the number one leader, number one player in electrification data center in Q4 last year and Q1 2026. The EBITDA margin, as you see at 13%, is well ahead of what we had in Q1 2025. Specialties, we see a little rebound in EBITDA and in EBITDA margins. We finally disposed the two factories that we had in Mexico in Q1 2026. There are two more factory to get rid of in the coming quarters.
We still suffer the softening of the automotive business for the remaining market. NUAL in the U.S. is particularly down due to the continued crisis in the residential market. Some oil and gas often is what caused this EUR 10 million reduction in EBITDA over last year. We have considered that EUR 4 million out of the 10 came from the Forex. Digital Solutions is our new driver of growth. First of all, we hit a 20.6% EBITDA margin in the quarter. Now we see head-to-head competition between the marginal Transmission, the marginal Digital Solutions. Let me remind you that before the China acquisition, the best margin seen in this space was 14.5%. We are now running at a different level of profitability.
The quarter in itself doesn't show yet the opportunity and upside associated to Hyperscale's. It is EUR 88 million versus EUR 42 millions of 2025. Forex hit the result by EUR 7, while you see was in EUR 25 million or EUR 4 -EUR 5 million. This is not the case for 2026. You see this number growing significantly in the coming quarters on the back of this pricing power that has increased more volume opportunity and the long-term agreements. I like to conclude this section of the business review and the overall company view with two outstanding breakthroughs in terms of innovation. Yeah, you see on the left of the social and climate and innovation KPIs. In terms of innovation, what we've done in this quarter is amazing.
We deliver the first cable, able to run 20% more power than the standard 525 kV solution. This will give customer unique opportunity to invest in a connection whose cost is similar to the original 525 technology, it can allowing them to transmit more power. The cost per megawatt transmitted is enhanced by 20%. Big contribution to make the energy transition financially more sustainable. Also we created a unique in the world, one cable, aluminum cables, aluminum metal cables, whose carbon content is negative. Vis-a-vis the standard regular cable, the same carbon that we do with the we generate with this production, always outweighs the carbon included in the production itself. We have a negative footprint in the sense that we create negative carbon emission with these cables.
Solution that will be certainly well appreciated by those among our customers are more keen in having green solutions. Those are hyperscalers by default. Let me now hand over to Francesco for more details in our financial results.
Thank you, Massimo, and good morning to everybody. Let me start from the top line. As Massimo said, very good growth, 5% organic growth with revenues growing up to EUR 5.2 billion, and a very remarkable growth particularly in Power Grid, in I&C, and in Digital Solutions. These are 5%, by the way, has been reached, despite, as Massimo commented, a flattish organic growth in the Transmission, which is only temporary. It's only due to phasing of the installation activities. In Transmission, we see a very strong ramp-up both of the top line and even more, I have to say, in the EBITDA in the coming quarters. Adjusted EBITDA saw a good expansion of the margins.
You see at standard metal, up by 110- basis points from 13.1% - 14.2%. Here, the important drivers are certainly in Transmission and certainly in Digital Solutions, including the accretion coming from the inclusion and the consolidation of Channell. As Massimo commented, some temporary adverse effect on margins of Power Grid due to the lagged pass-through of the cost material increases and the Midwest premium increase that we are very confident, and we expect to recover starting from the Q2 . You see the bridge from Q1 2025 to Q1 2026. As I said, important to remark the good growth, the very good growth of Transmission, but this growth is definitely expected to accelerate a lot in the coming quarters.
These plus EUR 23 million will be much more sizable starting from Q2, Q3, Q4, in line with the indication that Massimo gave for the full year. Power Grid is basically flat as a result of strong growth and the temporary margin adverse effect that we have commented. A very good progression of I&C in particular, an outstanding result of the Digital Solutions as a combination of the inclusion of Channell, also the very strong organic growth in the business. Unfortunately, a quite adverse Forex effect for EUR 36 million, say close to EUR 40 million. Even in this case, this Forex effect is expected to decrease, to attenuate in the coming quarters because you remember that last year the dollar was very strong in the Q1 , started to weaken progressively through all the quarters.
We will have a much lower effect than these EUR 36 million in the coming quarters. I have to say that it was also an outstanding Q1 in terms of net profit, up to almost EUR 250. Also, in this case, definitely above our expectations, and this is an excellent start to achieve our targets also in terms of earning per share for the full year. We can move to some other pretty outstanding achievement that we had in the Q`1 .
I like to comment once again, definitely above our expectation, which is a free cash flow last twelve months, very close to EUR 1.2 billion, and even above the already outstanding free cash flow that we had achieved in full year 2025, which was EUR 1,170 million. You see that also the leverage of our net debt is massive. We go from March 25th, which was EUR 4.9 billion, down to EUR 3.8 billion, despite having executed acquisition. You see the first bar, for EUR 1.2 billion. Obviously, mainly funded by the issuance of the hybrid bond for, say, EUR 1,943 million. This massive deleveraging was achieved through the last 12 months of free cash flow.
As you see also from the disposal, in particular, of our YOFC stake. We target a net debt by year-end, let me say in between EUR 2.6 -EUR 2.7 billion, that's a very strong message that I want to give because it means that year-end, our leverage will be below one in principle. This is definitely faster than we thought, for instance, when at the Capital Markets Day last March in New York. Excellent. Back to Mass.
Thank you, Francesco. Let me complete the presentation with some important mindset. We have strong driver of growth coming from Digital Solutions and Transmission with the number we mentioned before. Power Grid remains solid in volume. We will see the rebound in profitability in the coming quarters as the time lag will allow us to increase price more effectively in the market. Digital Solutions opportunity is a big one. You cannot imagine many customers reach out to us to ask whether we're available to expand capacity to support long-term deals, and we are working hard to make this happen in the coming weeks.
This will definitely allow us to add another important driver of growth to the North American growth and the Transmission growth that we had already started and showed in the last few quarters. For the time being, we confirm the guidance, of course, with a much-Positive view about where we will end up with in terms of guidance. But we have to wait until July to see the full power of the upside that we have in hand and to confirm the projected opportunity that we see coming in the next quarters. Positive also the free cash flow guidance, and we might see upside also there. Thank you for your time. As we can now move to the Q&A session.
As a reminder, to ask your question please press star one and one on your telephone and wait for your name to be announced. To withdraw your question please press star one and one again. There maybe a short pause while we compile our roaster.
We will now take our first question from the line of Daniela Costa of Goldman Sachs. Please ask your question. Daniela, your line is open.
Hi. Good morning, all. Thank you so much for taking my question. I have three questions. If possible, I will ask them one at a time to make it easier. First, just wanted to start on fiber, and to ask you to detail the dynamics we should expect over the coming quarters because obviously we have seen spot fiber prices raising significantly. You do produce a large quantity of your own fiber and the inflation, I guess, on the inputs is a lot smaller than what we see on the spot, but you have frame agreements. How long will it take until we kind of start seeing spot reflected on your frame agreement? What is the tailwind by the fact that you produce your own fiber? How should we think about margin expansion over the rest of the year and into 2027?
Thank you, Daniela. We will see the benefit of the long-term agreement over time because we will lock capacity. Part of the capacity is still not in place. We have to expand the capacity. The vast majority of volume uptake will happen in 2027 and beyond. In 2026, you will see certainly significant margins improvement as a result of the fact that the current fiber price in the market is at least EUR 10 per fiber kilometer. Only six months ago it was half of this, the price in the market. We are renegotiating all our agreement. We are shifting volume from low profitability customers to a higher profitability customers. Among the higher profitability customers, there are hyperscalers.
We are already a significant player in the long-haul connection between data center, we already have a relevant partnership in connection with these hyperscale's, not really related to volume, capacity, but really related with innovation capabilities. They need very high-density fiber for the long-haul distance. This trend, this strong relationship is what we are leveraging to add volume and commitment and pricing improvement across the board of our solution in the telecom space. We will see some volume uptake in Q2 , Q3 , Q4 . As we unlock some of the short-term capacity, we will see certainly a pricing benefit in the coming quarters.
Got it. Thank you. Then switching to electrification and to the topic we've been talking since the summer about potentially add the copper derivatives on the Section 232. Two points, I guess. Do you still think that will eventually come, and when? Do you see any shifts in competitive positioning from the recent kind of changes on Section 232?
I think we don't count much on the copper derivatives. Not because they will never happen. They might happen, but, you know, there is not much import of copper in the U.S. What is happening on the contrary in the last 3 months, there's been a significant change in the Section 232 tariff for aluminum cables. Before mid-February, the rule was, importers had to apply 50% Section 232 tariff on the metal content of those cables. Of course, the metal content of the cable were declared by importers. There's been a lot of cheating on this one, a lot of way of circumvent this rule by declaring less low copper content and pay less tariff.
The administration, in light of this and in order to fix the situation, shifted from 50% applied to metal content to 25% applied to the cable value. The cable value is transparent. It's something that you have to declare at customs. I think now we will see some real benefit coming from tariffs because those players will be charged with 25% across the whole cable value in full transparency. There will be no way to circumvent the rules. I think we can say mildly because this is our first signal coming from the market, that in April we've seen pricing or margin improvement in aluminum building wire space that we haven't seen in the last six months.
Got it. Thank you. Just finally, I guess the several things that you have been mentioning for a while, like transmission margins and all the new contracts in Digital, there are kind of things that weren't necessarily there in, on your last CMD. As you're thinking on when it would make sense to revisit the 2028 targets has changed versus the last quarter?
In our ideal world, we would like to review the capital market, a target for 2028 in combination to the next M&A. Of course, should not we land any M&A for the next two years or one year and a half, we will have to review the capital market targets anyway. We are pretty confident that the original plan is what we will be able to stick to. In the next 12 months, an M&A will give us the opportunity to revisit the 2020 target, as well as to provide a long-term target like 2031. That will be our.
Got it.
... approach, Daniela, in these regards.
Thank you very much.
You're welcome.
Thank you. We will now take our next question from the line of Christopher Leonard of UBS. Please ask your question. Chris, your line is open.
Yeah. Hi. Morning, all. Thank you for taking the questions. I maybe ask two. Could we start on the hyperscaler long-term contracts that you've mentioned, and could you update us in terms of what the sort of time frames these could be over, which we're speaking on currently with your partners? Could you also confirm that this would be across your portfolio of low and medium voltage cables alongside fiber? Or should we just expect it to be within fiber optics? Maybe I'll ask a second question after that. Thanks.
Yeah. Thank you, Chris. This is an opportunity that will be deployed in Digital Solutions. The rest is already covered by agreement and by specific project in the electrification Power Grid space. This is specific to Digital Solutions as an opportunity. The time frame could be something between three to six, seven years duration of contracts with conditions that I cannot disclose, of course, until we sign a contract, which are supporting a significant expansion of capacity in our fiber and optical cable footprint in U.S. These are the ideal condition that we had mirror from Transmission business, where down payment help us fund and finance investment in the expansion capacity. This would be the same model applied to optical opportunity within Digital Solutions space.
Okay. Sure. That makes a lot of sense. As a follow-up, could you just confirm currently what your sort of contract duration is in fiber? If these contracts are going from three up to seven years, what is the current level? Thanks.
In the current market, we play a role in fiber to the home and long-haul connection for data center. We have some two, three years agreement in terms of frame agreement with fiber to the home customers. We have no long-term commitment with any of the hyperscalers in the existing setup. It's a significant shift in terms of customer commitment, what we see today and what we're gonna seize as an opportunity for the coming years, from a spot business or project-related business to long-term agreement with a solid commitment to withdraw the volume when the capacity will be coming online.
That's really helpful. Thank you. The second question was on I&C margins in Q1, you know, coming down off the Q4 levels. Could you maybe comment, in the U.S., you saw good organic growth in the geography. Could you comment if you're seeing any pricing pressure in the low voltage vertical? If so, is there any way you can alleviate that for the rest of the year? Is M&A gonna be a key target for you in this segment in the U.S. for this year? Thank you.
Yeah. Thank you for your question. No, in North America, we've seen the opposite. The margin in Q1 were one percentage point up on the margin that we reported in Q4 . The market in U.S. is particularly stronger, continue to remain stronger, and again, driven by this rebound in non-residential, but also supported by this fantastic rate of growth in data center. Don't forget that to be a player in data center space, and we are the number one now in U.S., you need scale and service. We have all the condition in place to benefit from these two important features. We don't intend to expand with M&A our capability in U.S. in the I&C space. We are already the number one. What we will do is organically we'll add more capabilities to this plant in McKinney.
You know that we talk about the medium voltage expansion of capacity, which is complementary to the low voltage capacity that we have already in this location. We will become even more relevant by adding the rest of the portfolio that is needed to electrify data center space.
Thank you. Just as a follow-up on M&A. In the U.S. is your key target geography, as you've highlighted before, but we shouldn't expect that this will be across the low voltage, and we shouldn't expect potentially across medium voltage. Am I right in understanding that? Thank you.
Because we can't really tell much about the opportunities. I think the opportunity is in the electrification space, but I cannot be more specific than this. But in terms of cable, we have exactly what we need. Maybe there will be something else beyond cable that can help us complement the cable portfolio and sell more solution also in the electrification space. But leave it. Forgive me if I cannot go beyond this because we are interacting with different targets, and I don't want to disclose this to the market yet.
Complete understand. Thank you so much.
Thank you, Chris.
Thank you.
Thank you. We will now take our next question from the line of Vivek Midha of Citi. Please ask your question. Vivek, your line is open.
Thank you very much, everyone. Good morning. Hope you can hear me well. I have a few questions. The first is around Digital. Just looking to understand the potential scale of the ramp-up in fiber capacity you may be considering. Is there any sort of indication you can give us? Is your strategy going to be to fulfill these longer-term supply agreements for data centers, or could you also build some further spare capacity? In particular, just thinking about you've highlighted the potential submarine telco, which is potentially coming from very small volumes, but you're building up your capabilities there. Thank you.
The capacity allocation to data center opportunity will be twofold. In the short term, we redirect existing capacity from a low profitability customer to hyperscalers. because we want to bridge the two, three years time that we need to bring a new capacity online. The new capacity addition will be in the range of 40% increase of what we already have in the cable optical space worldwide. This probably give you enough information to appreciate the scale of the opportunity. Submarine telco is what we are strengthening with Xtera. Now we can be a provider of long-haul connection, optical submarine connection, and this is another way to interact with hyperscalers and support the growth of hyperscalers.
You know, now we see the data center market function relies a lot on Prysmian, thanks to our global and comprehensive portfolio of products and solutions.
That's clear. Thank you very much.
You're welcome.
My second question is a follow-up on power grids. You've guided for an improvement in the Q2. Could you maybe give us a little bit more flavor on how much you expect the margin to improve in the Q2 ? ... say, 15% or so standard metal price margin? Is it a little bit below that and then improving to that level in the H2 ? Thank you.
Thank you, Vivek. There is a catch-up situation due to the formula. Now, there's three, four months, two months' time lag, depending on different contracts, allow us to increase the price. If the cost continues to increase, you will see the benefit of the price increase in the coming quarters. We expect, as it stands today, to have at least a 100-percentage point increase in the margin of Q2 vis-à-vis Q1 . Things can do even better should we see a slowdown in inflation rate, or at least this will be the minimum baseline improvement, 100- basis points over Q1 . The most importantly than focusing on the specific margin by quarter is that there is no pricing pressure in the market at all.
There is no one that is willing to renegotiate existing contract to reduce the price. There is no softening in demand because both in Europe and North America, this is remaining. These two markets are remaining strong market in terms of demand. Europe in power distribution and high voltage. North America, again, medium voltage and medium voltage power distribution and high voltage. We will restore the 15% EBITDA margin, but more importantly, we would like to show continued growth as we've shown in Q1 in terms of organic growth.
That's clear. My last is a follow-up on that point, because the comparables for organic growth get stronger as you go through the year. By the H2, you're already growing double-digit in Power Grid. For how long are we likely to sustain these levels of organic growth? How do you see the midterm growth as you go forward? Thank you.
I think, you know, part of the organic growth is volume related, and part of the organic growth is price related. It's fine, you are correct. Last year, H2 , we had significant organic growth. We still see there's a double-digit growth for the remainder of the year, driven by volume and price. Don't forget, there will be additional capacity coming on stream. Also look at in Q1 2027, there will be a significant impact of additional capacity in the medium voltage space, partly in I&C, partly in Power Grid. Certainly, we see continued growth in the coming quarters as we expand capacity and as the market remain buoyant in terms of prices.
Very clear. Thank you very much.
You're welcome.
Thank you. We will now take our next question from the line of Akash Gupta of JPMorgan . Please ask your question. Akash, your line is open.
Yes. Hi, good morning. I got three as well, and I'll ask one at a time. The first one is also on Digital Solutions. Maybe is there any way to quantify how large these investments going to be, given when we look at some of your competitors, they are spending north of EUR 1 billion mark. Then could you also talk about the payback period for those investments and how should we think about the phasing of incremental revenues in the next couple of years? That's the first question.
Thank you, Akash. A very sensitive information, because we would like to sign the agreement and first and then to disclose the size of the revenue subside and the EBITDA margin, the EBITDA upside and all the rest. More or less, I can tell you the size of the investment is massive. It is, as you also said before, north of the EUR 1 billion investment. This is across the fiber space with a specific investment in U.S. and the optical cable plants. Three plants out of four in U.S. will be affected by this expansion, and one European plant will also be affected by the expansion. Payback varies. It depends on the size of the down payment that is still under negotiation. Could be very short, could be worst case, years.eight
Something that will anyway create value for the company in terms of additional EBITDA, in terms of net present value of those investments. We were never committed to expansion that large with having a solid customer commitment and the confidence that the payback and the IRR are in the right place.
When it comes to funding these investments, is it fair to assume that like we saw in Transmission early on, not just at Prysmian, but also at competitors, that customer gave nice down payments that act as a funding instrument for those expansion? Could that possible with hyperscalers this time around?
Yeah, it is possible with our customers. I cannot name the customers. It is exactly what we are targeting. This is exactly what is being offered. This is a copy and paste of the model that we applied to the Transmission space successfully in the last five years. The market in Digital Solutions allow us to achieve the same. Bear one thing in mind, that in U.S., those customer want to have U.S. fiber, and we have a U.S. plant. We are unique in the sense, alongside Corning and Furukawa. We are among the three that can benefit from this opportunity because of our existing footprint.
Thank you. My second one is for Francesco Gori. When I look at your P&L, non-monetary items in this quarter was just EUR 2 million against EUR 72 million, there's a significant reduction there. Can you talk about what is driving that and what does that change for full year in terms of what shall we expect the amount?
Yeah. Thanks, Kash. The only driver of that is the fair value of the metal derivatives that we use for the hedging. Last year, due to the dynamic of the metal price was negative. This year is fairly positive, this is basically, for instance, compensating the other item, the other cost item that we have in this line, which is related to the share-based compensation, for instance.
Thank you.
Thank you, Akash.
Thank you, Akash.
Thank you, Akash.
Thank you. We will now take our next question from the line of Uma Samlin of Bank of America. Please ask your question, Uma. Your line is open.
Hi. Good morning, everyone. Thank you very much for taking my question. My first one is on the M&A opportunities. I see that you have recently given the authorization from the board to potentially raise up to 10% equity, which I guess now equipped to almost EUR 4 billion of extra firepower. Does that change the thinking you have for the size of M&A you can do? What will be, you know, the focus areas there in terms of the target you're looking for?
Thank you, Uma, for the question. This is not changing the size of the target that we have in mind or give us more. It's just giving us more flexibility in terms of how we can manage the financing of the deals. Is time beneficial? It's not really having any impact in our aspiration or ambition in terms of M&A opportunities, which are well-defined and very clear and related to sizable acquisition in geographies and business where organic growth opportunity are stronger and related to asset like similar to the Encore Wire asset, with good potential to create additional synergies.
That's super clear. Thank you very much. My second one is on the sort of the pricing opportunities in the fiber optic cable space I guess you mentioned that the prices have increased massively in the last couple of months. How should we think about, you know, the proportion of pricing benefit you can see in the coming quarters? Like, would you be able to see the full pricing, in line with, you know, what you see the market, or is there any difference in terms of the contract structures you have?
You were seeing already in Q1 some pricing power because our EBITDA margin in Q1 in Digital Solutions has gained under 50- basis points over Q4 last year. There is already signs and the tangible signs of this pricing power. The full potential of this pricing power will be certainly visible in Q3 , Q4 . Also in Q2 , you will see more benefit coming from the pricing power. We are renegotiating across the board. In some cases, it's an immediate price when we talk about spot business. Where we have a frame agreement, it takes a little bit longer. Most of the business is new business, new order intake. We have some backlog we have to flesh out in different segment of optical cable geographies.
Again, this will be steady growing over the next two, three quarters. The full potential, I believe, will be Q4 , Q3 , 2025, 2026. Let's see.
That's great, thank you. My last one's on the Transmission demand. You know, given the conflict in the Middle East and the sort of the need of further electrification in Europe, have you started to see more demand in the Transmission space? How should we think about the capacity expansion plans beyond 2028, especially given your backlog remains a very high level?
Well, we haven't seen yet project, yeah, project coming on stream. It is takes longer. We see very active dynamics within our customers in different countries to work on the interconnection business to create more autonomy and independence in the different countries. Of course, to ship more business. In order to achieve this independence interconnect is one important asset opportunity. That one is to rely more on wind offshore. Those discussion are happening, are very active, and we count on this for additional opportunity in the coming quarters, years in terms of market demand. We will work on capacity expansion and capability expansion. We wanna add more capability or more capacity in the 525 kV space.
We are gonna expand the 525 kV capacity in the coming years to be ready to face the full ship from the old technology that was 320 kV to the 525, and also to the 525 90 degrees, which is the brand-new technology qualified two months ago, which provide more power to the interconnection network of our customers.
That's super helpful. Thank you very much.
Thank you. You are welcome.
Thank you. We will now take our next question from the line of Sean McLoughlin of HSBC. Please ask your question. Sean, your line is open.
Good morning, and thank you. Just wanted to touch on media comments related to the U.S. listing, just to understand that I guess, given the pivot increasingly to the U.S., this is back on, first of all, and remains priority? Secondly, would the timing be actually related or tied with M&A?
Thank you, Sean. This is always a hyper joy for the company. Never has it been different than this. We had also only timing issue in the past 12 months due to the conflict and clash with other activities of the company. I think your comment about M&A is pertinent. We will certainly take advantage if things goes in the right direction of our next M&A to couple it with the U.S. listing and create additional value for investors.
Thank you. You've also talked about kind of additional opportunities inside the data center. I suppose, you know, how could this grow organically, or does this require M&A?
Sorry. Is about the organic versus the M&A? No, this is.
Yeah.
This is an organic opportunity for sure because we have all the conditions to take advantage of this market growth expansion with existing asset in terms of factories, in terms of portfolio products. We don't need to rely on anyone else. Here it is a matter of finalizing, striking this contract, agreeing the famous down payment that will convince us to invest massive amount of money to expand capacity by 40%, 50%. All of this is organic, which is the beauty of this. Now we are in full control of the decision and the execution of the growth plan, as we had full control in the execution of the growth plan in Transmission. Similar model, similar structure from agreement, long-lasting benefit and opportunity to further strengthen the relationship with those customers.
Yeah. Very clear. One last question, if I may.
Yeah
Thinking about customer behavior in fiber. If we look across power equipment suppliers for data centers, I think the integrated suppliers tell us that being able to provide a broad portfolio is something that is well received by the hyperscalers. I think it sounds like you're making the similar argument that you have a unique offering as a bundled fiber and power player. I mean, your main fiber peer in the U.S. has already announced significant framework deals. I mean, where would you see yourself? Or how much of an advantage does this bundled offer give you if you look across the hyperscaler procurement over the next? 12 -24 months?
Interesting and very relevant questions, Sean. In the past, we thought that in data center we could only play a role by interconnecting data center with long haul, long distance cables. Where we are strength in terms of innovation, capability of making very compact fiber. Don't forget, we are the first that invented the 160 micron fiber vis-a-vis the 200 micron that is the standard market. Recently, we realized that we can be a player also inside the building, which used to be the space of the likes of Corning, CommScope and AFL, because they could package optical cables with the connectivity. In reality, there is a big group there opened by the further acceleration and expansion data center, and we had the opportunity to enter the space without making any M&A move.
By simply organically connect with the some of those customers. We have the opportunity there in the optical space to expand the business inside the building, which is where most of the volume will grow, which is where the growth is gonna be the highest in the coming years. Alongside this opportunity in Digital Solutions, differently from Corning, CommScope, AFL and the other, we also play a significant role in electrifying data center. By the way, the size of their revenues in electrification of data center through I&C business, Power Grid and Transmission is currently threefold of that we have in Digital Solutions. Due to the value of the cables and the quantity of cables needed to bring that much energy, electricity to data center. In this sense, we are unique.
The expansion of data center, without arguments, I can say relies on Prysmian ability to offer the full portfolio from power cables across the board or the segment of the energy cables and Digital Solution.
Very clear. Thank you.
Thank you, Sean.
Thank you. We will now take our next question from the line of Lucas Ferhani of Jefferies. Please ask your question, Lucas. Your line is open.
Good morning, and thanks for taking the time. The first question is on Transmission. Can you come back on the new capacity that is expected to come online this year? Should we see that over the next quarters? More H2? When do you expect that phasing to come through after kind of the flattish organic growth in Q1? Thank you.
Thank you, Lucas. The new capacity, basically two additional lines, came online in Q1. The effect was not fully visible because I said we had the phasing in installation whereby the installation activity was in Q1 2026, specifically lower than what we had in 2021, in Q1 2025. The new capacity will continue, the expansion new capacity will continue in Q4 with a new vessel joining our fleet, and there will be one more additional line bringing additional cable capacity in 2027. That's why you will see 25% organic growth in 2026 over 2025 in light of this cable capacity expansion and installation capacity expansion.
It defines the increase in the EBITDA. The organic growth will be double-digit in the full year.
The EBITDA growth will be 25% the full year. I think I said this before, EUR 180 million increase in EBITDA is what we committing, we commit to achieving in 2026 over 2025. It's a sizable amount on this. Today some of our competitors is the size of what they make in one year. They increase. Sorry for the comment.
Perfect. Super clear. The next one is on Power Grid on that margin recovery. Given the tight kind of supply-demand situation, you're saying demand is buoyant. I'm wondering whether how come you're not maybe able to push those price increases or go back to the customers to kind of ask for the Midwest premium to be reflected. There should be some bargaining power there. Also, given the aluminum, we're still seeing inflation, there's a supply risk also with the Middle East. This is likely to continue, does that bring risk in your ability to get back to normalized level if inflation continues and then they slide? Thank you.
Thank you. The talking about the EBITDA margin Power Grid is very simple, is related to frame agreements. In the past, we didn't have clauses to adjust the cost and reflect the cost increase to the price. We made this a long journey of including those formulas in all agreements across all utilities worldwide. Now we have agreement in place. In spite of the cost increase, if a cost increase happened today, we still have to recognize the value of the formulas. In some cases, the customer formula or the contractual formula is that we can pass the average of the last three month cost to the price of the new orders.
You can appreciate that when you take formal entities, you have at least two, three months time lag between when you incur the cost of a business that you deliver this month and when you can really reflect the cost increase in the new orders. It's a pure effect of time lag, which is a kind of depressing of a margin when costs inflate. On the contrary, when the market gears towards a softening inflation, you see the opposite. You will see us holding the price higher than what the cost would entitle us to do. This is the effect of the time lag. Slightly negative in the growing trend, in the soaring cost situation, super positive when costs take the other direction. This is for the contractualized business with frame agreement.
Of course, in the high voltage business, we win project on a project basis. In that sense, in that business, we can be much bolder and direct in passing or setting price to reflect the current cost. I hope I gave you the proper dynamics of the different businesses inside the Power Grid space.
Yeah. Thank you, okay. Just the last one, think is coming back on Sean's point. In Digital Solutions there's a, let's say, normal kind of fiber and optical cable business. In the slide you talk about these kind of new capabilities and driving that through partnerships. Just coming back on that, is that partnership more like a JV or reselling somebody else's product or is it more kind of M&A to develop those new capabilities?
No, no. I mean,
Those are inside the data center.
Sorry, I didn't mean to cut across. No, we are not talking about M&A opportunity in Digital Solutions. These are simply organic growth opportunity, which we will have full control of, and they are related to long-term agreement with customers. It is cables, of course, with some connectivity because you also don't forget that after the Channell acquisition, we also play a role in connectivity in fiber to the home, also data center. We are talking about organic growth of fiber capacity and cable capacity to provide solutions inside the building. Inside the building matters a lot because it's a new space to us, and it doesn't require M&A, as we thought in the past, to enter the space in the current market. Allow me, Lucas to be really more specific in a few weeks. After we struck contracts agreement with those customers.
Yeah.
All right. Thank you. We will now take our next question from the line of Alessandro Cecchini of Equita. Please ask your question.
Hey.
Alessandro, your line is open.
Hello, can you hear me?
Yeah. Yeah.
Yes. Okay. Thank you. I have just one question for you, just considering the tariffs that probably are supporting your business in the next quarters, also due to the change in the regulation. I mean in this kind of agreements, potential agreement with hyperscale. Just to understand in the high part of the range that you stated that you are confident to reach this year for the EBITDA. How much is roughly speaking included, or this agreement or I would say the depositing part of tariff?
The confidence in hitting the top of the range is supported by the Digital Solutions upside. This is, I said before, partly coming from additional volume that we can immediately unlock, partly coming from the more pricing, the higher pricing power that we have in the current market. Is also benefiting from what I said at the beginning, EUR 180 million increase, EUR 170 million, EUR 180 million increase in EBITDA or Transmission was not in our original budget or in our original guidance. There is a combination of this. Certainly, Digital and Transmission are the two major components to this upside of the guidance.
Many.
Yes. Tariffs, tariffs are not included as an upside. Because we count on tariff as we see margin improvement in I&C. We are not betting on the tariffs upside at all.
Okay. Thank you.
Thank you, Alessandro.
Thank you. We will now take our next question from the line of Nabil Najeeb of Deutsche Bank. Please ask your question. Nabil, your line is open.
Yeah. Hi, good morning. Thanks for letting me in.
Hey.
I've just got a quick question and I guess sort of a follow-up on Lucas's question on supply chain risks. Just wondering if you have seen any stress on your supply chain from the war in the Middle East, which I guess has gone on for a little while now. Are you really not being impacted at all from any shortages in aluminum or plastics, for example?
Yeah, great question. Thank you for it. There is a lot of stress on the supply chain coming from Middle East situation because many suppliers in the raw aluminum space or compound space had their plan, had their plants there. For logistics distress. Luckily we are not relying on this supply chain. We had the full self-sufficiency in Europe with European players. We used to have years ago some flows of aluminum rod from Middle East, which we disconnected years ago. We see no impact whatsoever coming from the supply chain and logistics disruption that happened in Middle East. There is an overall inflation in the world due to the additional energy cost, the oil and gas price, as you know very well, went through the roof.
This is a reflection and not an impact on the raw material cost. Again, in the flow business, we have immediately reacted and priced it accordingly, and we pass on the cost increase to the market. In the frame agreement business is what we mentioned before. There is a time lag, but everything we have clauses and formula indexes to pass this on to the market with this two, three months time lag. We feel highly protected against possible cost inflation. In terms of supply disruption, we don’t suffer from it at all.
Super clear. Thank you very much.
Thank you.
Thank you. As a reminder before we take our next question, please press star one and one on your telephone if you wish to ask a question . We will now proceed to our next question. Our next question comes from the line of Alessandro Tortora of Mediobanca. Please go ahead, Alessandro. Your line is open.
Yes. Thanks. Hi, good morning. I have, let's say, four question, okay? Very, very brief question. The first one, sorry, if you can just come back to the Digital Solutions space. You mentioned in the call that historically the legacy business was at best reporting this 14.5% EBITDA margin. From the margin expansion we see in Q1, you should be already there basically by year-end. The question is, first of all, if this is, let's say, something correct because, you know, we have a Channell, you know, expanding the margin, you know, for the whole division. Just a comment on the legacy business.
Second, clearly, the U.S. market is driving now this margin expansion. Can you comment also a little bit about the pricing environment in Europe also because, strangely, we see Chinese fiber price, you know, Chinese fiber now more expensive than the one we have in Europe and the U.S. This is the first, let's say, question.
Yeah, thank you, Alessandro. Yeah, we see this pricing power happening as we speak. This will have an impact across the board. This is not just for hyperscale's. Of course, hyperscale's are the ones willing to pay more to avoid that the shortage of cable in the market hampers their speed of expansion. I n the normal fiber to the home business, as I said before, we used to buy fiber from the market at $4, $5 one year ago, even six months ago, and now the cost is much higher. We have our supply chain secure through 2028, so the supply we need from the market is at the right price because we signed this agreement months ago.
We should have the full potential benefit of the new level of price in the market, both in U.S. as well as in Europe, but also in LATAM.
Chinese player are busy at serving the local demand of data center military applications with the capacity they have in place. They are not invading Europe any longer because they don't have capacity, they don't have spare capacity. The environment has completely changed in a positive way, if I may say, Alessandro.
Okay. Okay. Thanks. The question is on, sorry, on CapEx side. I understood that, you know, there are these ongoing negotiation with some hyperscalers. If we, let's say, take this, almost, let's say, what, around EUR 300 million CapEx for this year, should we think about, let's say, over the years that this is probably something that is going to stay as a level for everything we are discussing? This is, let's say, the third question. Sorry, the fourth one, just to conclude, just a question on, let's say, this line I see on the restructuring cost for items, which is, let's say, pretty high, EUR 24 million in the quarter. Can you comment a little bit, what is it?
Because I don't have in mind on top of, let's say, automotive, any significant restructuring. Okay. Thanks.
To fourth question, I take the first of the CapEx level for 2026 will increase over 2025, partly to reflect the fiber opportunity, but also, as I mentioned before, we have a series of investment that we're going to deploy in U.S. in transmission in other regions to support the organic growth across regions and business units. Which will maintain this level of, let's call it, almost EUR 100 million and go beyond EUR 100 million per year CapEx in the coming years. I leave the fact to Francesco to cover the restructuring cost item.
Hi, Alessandro. It's actually mainly related to the disposal of the plans of the automotive business, particularly related to a stock devaluation and inventory devaluation that we took as a result of these disposals.
Okay. Let's say in the coming quarters, we should think about, let's say, much lower-
Yes. It will be at a lower, a lower run rate than this 2024. Definitely. Much lower, I would say.
Okay.
Thank you. Once again, if you wish to ask a question now, please press star one, one on your telephone keypad. Questions. Thank you all very much for your questions. I will now turn the conference back to the room for closing comments.
Thank you very much for attending this earnings call. I wish you all a good rest of the day and see you next time. Thank you all.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.