Good morning. Good morning, ladies and gentlemen, and welcome to today's conference call at Siemens AG. At the beginning, we would like to inform you about the fact that this conference will be recorded and made available as a webcast. After the presentations, you will be able to ask questions. If you would like to ask a question, please press star 1 on your phone. You will be registered for questions. With that, I would like to hand over to Simon Krause, Head of Media Relations and Executive Communications. Mr. Krause, over to you.
Good morning and a very warm welcome to today's conference call on Q2 of fiscal 2026. I would like to welcome you together with our CEO, Roland Busch, and our new CFO, Veronika Bienert. Veronika Bienert is today taking part in this quarterly call for the very first time in her new function. A very warm welcome to you, Veronika. A few remarks ahead of time. This morning, we published our Q2 results. The presentation, as well as the presentations of our board members and any of the documentation, can be found at siemens.com/press.
There, you will also be able to find this conference call's recording. Very quickly on the rundown. After the presentations, Roland Busch and Veronika Bienert will be available for your questions. The conference call will end sharp at 9:15 A.M. at the latest. I would like to also point out the safe harbor statement, which you will be able to find at the beginning of the presentation. With that, over to Roland Busch.
Thank you, Simon, and good morning, everyone, and thank you for joining us to discuss our performance in Q2 of 2026. I'm very pleased that we're continuing our successful path to profitable growth, despite the still very tense geopolitical environment. In the crisis-hit region of the Middle East, the security of our colleagues has been our top priority over the last few weeks. From business perspective, we expect our revenue share from this region to be limited in the current year to 3%-4%.
The region accounts for only 1% of our procurement volume. Nonetheless, we've taken appropriate measures to limit these risks. We're closely monitoring developments as well as the possible impact on inflation, global supply chains, and investment sentiment. However, we haven't yet observed any significant influence on customer buying behavior to date.
Siemens is benefiting from its technological leadership and its strong position in key growth markets. Let me walk you through the highlights of Q2. The book-to-bill ratio reached a strong 1.22, lifting our order backlog to a record high of EUR 124 billion. As anticipated, nominal revenue growth was again materially impacted by the strong euro. Orders at the group level reached EUR 24.1 billion, an increase of 18% compared to Q2 of 2025, with double-digit growth at all three core businesses.
Smart Infrastructure, SI for short, again delivered a quarterly order record. We're seeing strong demand across almost all markets. SI's data center vertical clearly stood out with unprecedented triple-digit % order growth, topping even the excellent Q1, which is absolutely exemplary. Demand continues to be vibrant, driven by the build-out of cloud and AI infrastructure.
At Digital Industries, growth continued. The market environment had previously shown some early signs of improvement, but these are now being challenged by renewed geopolitical volatility. The automation business was strong across all regions. Our software business seized several major opportunities across the entire portfolio and is successfully upselling within its customer base. Mobility won several significant large orders in Q2.
Two weeks ago, we announced an important project which we're booking in Q3. We're delivering up to 200 double-deck trains based on our Desiro platform to Swiss Railways SBB for Switzerland's commuter rail network. The order value is around CHF 12 billion. Overall revenue growth totaled 6%, driven by Digital Industries and Smart Infrastructure. A very strong contribution came from SI's electrification business, which posted an 18% increase. Digital Industries software business delivered compelling growth of 14%.
It's been very gratifying to see that revenue was up in all regions. The Americas led the way with an increase of 10%, fueled by strong momentum in the U.S. EMEA grew 2%, while Asia Australia was up 8%, driven by India, which grew 21%. Profit in the industrial business reached EUR 3 billion, corresponding to a profit margin of 15.4%. We saw operational strength at Digital Industries and Smart Infrastructure, while Mobility was burdened by U.S. tariffs. Currency headwinds reduced the profit margin by 80 basis points but are expected to ease in the second half of fiscal 2026.
These results translated into basic earnings per share before purchase price allocation accounting, or EPS pre PPA for short, of EUR 2.81, which included, as previously reported, a gain from the divestment of our airport logistics business in the U.S. After a somewhat weaker first quarter of 2026, free cash flow increased to EUR 1.7 billion. We confirm our outlook for fiscal 2026 at the group level with some adjustments at individual businesses, however.
Veronika will provide you with more details on this later on. Let's now take a look at the portfolio. As planned, we've concretized this timeline for the spin-off of Siemens Healthineers' shares. A shareholder decision is now planned for our next ordinary annual shareholders meeting in February of 2027. Let's take a look now at the four key levers that are driving our growth as ONE Tech Company.
First, grow digital. In the first half of fiscal 2026, we grew our digital business by 19%, well above the ambition level of 15%, which we announced last November. What are the drivers? We're generating organic growth from our expanded Siemens Xcelerator software and digital services offerings, coupled with strong growth from our latest software acquisitions. Second, growth regions. The Lionheart Project is a prime example of Siemens' strength as ONE Tech Company.
Europe's first integrated lithium project, Lionheart combines sustainability and critical raw materials. The Australian company, Vulcan Energy, is building a geothermal plant in Germany's Upper Rhine Valley to extract lithium, a key component of batteries for electric vehicles. The project will strengthen Germany's competitiveness and in turn, its growth. Our technologies, automation and digitalization systems, and smart building solutions are the backbone of the project.
We're combining these technologies and helping ramp up production faster. ONE Tech Company also includes Siemens Financial Services, which will be a minority investor in the project and has supported the structuring and arrangement of its debt financing. Third, growth verticals. Data center demand has been soaring. Our team grew revenue in the first half of fiscal 2026 by more than 45% to EUR 1.8 billion. We're confident that we'll be able to keep up this stunning pace throughout fiscal 2026.
To meet accelerating demand, we're further expanding low and medium voltage production capacities in the U.S. at several locations in North and South Carolina, and we're further expanding our data center partner ecosystem to scale next-generation AI infrastructure. The goal is to create more flexibility across computing, energy, and the necessary infrastructure systems. Our customers will be able to connect their data centers to the grid faster, scale more efficiently, and operate more reliably, even in a power-constrained world.
Fourth, growing with AI. Bringing Industrial AI to the real world was the focus of our first Real Meets Digital, or RXD for short, summit in Beijing, an event attended by more than 2,700 customers and partners. While there, I spoke with Joe Tsai, the CEO of Alibaba. We expanded our partnership to bring our industrial software together with Alibaba's cloud and AI capabilities. Now, experts at our customers in China can run complex simulations more flexibly and more efficiently. At the event, we also introduced 26 new products for edge automation and control to support Industrial AI in industry and in infrastructure.
We developed these products locally, and as we always say, at China speed for the Chinese market and beyond. Those of you who visited our booth at the Hanover Messe trade show could see firsthand how together with our partners, we're scaling Industrial AI in production facilities. Let me highlight just a few examples. First, we launched our Eigen Engineering Agent, a milestone that's enabling us to move from an AI that only provides assistance to Industrial AI, which plans and executes engineering tasks end-to-end in even complex projects.
The impact is impressive, with up to 50% greater efficiency and up to 80% higher solution quality, proven in more than 100 global pilot deployments. Since market launch, customer interest has been high. Second, we're applying physical AI in our own factories. We're automating complex and unpredictable logistics tasks with AI-powered robots. After receiving a task, these robots figure out by themselves how to solve challenges and optimize the required actions, a huge opportunity to address the scarcity of skilled labor.
We've entered a strategic partnership with Kion to jointly shape the supply chains of the future. Using digital twins and our Digital Twin Composer, we turn warehouses from a physical hub into the digital nerve center for the supply chain. A key point in our collaboration is that we're exchanging selected areas of industrial data and domain know-how to better scale Industrial AI. As we all know, AI factories will increase the demand for electricity. We already have a solution to help meet this demand, a new comprehensive direct current or DC protection and switching portfolio, the basis for the more efficient and sustainable operation of AI factories with DC solutions.
I'm very pleased with the momentum and performance of our Digital Industries software business. Organic annual recurring revenue, ARR, grew a very healthy 11% compared to the second quarter of 2025. The integration of our Altair and Dotmatics acquisitions is progressing very well. We've taken a key step by implementing targeted cost synergy measures of $150 million following the Altair integration. The bottom line impact will now follow. As AI capabilities continue their rapid evolution, we're far ahead.
We're using AI in our own operations massively, I must add, to enhance productivity by leveraging, for example, the full potential of AI-powered coding for our software engineers. We at Siemens are uniquely positioned to support our customers with precisely targeted AI-powered industrial software. Let me explain what I mean in more detail. There are 4 key focus areas. First, deterministic. Our customers' plans and systems follow physical laws, predictable, deterministic. Unlike AI that's based on probabilities, our Industrial AI provides physics-based solutions that deliver fast, high-quality, deterministic intelligence that can both be trusted and verified.
This intelligence isn't a given in the AI world, but for our customers it's indispensable. Second, contextualized. Industrial-grade AI requires precise data contextualization. Our industrial software understands design intent and all of the product's possible configurations, and it takes into account all the rules and all the relationships relevant for a product. Third, multi-domain. The complexity of innovation is rapidly increasing in a world of more personalized and increasingly software-defined products. Our customers require fully integrated AI that understands a design across all the domains in their enterprises. Siemens is the only company that can deliver this technology.
Everything from product lifecycle management to electronic design automation to simulation and shop floor execution from a single source. Fourth, live intelligence. Real-time intelligence that will drive action requires a digital twin that's infused with real-world physical data, a live digital twin. Siemens is the industry leader in combining the real and digital worlds to drive better, faster real-time intelligence and governed action.
We're implementing this objective in three concrete ways. First, faster engines. Our physics AI solution doesn't replace deterministic computer-aided engineering solutions for simulation, but it makes them more efficient, much more efficient. With full AI support, an engineer can very rapidly screen thousands of design options and make deterministic calculations with only the top candidates. The result, dramatically faster iterations for the optimal design and dramatically faster validation to get the customer to the market faster. Second, faster engineering.
Another key innovation is our new agentic industrial-grade AI platform, which autonomously plans, executes, and validates. Where have we tested it? Well, we stress-tested this platform where the stakes are at their absolute highest in semiconductor design. Our Fuse EDA AI Agent orchestrates highly complex workflows across very specialized tools securely and reliably. It delivers real productivity for engineering.
The companies TSMC and NVIDIA already use it. The system is not a single tool. It's a platform approach. We'll extend this agentic intelligence to more than 20 agents across our entire software portfolio. Third, increased design intelligence. One of the key challenges in building and implementing comprehensive digital twins for factories is complexity, because data is fragmented everywhere in different systems, in different formats.
Siemens has resolved this issue by introducing the Digital Twin Composer, which can merge all the data streams from the digital and the real worlds into one software product. We launched it at the Consumer Electronics Show, CES, in January. Two examples from the Hanover Trade Show are PepsiCo and Kion. These companies have built an ever-evolving engineering mirror of a physical product or factory to constantly drive operational improvement.
Customer interest is huge. Since the CES, we've received more than 300 inquiries from large enterprises. To sum it up, our foundation is very strong. It's built on Teamcenter, the industry's number 1 trust and secure PLM software for the centralized administration and development data and processes. On its basis, we're bringing to life the benefits of faster engines, faster engineering, and increased design intelligence. Our Industrial AI is secure, trusted, and governed. We're building precisely what our customers need, the AI-driven operating system for industry. Now, with that, I'll hand over to you, Veronika, for your first quarterly press conference as CFO of Siemens. All the best.
Thank you very much, Roland. Ladies and gentlemen, good morning, everyone, and a very warm welcome to our press conference call. I'm very pleased to engage in a dialogue with you today for the very first time in my new role and to participate in jointly providing insight into the latest developments at our company. Let me jump right into the details of our successful second quarter of fiscal 2026 and share our expectations for the rest of the fiscal year. We'll begin with Digital Industries or DI. At EUR 4.8 billion, orders for DI were 12% above the prior year quarter, with a book-to-bill ratio of 1.03. Overall market dynamics in DI's automation business have been gradually improving.
At this stage, however, we have limited visibility into the impact of the conflict in the Middle East will have on investment sentiment in the future. DI's software business again remained on a strong growth trajectory over the prior-year quarter, with orders close to EUR 1.8 billion. The book-to-bill ratio was clearly above one, driven by structural tailwinds from sustained AI momentum and by several large order wins in the electronic design automation, or EDA business, and in the product lifecycle management, or PLM business.
Our order backlog at Digital Industries increased moderately to EUR 10.2 billion with a gradually increasing share of software. Let's now turn to revenue for Digital Industries, which increased by 8%. Here, DI's software business was up strongly by 14% on broad-based double-digit growth across the PLM, simulation, and EDA businesses. Revenue in Digital Industries' automation business was up 6% to EUR 3 billion, led by the short-cycle factory automation business. The process automation business was up modestly. With a strong contribution from its software business, Digital Industries' profit margin was at 18.5% higher than we expected.
Digital Industries is increasingly reaping benefits from the fact that the transition to software-as-a-service, or SaaS for short, is nearing completion and from realizing cost synergies in connection with Altair. A favorable product mix with a high share of short-cycle business supported healthy profit conversion from the automation business as well. Sustained productivity gains remained the main engine for a clearly net positive economic equation in the second quarter. Integration-related costs in connection with Altair and Dotmatics reduced the profit margin by a magnitude of 90 basis points in the second quarter, in line with expectations.
We now expect this number to reach around 80 basis points for the full fiscal year 2026. Finally, as anticipated, negative currency effects weighed on DI's margin development with around 90 basis points. I am particularly pleased that Digital Industries improved its performance in free cash flow to EUR 760 million. Looking at how the business developed from a regional perspective, DI's automation businesses grew across the board.
After a strong first quarter, China was robust and clearly up in orders and revenue. The first quarter of fiscal 2026 had been supported by some pull-forward effects due to the expected price increases. In Q2, the book-to-bill ratio was above 1 in China, where motion control, in particular, drove revenue growth. Customers have received our local product portfolio in China very well, and it grew by a rate in the mid-20s.
Germany showed 13% order growth compared to the weak prior year quarter, while revenue was up modestly. The U.S. showed positive trends driven by brownfield modernization and greenfield activity in selected industries. Among them were, of course, semiconductors, data centers, power generation, and grid modernization, as well as aerospace and defense-related manufacturing. After a successful first half year, we raised our fiscal 2026 guidance for DI's revenue growth on a comparable basis to the middle of a narrowed range of 7%-10%.
In addition, we now expect DI's profit margin to come within a target range of 17%-19%. The DI team continues to drive its growth trajectory and margin expansion by simplifying its setup, optimizing its sales approach, fostering innovation, and ensuring stringent integration of recent acquisitions. For the 3rd quarter, we expect to see Digital Industries orders clearly up over the prior year level with a strong contribution from its automation business. We assume that DI's software business will grow moderately due to lower order volume from the EDA business year-over-year.
The sales funnel for the EDA business is again skewed toward the 4th quarter. We anticipate that Digital Industries revenue growth will see a high single-digit increase supported by growth in both the automation and software businesses. In addition, we expect a DI profit margin of around 18% for the 3rd quarter. Now, let's turn to Smart Infrastructure, or SI. In the 2nd quarter, the SI team continued its success story with an excellent performance across the board in all businesses and metrics.
Overall orders were up 35%, reaching a quarterly record of EUR 7.5 billion. This increase was driven by massive growth of 62% in SI's electrification business and 38% in its electrical product business. That being said, both businesses benefited from surging contract wins from hyperscalers and co-location providers, but also from leading semiconductor firms. SI's data centers orders amounted to a new record high EUR 1.9 billion, with our customers globally building out their capacities for surging AI workloads.
The book-to-bill ratio reached an outstanding 1.27. Smart Infrastructure's order backlog reached a record level of EUR 22 billion and now already provide visibility well into fiscal 2027. SI's revenue growth was broad-based and reached 10%. The largest contribution to this came from the electrification business, up 18%. Stringent backlog execution led to further expansion of SI's operational margin, which rose 10 basis points year-over-year to 18.6%. Smart Infrastructure continued to benefit from economies of scale due to higher revenue and from sustainable productivity improvements.
These effects offset a material currency headwind of about 110 basis points, as well as higher commodity costs. For the second half of fiscal 2026, we expect pricing measures in SI's product business to increasingly compensate for higher commodity prices. With regard to free cash flow, Smart Infrastructure achieved an excellent cash conversion rate of 1.02. Despite the strong top-line growth, the SI team reduced operating working capital. Looking at the regional top-line development at Smart Infrastructure, there was healthy demand across the board. Stringent backlog execution drove an increase in revenue.
The U.S. here stood out with exceptionally strong order momentum, up 72%, led by data center demand. It was also good to see bookings in the buildings business up in the low teens, or by the low teens, I should say. Germany recorded double-digit order growth in SI's buildings and electrical product businesses. The region comprising the rest of Europe plus the Middle East also benefited from large data center orders in the Nordics and from some power utilities wins.
Despite a continuously soft real estate market, SI's orders and revenue in China showed further improvement driven by its electrification and electrical products business. Smart Infrastructure service business delivered 7% growth, clearly up across all regions. We expect SI's service business to accelerate further in the second half of the fiscal year. Our SI team continues to expect a very consistent end market dynamics.
Here, the build-out of data centers and power utilities is and will remain a key pillar for growth. After delivering 10% revenue growth in the first half of fiscal 2026, and given high visibility from the order backlog, we now raise our guidance for the full fiscal year for Smart Infrastructure's revenue growth. We now expect revenue in the range of 8%-10% on a comparable basis. For full fiscal 2026, we continue to expect SI's profit margin to be up in the upper half of our guided range of 18%-19%. For the third quarter, we anticipate that SI's revenue growth will be at the upper end of its target range, and that the profit margin will be in line with our full year expectations.
Mobility recorded a mixed set of results in the second quarter. Strong orders at EUR 5.3 billion were well above the prior-year level. The book-to-bill ratio was 1.76. Mobility's order backlog stands at EUR 53.5 billion, with further improvement of the gross margin profile. Around 30% of it represent attractive service business. Now, as Roland already mentioned, Mobility's sales pipeline for the second half of fiscal 2026 looks very promising. Mobility's revenue in Q2 came in 2% below the high basis of comparison from the strong level in Q2 of fiscal 2025.
It was held back by the impact of the U.S. tariffs, mainly in the rolling stock business. In addition, in large-scale rail infrastructure projects, we saw conversion delays that were mainly due to the delayed call-offs from framework agreements, especially in Europe. The U.S. Supreme Court ruling on tariffs and the subsequent introduction of similar tariff structures triggered an immediate reassessment of project calculations in the U.S. The result of this reassessment impacted the top and bottom lines equally. These effects reduce Mobility's profit margin of 6.9% by 170 basis points.
Severance charges at 80 basis points were somewhat higher due to some factory network optimization measures. Mobility's free cash flow was soft as expected because the timing of milestone payments led to a temporary buildup of operating working capital. Looking at the expected project payment profiles and the foreseeable order awards, we continue to expect a material catch-up in free cash flow in the second half of fiscal 2026, as we saw in the second half of fiscal 2025.
After the 1st half year, we're taking a prudent perspective on the current geopolitical challenges, and we have taken into consideration the current situation regarding U.S. tariffs. As a result, we lower our full year outlook for revenue growth at Mobility to the range of 5%-7%. Despite this change, we confirm our outlook for Mobility's profit margin for the full fiscal 2026 year in the range of 8%-10%. Although we now expect it to come in toward the lower end of this particular range. For Q3, we assume that Mobility's revenue growth and profit margin will be within the full year guidance range. Performance in activities below our industrial business, as shown on page 19 in the appendix, was as expected.
These results included a gain of EUR 172 million from the sale of our airport logistics business in the U.S. Ladies and gentlemen, at EUR 1.7 billion, free cash flow in our second quarter was well above the prior year level. As previously discussed, we saw a significant catch-up in our industrial business as well as lower tax payments below our industrial business. We are very confident that we will achieve a double-digit cash return on revenue once again in fiscal 2026.
With our capital structure metric of 1.2 for industrial net debt over EBITDA and with strong investment-grade credit ratings, we continue to act from a position of financial strength. We also remain fully committed to delivering stringent capital allocation and strong shareholder return. Therefore, we retired 18 million treasury shares in March 2026 and have almost finished our current EUR 6 billion share buyback program after less than two and a half years. Now, we will conclude this share buyback program fully in a few weeks, and as a result, we already announced a new program today with a volume of up to EUR 6 billion over a period of up to 5 years.
These parameters allow sufficient flexibility. We have built a track record of rigorously accelerating execution of our share buyback programs when doing so makes sense and is feasible. With this, let me point out the updated assumptions on which our outlook for full fiscal 2026 are based. Additional investments in AI-based innovation will lead to research and development intensity slightly above prior year levels. Selected investments in optimizing our sales channels will keep selling and general administrative expenses as a % of revenue on par with the prior year level. We will continue to support medium-term growth momentum by increasing investments in targeted growth fields to expand capacities.
We now expect severance costs in the range of EUR 300 million-EUR 350 million. We will continue to work rigorously on ensuring competitiveness across our businesses and functions, primarily with regard to Digital Industries. As expected, foreign exchange effects were a strong burden on our results in the first half of fiscal 2026. Based on current exchange rates, we expect the foreign exchange headwinds to ease over the second half year. Finally, ladies and gentlemen, let me conclude with our confirmed outlook for the Siemens Group.
For fiscal 2026, we continue to expect comparable revenue growth to reach the upper half of our guidance range of 6%-8%. We anticipate that we will reach basic earnings per share before purchase price allocation accounting in a range of EUR 10.70-EUR 11.10. In a time of highly volatile geopolitics, we are delivering resilient performance with healthy growth and strong free cash flow. With that, thank you very much for your attention, and we're now looking forward to your questions. With this, I would like to hand back to Simon Krause.
Thank you very much, Roland and Veronika. We now have until 9:15 to answer your questions for technical reasons. As always, we cannot mix the German and English language questions. We'll start with the German language questions. If you have logged onto the English conference call, please do ask your questions in English. We will answer your questions in the very same language. With that, back to the operator.
Thank you very much, Mr. Krause. If you would like to ask a question, please press star 1 on your phone. 1 moment until we have the first question, please. The first question comes from Axel Hübner, Handelsblatt. Please. 1 moment. Bear with us, please. Mr. Hübner, your line is open. Please. Thank you, sir.
Thank you so much. I have 2 questions. The first one regards Mobility. Is there further need for action? Do you need to make any structural changes with respect to personal adjustments, reallocation of projects, and the like? With respect to data centers, based on your assessment, are we talking about a boom of 2 to 3 years, or is it simply a new business that will remain and continue to grow in the years ahead? Thank you.
Good morning, Mr. Hübner. With respect to your first question, the short answer is no. Here, we don't believe that there is any need to change our strategy. Of course, we continue to improve costs significantly. In India, we've won nice projects. We have thus built a supply chain that we intend to use on a global level. We have also built up a lot of engineering. We use AI to improve quality. We have a very competitive portfolio, so when it comes to Mobility, we will hold the line. What does the revenue weakness come from? Well, tariffs is the one thing we've already mentioned. They go from the top to the bottom.
On top of that, we had a weaker framework condition, especially in the DACH regions, so Germany, Austria and Switzerland. That doesn't make us nervous. We know it's not nice because, of course, weaker revenue translates into a lower margin. We don't see any need for other action or to revise our strategy. We don't plan for that. With respect to the data centers, well, you asked about the 2 to 3-year horizon. We don't identify any weakness in demand for additional computing capacity, especially for GPUs, for AI. Here, demand remains extremely high.
If we look at the companies that are building big models, they say that they actually have to prioritize between training new models and inferencing, so basically we're talking about an allocation to a certain degree. Growth may weaken as network capacity becomes tight or as energy supply becomes tight. Electrification components can suffer from this in the low, medium, and high voltage areas, but we do see growth over the medium term. The question is rather how quickly we can transfer from training models to inferencing so that customers can actually use the models and monetize them.
That's decisive. With Anthropic, we see, for example, that we're going strongly into the operational use of AI. There, revenue has grown substantially, and we see that with other similar players as well. Bearing that in mind, this will continue for quite a number of years, but of course, we don't have a crystal ball to see into the future beyond that.
Thank you very much.
Thank you.
The next question comes from Alexander Hübner from Reuters. Please go ahead, sir.
Yeah, I don't know if you can hear me.
Yes, it sounds as if you're in the bathtub. No, no, I'm actually sitting in my office. Well, it does sound as if you were in the bathtub or in a bathroom, but we can understand you.
A couple of questions have cropped up in my mind. The EUR 350 million that you want to invest into personnel, are you talking about what we're familiar with? Is something happening in mobility for perhaps? What exactly does your personnel restructuring plan encompass? Altair on Dotmatics, the integration synergies, can you give us some more information on that? The revenue share of Altair and Dotmatics, can you quantify that for the second quarter? Now a third question to improve my understanding. When it comes to tariffs, if I understand you correctly, the rulings on U.S. tariffs have been declared invalid. Does that mean that your calculations were a bit premature or did I miss something?
With respect to the first issue, restructuring, this is something I can deal with briefly. That's nothing new. It's what you're familiar with, and there's no news to report on from Mobility, so there are no changes here. With respect to Altair and Dotmatics, when we acquired the two companies, we did announce that we have identified synergies, in particular when it comes to infrastructure.
Altair no longer has to do external reporting, so in support and service, there's a lot there. IT systems are also being merged, so we're saving costs there. These EUR 350 million are measures that we've already implemented, now we expect that to trickle down to the bottom line. The revenue share isn't anything that we're going to report on individually because that's increasingly difficult to do. We're talking about the platforms as well, the Siemens Xcelerator. We're not gonna report separate figures for the revenue share there.
We also have claims. Speaking about the U.S. tariffs, at Siemens it's immaterial. At Healthineers, we're talking about sums that are slightly higher, but it remains to be seen how things pan out. The impact at Siemens is immaterial. Of course, it's not nice to see the tariffs that have been imposed on Mobility. They are going to be a burden, but we will take cost measures and sourcing measures to compensate for that. That's the status quo.
We don't know what the situation will be like tomorrow, of course. If I may add, when it comes to tariffs, they are of 2 different kinds. Some tariffs were withdrawn, and there are possibilities to receive refunds. Of course, we take our fiduciary responsibility seriously and will fully fulfill it. Then we also have new tariffs which have been imposed. These relate to Siemens Mobility. Here we had to react, and we had to record this in our accounting and on our balance sheet.
Whenever there are changes to the law, then similar to the other tariffs that were withdrawn, we would continue to pursue reimbursements, but we have to wait and see how the legal framework changes. Rest assured that we monitor these developments very closely on a daily basis.
This brings us to Michael Fleming from Börsen-Zeitung with the next question. Please go ahead, sir.
Hello, Mrs. Bienert and Mr. Busch. You said that the war and the conflict in the Middle East hasn't trickled down to customer behavior or customer spending. What about inflation? What is Siemens assessment, and how are you bracing yourself for effects on your own business? Another question with respect to Mobility, optimization of the production network was something that you mentioned and that is being curtailed. Could you perhaps chisel out in more detail what you're doing there? Third, with respect to restructuring costs, we're talking about a drop of EUR 50 million on average since the beginning of the year. Why? Thank you.
Okay, I will begin with the purchase behavior. We're talking about the purchase behavior of our customers, not consumers in general. Is that right?
Yes. Yes. Well, I believe that that would probably have an impact on your business, right? Inflation. You're talking about inflation?
Yes. Well, I was gonna talk about that. 2.9% Germany, 1.8% U.S. Of course, higher inflation curbs growth on the markets. That's an indirect effect, and it remains to be seen how big the effect is. Of course, it's not helpful, and it goes without saying that that will affect the investor behavior. We don't see anything yet. If we look at all the markets, we actually see a slight recovery in certain areas in the China region and in the U.S. with respect to investing behavior, aerospace, defense, and to a certain degree, life sciences.
A lot of things are going on, and by the way, also in the automotive sector, because they have to shift around production and become more flexible. The influence of higher inflation driven by higher energy prices and not just oil and gas, but also derivatives thereof, if that persists, will have an effect. This brings me to the key point, the answer. The question is: How long will the Strait of Hormuz remain blocked, and to what extent will that weigh on things? The longer the blockade, the more difficult the situation will be.
At present, we don't believe that the blockade will last so much longer. We have seen simulations and studies, which show an impact on GDP and GDP growth. We hope that that won't happen, of course. With respect to Siemens Mobility, the production network was mentioned. Well, nothing has really changed. We are basically implementing what we announced already. As you know, in the U.S., we have built up manufacturing capacities in Lexington.
We are shifting volumes from Sacramento, for example. That was the idea behind that. Sacramento will go fully to Lexington. As we speak, that's what we're doing. New orders are being received as well. In India, our production of components, bogies, and drive systems has been ramped up, and we're working together with partners with respect to assembly. For example, locomotives. By the way, the first locomotives have already been delivered.
They are already in operation by our customers. We're talking about a very big order here, which we are processing. All of our goals are being met. What is exciting here, and this gives you a backdrop to my statement, we have local manufacturing of these locomotives, and therefore we have very high visibility on a supply chain basis in India, and we also have high levels of quality, and we can leverage these things. We're not gonna change the production network. If at all, we may make some acquisitions. Verona?
Mr. Fleming, thank you very much for your question. I would like to just add on to this on inflation. I did report briefly on the economic equation in the different businesses. Of course, here, what comes into play as well is that we do see inflationary impacts, which of course translate into pricing effects. We, of course, see those reflected in our pricing in the purchasing department, so we're keeping a keen eye on that and therefore can of course balance this.
I can only, of course, tell you that we continue to have a great economic equation and no concerns here. When it comes to the restructuring, year to date, we are at restructuring costs of around EUR 189 million year to date. Due to the ongoing process in Q3, Q4, and the outlook that we have, we changed the outlook to EUR 300 million-350 million.
So much for that. Thank you very much.
Moving on to the next question, Marcus Freihauf, FAZ. Please.
Good morning, Mr. Busch, Ms. Bienert. I have a question on the Mer Mec acquisition in Italy. Can you tell us anything more about that?
We can make that brief?
No.
Okay. Thank you.
Since you're already on the line, do you have a second question?
Sure. The macroeconomic uncertainties that you spoke of in your presentation, how could they impact Digital Industries market environment?
The geopolitical and macroeconomic uncertainties. I'm sorry. Of course, we're keeping a keen eye on that as well. One thing here is technology related questions and technology limitations in terms of what you can deliver to a country. We have that on our radar. At the moment, that's not a pressing concern. When it comes to trade, we're always local for local.
We also don't really see that for DI. It's nothing which is currently majorly on our radar, except for, you know, the war-related topics that we spoke of that you also just mentioned. There's no specific pressing matters that we have on our radar. Of course, tech restrictions can hit you very quickly if, you know, certain restrictions are imposed. At the moment, there's nothing really there. Nothing specific.
Yeah, sorry. Maybe I can just add on to this, says Veronika Bienert. What we of course also see is, this is about the Middle East crisis, is potential secondary effects that could result from that. Supply chain impacts and such. Of course, we also are monitoring that very closely on a daily basis. We believe in the current environment, we are positioned very well and of course, have also initiated the different surveillance activities across the different business units in order to make sure that we are able to react at short notice if there are any potential impacts on our business.
Right. I currently see no more questions in German. As a reminder, if you would like to ask a question, please press star 1. We have one other question from Stefan Grossmann. Fränkischer Tag, please, over to you.
Good morning. I have two short questions. One on the deconsolidation of Siemens Healthineers on the timeline. Why are you waiting until the next AGM? Could you not have had an earlier opportunity, and why did you not take that opportunity? Digital Industries is recovering, I heard. What does that mean for the restructuring, especially for the metropolitan region in Nuremberg, but also Germany as a whole? Because Veronika Bienert also said that competitiveness is supposed to be strengthened further, especially in DI, which presumably also entails restructuring. How will this continue? Thank you.
On to Healthineers. We did cover that in great detail here. It's about simply figuring out certain topics regarding services, regarding loans, you know, simply financial topics that have to be moved from A to B. I think the biggest point is the tax impact. We need a reliable statement from the authorities, which we have not received so far. Before we have that, we cannot, you know, initiate even an extraordinary annual general meeting, and that timeline has been breached.
We've given the timeline to all of that has to be prepared, you know, all the necessary reports and so on. Yeah, that is now two, three weeks ago would have been the perfect deadline. We still don't have a firm, reliable statement. The good news is, conversations between Healthineers and Siemens are going very well when it comes to divvying up the businesses. The conversations with the tax authorities are also very constructive. We are optimistic, but once we have it, we can get started.
Of course, that moved us to say, "Okay, we will just continue with the regular process." By the way, this is just the regular process regarding such spin-offs, right? That you do it via the AGM, that's exactly what we will be doing as announced in the regular way. DI is recovering. Yes, we are happy about that. Now, what we do in structural changes, again, is nothing new. You know what everybody knows. This doesn't only have to do with a particular quarter, it has to do about wanting to increase the competitiveness in a particular business, in automation, in software. Those are simply measures that we have to take in order to maintain our competitiveness.
That's, of course, also the cost positions on the one hand, on the other hand, also making sure that you have leeway for innovation and investment in innovation. We do this across the board. You can see it. We're investing in China, we're investing in new products that now have really translated into a huge success. For also our customers also in Germany. In Europe, we've shown what we can do in the software space there. We're simply carrying out a plan which hopefully is going to catapult us to the top of Industrial AI, which of course we are going to drive further with our customers and partners.
Thank you very much.
Right. Thank you very much. We now have no more questions in the German line, we're going to switch into the English line. The operator is going to switch into the English line, so please bear with us. This is going to take a second.
Ladies and gentlemen, we will now begin the questions for the English part. Please press the star key followed by one on your phone to register for a question. One moment for the next question, please. The next question comes from John Revill from Thomson Reuters. Please go ahead. Mr. Revill, your line is open.
Maybe let's jump to the next one and, yeah.
Yes. We try the next one for this. The next question then comes from Marilen Martin from Bloomberg News. Please go ahead.
Hi, good morning. I somehow landed in the English line, asking a question in English now. I have a question on China and the value for my products that you mentioned. Is that impacting your margins in China as well? As well, like, related to that, which segments, which products are you most under pressure already from local competitors like Inovance? Also, like, do you plan to roll out your value for money products in other markets as well? Or will you mainly keep them in China? Thank you.
Yeah. Thank you. Super relevant questions. Starting with the margins. In Q1, we saw our competitors increasing the prices. Did we. We didn't do that again in Q2. You see that also the competitors, which are super aggressive, they have to look into their bottom line as well. The key point is that to your answer, we don't see an impact in margins. We develop products super competitive in China, which are fitting into our expectations, what the margins are asked for. This goes only if you specify the product locally, if you source locally, design locally, source locally, and manufacture locally.
Then you have a very strong position, and we do that. On top comes that we are leveraging our technology, which we have. It gives us a competitive advantage. I mean technology which scales globally, which is really scaling, which gives them another advantage. We are very happy with these products.
They land extremely well on the market, both the 16 and the other 26 products which we launched. Which brings me to the next question, which is which kind of products are there? We see, I mean, Inovance, for example, they come from the drives. Now they work into controls. This is basically the focus which we have, drives and controls. We work on both, also including some switching technology where we also launch new products, which successfully hit the market.
We are very proud to also talk about our smart PLC controller, which is really setting a new benchmark in price performance in the market. This is where we really have a good chance to defend our market and market share. Uh, the clear idea is not only to defend, but to win market share. We could win customers back with our strong products which we launched. Which brings me to the last one. Selectively, some of these products go also on global markets, and we see already a demand coming, for example, from India and other places where these products. We will see these products on these markets too. Veronika has another point.
Maybe as well about our sentiment for the third quarter. Building really on March, very strong performance. April sustained its very positive trajectory, in particular with the discrete business, and this really serving as a growth driver and supported by very good momentum in China. I think that's very important to know.
It looks like there are no further questions in English. As a reminder, if you would like to ask a question in English, please press the star key followed by one on your touch-tone phone now. Okay, we can see Mr. John Revill has signed up for a question. Mr. John Revill from Thomson Reuters, please go ahead.
Hello? Can you hear me now?
Yes, we can hear you loud and clear.
Oh, super. Sorry about that. I'm a bit rubbish with technology. There we go. Welcome, Fraubinet. I've got a couple of questions, if I may. Could you please explain a little bit about the margins in the quarter, a little bit more about why they declined this quarter compared with a year ago? How much of this is to do with Forex and the tariffs? Could you explain what's gone on with where the Forex has come from, the Forex impact there, and also the tariffs thing there?
I thought tariffs now would obviously, it's a bit lower. It's like 10%, isn't it, for everybody from Europe or everybody all over the world now, isn't it, from the Americans? That's my first question. The second one is just on your outlook. You're saying you see no impact thus far from the Middle East. I was wondering, if the global economic slowdown, I mean, the IMF lowered their forecast for the year. Do you see any kind of economic slowdown globally affecting you guys? If not, why not? What gives you kind of confidence to keep things going? Thank you.
Let me, you, you come later with the margins. I talk a little bit about the tariffs. The tariffs, this is an impact which hits our Mobility business with 170 basis points top and bottom line, and it's basically material in which is they're working on aluminum and other components which are affected. This is something what we. This was through the recent changes. They had another change. Sometimes they include the material within components like they did for machine builders. This is the point.
The outlook. I mean, the point is, as I said before, the assumption which we do is that the war doesn't drag on for much longer. If it goes for longer, you may have a higher impact also on supply chains, is it oil and gas or derivatives of that. This is not baked into, I guess, any numbers because you cannot, can't really make a judgment. So far, let me start with our revenue coming from the Middle East. It's 3%-4%, so quite low. We have 1% of the purchasing volume coming from there.
For the later one, we have measures. For the former one, it's a minor impact. It's more investment related. Therefore, in the indirect impact we talked about, if inflation would go up further for the rest of the year, we would see that on our markets. The base assumption is, as I said before, that it will not drag on for the rest of the year.
Do you expect like a broader impact moving forward just because of I know we haven't seen the economic impact sort of in Europe and in North America, outside the Middle East yet? Because of, I mean, the oil prices are still kind of rising, that's still coming, you don't see that as a kind of particular headwind moving forward?
This is, it's hard to say. It's indirect. How much does an increased inflation now impact on the investment behavior?
Yeah.
I mean, let me go for one point. Let's assume you're a car builder, and you see an impact in your sales of cars because the inflation goes up. That does not prevent you from investing in your plant because you need to release a new car. This is not fully directly coupled. To some extent it is, and if it drags on for longer, it would.
Some investments, they go despite a short-term impact on, let's say, buying behavior of customers. It's a bit different for food and beverage. If people are then stop buying more expensive food or whatever, then they have an impact. Again, since we're in an investment cycle, it's a second derivative on this, on this, eventual continued increase in inflation.
Okay, okay.
Yeah.
Thank you.
On the fourth question, I hand over to Veronika.
With regards to margins, I think it's very important to highlight that the EBITDA impacts in Q2, I mentioned the 80 basis points. This goes really along the different businesses. We had in Digital Industries, you could see an impact of 90 basis points or in Smart Infrastructure, 110 basis points negative. This is really something we see there and with regards to tariffs in our businesses, it's only Siemens Mobility which has been impacted. Overall for Siemens Healthineers, the other businesses, DI and SI were not impacted by tariffs. This is really something which we can see on our margins.
As you might recall, I mentioned as well the FX impact, in particular, out of the U.S. dollar. We expect that for the second half of this fiscal year, we see a lower impact going forward in comparison to the previous year quarters. Therefore, this is our assessment in terms of margins. You mentioned global economies. Rightfully, the inflation, we see that according to the latest information, we see it in the U.S. or in Germany, inflation going up. That is something we are monitoring very carefully.
We really run our efficiencies and productivity activities really, and there's a very stringent follow-up in terms of our economic equation, how we really run that. We set on a high diversified approach across global on a global perspective and see where we really can make a difference with our offering there. We are still in a very opaque environment, confident that we can reach our outlook.
Could you explain just the mechanics of the FX thing, though, please? I'm not clear because I thought basically you made things, say, in the U.S. for the U.S. How does FX affect your margins then? Can you explain just the mechanics of that? Sorry.
The mechanics, so that's what you can see there. Maybe, what is very important for us is really that we ensure there's a very diversified approach which we are running. If you look at production facilities and the like, that we ensure that we have natural hedges. That's what Roland outlined before that we increase our production facilities, for instance, in the U.S. so that we can net that. Similar, we do that, for instance, in Asia, where we can see as well a volatility from an FX perspective. Yeah.
No, could you explain the mechanics of how it actually works? As in like you how did the FX affect your margins if you are producing stuff in the U.S. for the U.S.? How did your margins decline because of that then? Because of the weakness of the dollar, how did that reduce your margins overall then?
No. Maybe there was a misunderstanding really on a comparable basis. If you look at our margin quality on a comparable basis. Of course, the relevant FX margin impact is deducted. Therefore, that's what I highlighted, that, if you really deduct the margin impact, on the different businesses, then you can see that, this, we have a very favorable performance in the different businesses. If you have it on a comparable basis. We run, for instance, for Digital Industries, we are FX comparable at 19.4%, for Smart Infrastructure at 19.7%, yeah.
Yeah
the FX impact.
No, no, I'll just touch on explanation, sorry, of how it actually worked in terms of why did your margins go down, though? Well, because you're just getting less euros. You're getting less euros now as a result.
You still have-
It's a translation effect.
you still have traffic of flows between Europe and United States, for example. I mean, it's.
Yeah
it's our local for local content is at 85% level. Obviously, the rest is also not local for local. Maybe one more point on the margin. Remember that last year, we had gain from buying accessories and a sale of a stake in Bangalore. This year, we had in the counterbalance, we had a disposal of our airport business, which we disclosed. There's a net effect, so to speak, which doesn't repeat this year. Therefore, this explains, or basically, the drop in absolute terms of our profitability.
Okay.
Just to add from my side. We really need to differentiate translation effects and transaction effects and our hedging process. Siemens is exposed to certain currency effects, mainly involving in the US dollar area, British pound and currencies from other emerging markets, particularly the Chinese yuan. Siemens is still as well a net exporter from the Eurozone to the rest of the world. As a result of a weak Euro, this principle is favorable for our business, and a strong Euro is principle unfavorable. Therefore, we mitigate a significant portion of our currency risk through natural hedging. What I just tried to explain.
For instance, factory production sites, which we are diversifying. We do this similar thing, for instance, for R&D activities that we are diversifying that as well on a global basis. Therefore, we are looking for a global distribution of production facilities. In addition to this natural hedging strategy, which I mentioned, we also hedge currency transaction risks, using derivative financial instruments. Of course, if you have a continuous trend, for example, a long-term depreciation of the U.S. dollar, then they really only on a temporary basis limit the currency effect, especially in the product business. Here we minimize the currency risk through rolling hedges, at least for three months in advance, yeah?
Yeah.
For the project business, it's a different approach. Here, we are hedging foreign currency risks on a customer and supplier side. They are hedged 100%, so that those currency impacts are minimized over the project term.
Excellent
The translation risk are arising over the conversion of the company financial statements into the group currency plan.
Excellent. It's a twofold thing then. It's translation.
Yes.
It's main translation.
John-
The effect is main. Sorry for sure. Okay.
John, we are running out of time, so maybe we can take this.
Okay
offline.
Okay, we'll do. Okay.
Yeah, exactly. Thank you very much for your time today. We do not see any other further questions here, so we can close the conference call and we will take this offline, John. Thank you very much for your interest. Our conference call for analysts with Roland and Veronika will begin shortly at 9:30 A.M. The analyst call will be broadcast live at siemens.com/analystcall. You'll hear from us again at the latest on August 6, 2026, when we will release our third quarter results. With that, thank you and goodbye.
Ladies and gentlemen, this concludes our conference call. A recording will be posted at siemens.com/conferencecall. We say thank you and auf Wiedersehen. Goodbye.