Hello everybody and welcome to Qt Group's Q3 2026 results presentation. My name is Hertta Närvänen. I am the Communications Lead at Qt Group. I am here today with Juha Varelius, our CEO, and our CFO, Ann Zetterberg, who will be presenting the results. After the presentation, we have time for questions, first starting from the room, and then if time permits, from the line. That is enough of me. Now I will give the stage to Juha. Please go ahead.
Good afternoon, everyone, and welcome to Qt Group's Q3 results. We are going to go through the very traditional business highlights then financials by Ann, and I am going to talk about the outlook and guidance for 2026. If we go on this current quarter, we had a pretty good, okay quarter. As you know, the third quarter is usually our slowest one, and this year we ended up on EUR 51.7 million with a growth of 27%, so top-line growth was satisfactory. We were very happy about that. EBITA margin was 11% and the EUR 5.7 million on that does include a one-off cost of EUR 5.3 million, which was for these change management negotiations. We still have some way to go on those, but they are a minor thing to close. So our expectation, that includes all the one-off costs.
There will not be any more on those on fourth quarter or later on this particular process. I do expect that we are going to close that process during this quarter pretty much. On ARR, the ARR growth was 32%, but that is of course IAR effects pretty much on that one. We did have a pretty good growth on Qt license sales as well. If we look on the license sales, we do have a bit of a fluctuation on different regions. This time the best performing region was really Europe. APAC was a good second, and like we have had now some time, the U.S. has been the slowest moving on our regions. If we look on the segments, there is not a whole lot of change on that. As you know, we are on 70 different industries and medical and defense.
Defense is particularly hot segment globally overall now. If we look in the medical is usually very long-term business, so they look beyond the kind of economic downturns or upturns. They have very solid long-term plans. If we look automotive, it is a mixed bag in a way that in China and APAC, our automotive is doing pretty well. Obviously our customers in Europe and U.S. are a bit suffering. On renewals, we have always had a fairly stable churn. It is a relatively low churn. People that sign up for Qt usually renew, and that is, the product is good, and usually when people start developing with some products, they do not do a kind of a running changes. They go with the one product all the way through the product life cycle. That is a very typical thing. But we do have very long-lasting customers.
The ones that have started using Qt way back when are still doing that. The renewal rate hasn't changed. I remember during the spring, there was a lot of discussion that AI is going to replace the developers, and AI is going to reduce the number of developers. We haven't seen that. The renewal rates, if we look, people are pretty much renewing what they've been renewing or what they've been having licenses. We don't see AI effect on that. We do see people using AI, of course, as a tool helping them, but we haven't seen reductions on the developer license usage because of AI. If we look on, where do we see usually people renewing less licenses is a situation where there is no new project starting and the project goes on a kind of a maintenance mode.
When you're on a maintenance mode and not so on a development mode, then you might need less licenses. I've been in this job quite a while, and if I look the customers we've had in the early days, pretty much all the big ones that were there then are still there. In that sense, it's a very stable market. CRA is, that's particularly a European thing because in Europe we like regulations and laws and these type of things. The CRA, it's a European thing. It means that you need to have DoCs and a lot of documentation, and you need to support your product at least five years that it's cyber secure when using Qt 6.12 or beyond. You get that DoC from the Qt, and so it helps a lot for our customers on that.
Particularly customers, if somebody's been using open source before and thinking that doesn't need a commercial license, this will drive that conversion. Of course, for new customers, it's a good selling point. IAR subscription has been going well. That's kind of expected because in the beginning, we didn't know where it's going to land, but as it started going pretty well, it'll continue to go pretty well. When we did the subscription change in Qt, it took us three years, and then the majority of the people had changed into subscription. That's my expectation as well on IAR case. We've done also the integration has gone forward. All the main things have been integrated. I think it's fair to say that I don't expect any integration problems anymore. Many things have been integrated. We are working together, and I don't see any major problems over there.
In that sense, of course, the integration continues, but I don't expect any trouble or problems on that front. I would say that the integration risk is more or less already behind us in that sense. Of course, when you buy a big company like we did on IAR, there is always a risk that there comes all kinds of integration hassles. It's been amazingly smooth, I must say. Probably the Nordic culture and the closeness helps as well. I'm going to talk more about on the future outlook. If we look on what happened during the third quarter, of course, there was a bit of a turmoil in oil prices and whatnot, then a bit of a war going. That war started earlier, but during the third quarter that what's going to happen.
Usually, when we have a lot of uncertainty, we do see people shifting from three-year to one-year licenses. No major shift now, but if I looked on different product groups, maybe a bit more one-year license sales than three-year license sales, but no significant numbers changes over there. In that sense, a pretty typical quarter for us. No big surprises. I think, like I said already on the second quarter, that we've seen the worst behind us. We're going into right direction, and I say that there is a lots of room for improvement in U.S. And our profitability, obviously the third quarter is the slowest quarter. The profitability without the one-off costs would have been a bit over 20%, so it's on a good level. I'm already going into the future outlook, so I stop here and talk more about that.
Like I said, on the change negotiations or this change we did, we said that we're looking for EUR 20 million cost savings, and that is going to happen. Like I said, we have a few small minor things in Europe to close, and then the whole process is closed. That EUR 20 million cost saving is going to happen. When you look next year, of course, we're going to be investing next year, so don't make an estimation that our cost level will be this year cost level minus 20. Business does go forward, but from this year current run rate, EUR 20 million will disappear, which means that we announced then that we're looking to downsize roughly 200 people, and that was mainly some in U.S. and Europe. Europe was a big part of it. APAC was basically not affected a whole lot at all.
And we're going to get into that 200 number or very close to it when the whole thing is over. That's where the majority of the EUR 20 million comes from. More about the future outlook, but now I'll let Ann to go through the numbers a bit more detail.
Yes. Hello. I'm going to tell you a little about the financial numbers. We had, as you saw, a pretty good Q3 with 27% growth. With an exchange rate impact, it was 26% growth, which was quite positive, and we were quite pleased with it. The distribution licenses grew 18%, which was nice. And as Juha said, we were specifically happy with the development in EMEA in the application device licenses and device creation licenses that were. We had a good increase in new sales. But of course, it is the IAR also that affects the Q3 sales, as we didn't have IAR at all last year. So the growth that you see in maintenance, 155% in Q3, that is from IAR. Looking at the year to date then, the growth was 19.1, with the exchange impact, it was 21.7% at comparable currencies.
The distribution licenses year to date has declined, but that was expected as we had a very high level of distribution licenses sold last year. Of course, the effect from the new sales in EMEA, in device creation licenses and from IAR also is a large part of the growth in the year to date numbers. Also, I often get the questions about how the multi-year contracts affect the P&L revenue, as it is difficult to understand sometimes, because the Qt revenues are, to some extent, recognized upfront for multi-year contracts. Looking at the third quarter then, and also the year to date numbers, there is really no shift to longer contracts to push the revenue growth. It's actually a lower percentage of the total revenue share in Q3, and also year to date, when it comes to those longer three-year and five-year multi-year contracts.
The annual recurring revenue then, it grew by 32% at comparable currencies, which of course is IAR, like you have said, but IAR also has a very strong ARR growth during this period as we're moving into subscription revenue, which increases the ARR, but also the Qt-based business in SQS and Qt also has a nice growth in ARR because we have very strong long contracts and good relationship with our customers and a very stable low churn. Looking at the expenses side, we have done a lot of cost efficiencies, but of course, the personnel costs are affected by the reorganization parts, the restructuring. Those are one restructuring costs that are booked in Q3. Those are EUR 5.3 million, and year to date, they are EUR 9.7 million.
We do estimate that this is the full cost for the restructuring process, even though we haven't fully closed some of the processes yet. We are about 1,000 people at the end of September, and IAR wasn't there last year, and IAR was over 200 people that were acquired. Even though it is an increase of 80 people, you can see that we have declined the number of employees quite heavily during this period. Also, the other costs are actually lower in Q3 than they were last year due to all kinds of synergies and cost efficiencies that we have chosen to do during this period to get a better profitability in the company. It's also a natural effect when you made an acquisition that some of the costs are double. That hasn't fully been realized yet.
There are still entities to merge and still offices to merge, we can still have some effects from that moving forward. The total cost then, they grew by 26% about in Q3 and also year to date, about the same. That restructuring is still ongoing, like you have said. We do expect that we will have that 20-plus savings from the actions that we have taken. Although we do have certain investments that we're planning to make, so you must have that into consideration when you plan our P&L or analyze that for the future. Looking at the profitability in Q3, it was EUR 5.7 million, a margin of 11%, but if you adjust for the one of costs, we actually have an EBITA of 21.4, which is quite much higher than it was last year.
The EBITA year to date was 12.1, but if you adjust for the one-offs, it is actually in level with last year's 17.5, so we actually reached 17.9 if we adjust for those one-off costs. Quite a decent quarter that we are pleased with in many ways. Looking at the balance sheet, of course, we have a large part of goodwill, and that is kind of a base, stable base, not changing from quarter to quarter, as we do not write goodwill off. But the other intangible assets, which are technology assets from acquisitions and also internal development assets, we write those mostly over 15 years. The internal development assets that we capitalize, as you might remember, I mentioned to you before, those were EUR 0.2 million in Q3, and this is IAR that still capitalizes some costs in projects, some development costs.
Part of the projects have been finalized, and we expect that the rest of them will be finalized during this year. So next year, this will probably not be happening, and we will instead depreciate those assets moving forward as they are final. The trade receivables are around 20%, which is over rolling 12 revenue, which is quite normal for a software company like us. We have large companies, and they require fairly long credit times, so it is a normal and stable level for us. The ending cash balance was 15.2, obviously lower than last year because we purchased IAR, and we are also repaying that debt. We will have a good liquidity, but it will not increase past last year's level, as long as we continue amortizing the bank debt.
The interest-bearing debt was EUR 126.7 million, and we still have bank loans of EUR 120 million, and we pay those off every half year with EUR 15 million. So yearly, EUR 30 million will be amortized. Under other receivables and other short-term liabilities, we still have those EUR 5.2 million that we hold to buy the rest of the IAR shares. The arbitration has not been finalized yet. I am hoping it will be, at least it moving forward, so hopefully we can close that one soon. Of course, there is also short-term liabilities increasing from the restructuring and letting people go. That is also booked as a debt in the balance sheet. Equity, EUR 212, EUR 213 million is 53.6%, so stable balance sheet. As we continue amortizing our bank debt, that will also increase over time.
Looking at the cash flow, January to September, that was 29.5 compared to 32.4 last year.
It is basically the same operational cash flow. But we are amortizing the bank loan with 15, so that affects the cash flow for a period, and the operational cash flow is affected by the interest that we pay on the bank loan. That is short summary on the financials. With that, I guess I will hand over to you again, Juha, to talk about the outlook.
Okay. Yeah. Thank you.
Thank you.
We haven't changed our guidance that we've given for the year, so the full year guidance is still the same. The net sales, 10%, and operating margin 15% at least. We're keeping those. If we look on the business, how I see it, the fourth quarter obviously is always the busiest quarter, and at this point, we do have the pipeline, and everything is over there in place. If I look overall, all our product lines, what we do see, obviously on IAR, we do have a lot of subscription change. But if we look next year, IAR is going to be growing because of that price change already. If I look on our other products, we do see organic growth on all of them. We were actually in this very same room on our shareholders' meeting.
On the shareholders' meeting in the spring, there were questions about our profitability, and we said that we're going to do measures during this year in order to be on the 30 plus minus profitability next year. That's where we are definitely solidly going towards. As we do have organic growth, then we will have a revenue growth also next year. When we said that we're going to do a EUR 20 million cost savings, of course, we're going to be also investing next year. Now if we look at where the investments are largely going in this current environment, they are more and more on AI-related investments. Now we had a World Summit earlier this week, and we introduced, it was renamed Clate.
It's about our design tooling and design, and one of the major ideas over there, obviously, is that the designers can start using AI and doing their designs, and later on, it generates QML code right up front. We're going to be investing, adding AI agents increasingly amount on our tools so that they are easier to use. Over time, we do see that this will actually kind of hinder a bit that the underlying languages, like on Qt now it's C++, but in the future, the languages are going to disappear more on the background when you can use AI on front to use our frameworks and our tools. On IAR, this transformation into subscription, it's going to go as it is going now, and going to take a couple more years to happen.
The reorganization thing, we do have some minor things in Germany to close down, but I think they're going to be closed. As we think, it's pretty much handled. The market challenges are kind of a When we operate in three regions, APAC, EMEA, and U.S.A., and 70 industries, it's kind of difficult to say in one sentence what the market looks like. We're doing pretty well in China. We're doing pretty well in Japan and APAC in general. Automotive is doing pretty well there, as you know. a few years back, I said that there's going to be a day that we are going to be driving Chinese electric vehicles, and I think that that was a pretty accurate prediction. Some people still might have a Tesla, but the BYD is coming. But we're well-positioned over there. We're doing pretty well over there.
In automotive in Europe and in the U.S., obviously our customers are suffering, and not only the automotive manufacturers, but the tier 1 manufacturers as well. Whereas in medical, we're doing pretty well. All around the globe, defense is a very hot topic. You know that around the defense industry, there is a lot of money, a lot of startups, a lot of investments going on, and we're getting our share of that. And I think that that's going to continue for many years to come. Saying in one word what the market looks like is very difficult. But in general, I'm happy how we're doing in Europe overall, when I combine all the segments. I'm happy how we're doing in APAC. Doesn't mean that there is always room for improvement. And I'm not that happy how we're doing in the U.S.
I think that in the U.S., we can improve quite a bit. There is room for better execution. The long-term growth, I think that what I do get challenged is that I actually don't get challenged that will there be a screen pretty much on every device, and will there be touch screens, and will all the devices be digitalized. I don't get challenged on that. I think that's commonly agreed upon. What I do get challenged is that will AI take over this all? And who knows when we look five years or 10 years ahead at what AI can do and what it cannot do, right? Usually what we do is that when a new technology arrives, in the beginning, we overestimate the effect, and then in the long term, we underestimate, right?
We usually overestimate what is going to happen in the next two, three years, and then we underestimate what the world looks like 10 years from now. That has traditionally been. Of course, AI is moving faster than anything else we have seen before, but that is usually how things go. If I start from the kind of embedded systems that somehow are functional safety or safety critical, and they need certifications and whatnot, and CRAs and whatnot, the AI is quite far from that. If you code with AI, getting into a situation that you can have certificates for car brakes and whatnot and these type of things, I think that we do not see at all.
Actually, we see more that the use of AI is limited in these type of environments because it is crucially important that nothing goes wrong, and it is crucially important people understand that these certificates are met and nothing bad happens. Then we have kind of in-between embedded systems, and over there we see that people are using AI to help their work and whatnot. But we still see that people are pretty conscious on AI usage, and basically for two reasons. One is that when you do embedded devices, a crucial cost effect is the hardware, the amount of memory the hardware has, and the hardware itself. And manufacturers usually want to have as clean and as efficient code as possible so that they can have the cheapest possible memory and the amount of hardware for specific functionality.
AI, well, AI still has room to improve on that, right? It also means that these products need to be supported a long time. So it makes sense that whatever is built in there, it is somehow structured and architecture is known, and it can be moved forward to other developers, maintained and whatnot, and there frameworks do help. So I think that the AI models will be using frameworks also going forward in that sense. And then the third is that at least at this point of time, the software usually represents a small fraction of the cost of the whole product, not to mention what does it cost if you have to do product recalls, right?
People are kind of calculating that how much do I want to save on doing software, increase my hardware costs, and taking risks that I might have product recalls versus that I save on the cost of the software. So that all kind of sums up to that humans and developers are very much involved in the whole process so far, and thinking about the architectures and using frameworks. Then we come to a software that is not so much on embedded anymore. It is type of software that I will do my own web pages. And if I do my own web pages, and they are a couple of bugs, I can fix them tonight, and then I have a new web page.
And for that kind of use, AI is very good. So we see it on a low end where the risk of something going wrong is limited.
There, the AI usage is increasing. That is kind of the world we see now. Going forward, what we see is that if we talk about a product, and there is no timeline to this, but first of all, we do see that over time, we are going to go more on consumption-based pricing. We are going to introduce, well, we have already some, and we will introduce more when we go forward. Some people have asked that, is there a huge risk involved in that? I do not think there is because when we are going to start introducing consumption-based pricing, we can, of course, do it on a limited market. We can do it on the new customers only and see how it really goes.
We do not have to roll it up. We do not have to go on a consumption-based pricing to all customers globally, existing and new ones.
We can launch a consumption-based pricing in a particular country only for new customers and then view how that usage goes. So it can be done in a way that you do not take a humongous risk doing it. Going forward, I think that we are going to have more and more AI agents on our products, which will help the use of our products. Those agents will also be combined to each other in a way that if you do coding with Qt, you are going to be able to have integrated testing on that in a way that every time you do a code change, it automatically runs through the test on that code, finds bugs, and fixes them automatically, and then just reports that this would happen. So we are going to have a design tooling that you can write text prompts and build designs.
You are going to be able to have agents that help you creating code with Qt Framework, testing with our testing tools, and then IAR turning that all to machine language. I think that then using all those, you can use the whole set of products, or you can use a subset of products on consume-based, and AI is helping you on all that, and that is kind of the future in the 3- 5 years from now. Do I see that the Well, at least now we see that if we do AI-helped coding with Qt, and it is done by ourselves, it is far more efficient and consumes tokens far less than if you just take a normal language model and put it to do something. So I think that those efficiencies will always be there.
I do not think that the efficiencies, having very efficient software on embedded devices that have very little bugs to prevent product recalls, that is kind of the fundamental thing on embedded world, and that is not going to go anywhere. So eventually, what that means is that our addressable market will grow because it will enable people with less skills to do more. So when this world kind of comes, it means that you and I will be able to do simple demos that runs on real hardware. We can be able to do product managers, we will be able to do simple demos and simple coding and whatnot. So if you think nowadays, if a product management has an idea, then they have designers designing something, and then it goes to R&D for development.
When this world comes more in reality, we can do more of that, and it means for Qt, a bigger addressable market as we go forward. Then another change that we usually don't talk so much, but it's also happening, is the way that the processes are run in companies. That means, for example, that in former days, it was very important that you were visible on Google, and you had people that were able to optimize your Google visibility and whatnot. Nowadays, that's kind of getting lost. You need to be visible on AI. I don't know about you, but at least I'm talking so much. Whatever I want to do, I ask AI. I don't go to Google anymore. It's even better. I can use my native language on AI, and it translates and searches and does what it does and make recommendations and whatnot.
A buying process that you need to be visible on somewhere or a buying process that we had previously that people came to read our documentation, that's, of course, changing quite a bit. So one of the first things you need to be, you need to be visible on AI, which means that you need to be able to train the AI that it knows your product, it can recommend your product, it knows how to help if there are bugs and whatnot. We are very well down on that road. We've been doing that a long time now already. But that's kind of a change we talk a bit less. Of course, we have Q4 to close, and that's going to be the busiest quarter and the best EBITA. If I look at Q4, I'm pretty comfortable with it.
If I look towards next year, this year has been a tough year in many respects. We've laid off people. We've done many not-so-pleasant things and had one-off costs and all kinds of challenges. If I look next year, on a number-wise, obviously, it's going to look substantially better than this year, particularly on a profit line. I'm looking forward that it's going to be a better year. So I'm hopeful to that. Then there is always this disclaimer that if something terrible doesn't happen. But I think that our new normal is that there is at least one or two wars starting somewhere. I think that probably fair to say that for the next two years that I see forward, there are going to be a lot of surprises. What happens after that, we'll see. Yeah.
With that, thank you, and I'm sure you have a lot of questions.
Thank you for the presentation. Felix Henriksson from Nordea. I have three questions. I will start off with the distribution license growth in Q3. It got back to positive territory at 18% year-on-year. Was this mainly timing, or is there something to extrapolate for the coming quarters?
No, it is timing. The guidance we have been giving before that it is flattish or small decline is still there. The thing is that we did report the distribution license revenue early on a yearly basis. The reason is the fact that it really goes up and down. On a yearly level, you can kind of see a bit of a trend, but the quarterly fluctuations are really big. Quarterly fluctuations like last year, the biggest ones on quarter-on-quarter were like EUR 10 million. It goes up and down. Unfortunately, I cannot promise yet another 18% on distribution licenses, no. It is like the previous guidance that it is flattish, small decline.
Fair enough. I appreciate the disclosure on that. On IAR, I think in Q2 you stated that around 68% of the customers had been converted into the subscription model. Can you update us on that figure? You also mentioned that it takes still two years to complete the migration. Sounds lengthy given how far you are currently. A bit of color on that. Thanks.
Yeah. On that particular figure, I need help from Ann because I do not have it. I will give you a little time. We had it on Qt, and when we did it on Qt, in the beginning it spiked, and then it kind of slowed down. Eventually, there are customers that we will never convert. They stay on old versions and whatnot. My expectation is that it will slow down. I think that two more years, and then we are where we are, and then I think that it is pretty much done. What was the percentage on third quarter?
Well, it is above 50%, but the 68% is not 68% of the customer base. It was 68% of the bookings at that time. IAR has a large amount of customers who do not buy anything every quarter. There is still a large portion of the customers that will come and want to buy perpetual from us, and then we will convert them. So it is not 68% of the customer base, but more of the bookings there. That is the number we have been talking about. That is still positive and more than 50% continuing.
Got it. Thanks. Good clarification. Then finally, on the Qt licensing model change towards a consumption-based model. I think in the last quarter, you were still a bit hesitant to comment about the potential revenue impact of that. So can you disclose anything more about that? Because logically thinking, it sounds like there might be some element of disruption given that you are moving from an upfront-based three-year license booking model towards a more stable one.
Well, it is too early to say, but of course, we will introduce a model that our current customers will not get a huge price increase or a huge price reduction to that matter. Because I think that our position in the market is that our products are really state-of-the-art. They are really good. But they are not the cheapest in the market either. So I do not think that we have a price elasticity really to increase a whole lot of our pricing. Now I think that if we look overall the cost levels where we are, how much we charge, even we do go in a consumption-based modeling, I am not expecting to have a huge revenue increase through that, but I do not want to see any decrease either. It is going to be modeled through that.
I think it is more where the world is going that the developers are using AI to boost their work, which means that there is more usage of Qt Framework, and we think that fair enough to have that. One equation over there obviously is that, let us see how it goes, but as you know, earlier on, people were saying that we are going to start using AI and we are going to get a lot of efficiencies. Well, yeah, sure. If you use a tool that is free of charge. But those days are gone, right? Now people are paying for tokens, and I know that on many companies, the cost of using AI is becoming visible that, hey, this is how much.
I know that there are companies that they're looking at what are we doing and are we really using AI for something meaningful because it does have a cost attached to it. If you look at the AI companies and how much revenue they need to cover their investments, we might come to a point that the Indian coder is still the cheapest one, right? We do not know. We need to view this from our customer point of view. They want to develop software and it has a total cost, so we cannot increase a whole lot of our costs in that environment. We are looking for a revenue neutral, but we are also looking for that we go into that consumption-based because AI is being used to produce something throughout our frameworks and tools, and we do have quite a bit of tools.
It is not only Qt Framework, but also our test tools and whatnot. We need to look at the whole equation, but when we do get into that, they are very well integrated and the AI is helping on using that. We think it is a winning combination. It is definitely something that I do not know that the whole other companies have something like that. I see, for example, some of the testing companies that are our competitors, they are trying to implement tools for developers. We already have 1.5 million developers on Qt Framework. They are trying to move into that, hey, it is not only a testing tool, but something for developers to develop. This combination on consumption-based offering, it is a very compelling offering when we get there, and a very unique one. Let us see that if we can add any value.
From a customer point of view, what is the added value is that, hey, I get a whole set, and I can do the whole thing, and I do not have to think about it, and it works very well together. That is where the benefit comes.
Thank you.
Hi. Thank you for the presentation. Waltteri Rossi from Danske Bank. I first like to ask about IAR. I know you do not disclose this, so that is why I am asking. What was IAR's base revenue level in 2025, and how much has it declined in sales this year?
Well, the IAR, if you look at the historical data on IAR, it was on a fairly slow growth, and it was on a bit over EUR 40 million. I think it was EUR 42 million roughly, and it was on 5% growth year-on-year. It was a bit over EUR 40 million. So of course, there was not a whole lot of changes when we acquired it last year. The subscription change did start, but it was on a very early phases, and I think that we have accelerated it this year. The revenue decline has really come this year. Like we discussed already offline, we do not disclose the BU numbers, so we do not disclose the BU numbers. We were discussing early on that it is a high single-digit millions. Let us put it that way. But yeah.
You mean decline has been high single digits?
Yeah, decline. Yeah. So between-
Year to date
5 and 10, yeah.
Year to date.
Overall, I'd estimate that to be this year. Yeah. Not year to date, but to give you some idea. I think that some analysts were estimating that the decline can be even high as 30%, and I think that was a very high end. Not that bad, but substantial.
Okay. That is helpful. Thank you. Second question relating to the license maturity mix. You mentioned earlier that I think one-year licenses are going a bit more than three-year licenses. To me that actually sounds that the split would be close to 50/50 right now of sales. Can you give any indication on the split between one and three-year licenses? Is it more like 50% or 30% the three-year licenses?
Well, that number I do not have in my head, but I knew that you are going to be asking this, so I was just looking at how much we sold on third quarter one and three-year licenses. Of course, we do have multiple products. The changes were very little, but on one-year licenses, it was a bit more. A bit more than on the three-year licenses, but no substantial change, really. I did not calculate the millions. I was just looking at the different product lines. So a bit more one-year license, but no meaningful change in that shift, really.
All right. Final one from me. You have now publicly stated your plans to change the pricing model at some point. Have you seen from customers any changes in the buying behavior that they would be buying now the licenses with the old terms?
No. Our customers are like Daimler and LG and Fortune 500 companies, and very long relationship with our customers. If you look on the products that where we at, of course, we do negotiate with sourcing organizations and what, and of course, they are tough negotiations and always that, "Can you give more discount?" and this and that. But the very long-lasting customer relationships, the users are actually deciding that what they want to use, and then the sourcing organization is negotiating. If we do not do anything drastically stupid, they are not going to start changing. If you look, well, we talk too much about cars, but let us talk about medical devices, for example. Our cost in the overall whole product, it is like this big.
If you think that companies, they want to use the best of breed products to build their software, and if they can squeeze the software development tooling cost and testing cost, they're optimizing this size of the overall cost. If you think car, for example, there is a software cost, but our part of that software cost is like this much. We're not the first line to start squeezing. It's more important for those customers that they, for example, in Europe, they fulfill the CRA requirements and the software works, and there are not recalls, and it looks cool than the optimized. That's kind of the position where we are. The users are happy with the products. They're not changing. Most companies are very big, so the pricing discussions are with the sourcing organizers.
Their target, by the way, is always that lower the cost by 5%, so it's a funny discussion. They want to have more cheaper, and we want to. That's how it works. But absolutely no. We're going to move very cautiously on that consumption-based pricing models as we go. We have had customers that are using AI, and they've been asking that, "Hey, well, how do you want to charge this?
Got it. Thanks, Juha.
Good afternoon. It's Matti Riikonen at DNB Carnegie. A couple of questions. Firstly, you already discussed a bit about the difference between ARR and organic growth, but could you just quantify that how much the maturity mix in your growth is affecting your top line growth? How much that has done in the first three quarters of this year? I'm just trying to understand that what kind of change in the numbers that we see is really affected by the maturity mix.
Thank you, Matti. That was a very specific and very articulated question. Would Ann Zetterberg want to answer?
Maturity mix, you mean the three-year and five-year contracts then?
How much of those there are. I can say that, as I said when I was upstairs on the stage also about the financials, the multi-year contracts are in Q3. That is a share of the total. In Q3, they are lower, the multi-year contracts, than they were last year. They have a lower effect than they did last year. The growth does not come from that. It is actually the same for the year to date, but much smaller change. It is more close to the same share of the total revenue. Yeah.
Does that clarify it? Yeah.
But for exact, we've actually probably looked into. Yeah.
All right.
That's it.
And no major changes in the quarters either, I assume. So Q3 has been kind of favorable in terms of Or not as favorable as-
Not as favorable. Exactly.
earlier. But then in the first half, you had quarters that had the positive impact on top line growth.
You mean Q1 and Q2?
Yes.
I believe in Q2, we had a higher degree of the multi-year contracts. We communicated that, right? Than we did in Q1. There was some effect there in that quarter, in the growth, but not in Q3. I would say quite the opposite.
All right.
Thank you for that.
Yeah.
Then the second question is that normally when you have prepared yourself for the next year, you have been growing your resources. Now you also say that you would need more resources in 2027, so you need to invest. But of course, in this environment where you have just sacked a lot of people, that might be a bit difficult. So when can you start investing in growth more? Is that going to be in first half or Q1 next year, or how do you plan to do that?
We are hiring already. Of course, we do need replacements. People are leaving voluntarily as well, and we do need increased number of people, specifically in APAC. We are hiring that, and on a growing scale, we need more AI capabilities, and not only on R&D, but also on the business side. How do we use AI in our own processes to improve them? On the R&D side, if you think that what I was describing, that we go in the consumption-based model kind of a platform where all our products are, and we build AI agents on top of that. We need new skills on that type of development, and we are doing those hires as we speak. In that sense, it is a bit of a shift.
I think that next year on many companies, you are going to be seeing more of that there are change negotiations where, at the same time, same companies are hiring.
All right. Thank you for that. You talk about the importance of regulated customer industries for you, so that many customers are actually in those kind of environments. What is the revenue share of your customers actually being in regulated industries?
That I do not know. Yeah. Because it is not so straightforward. We talk so much about cars that I met some investors that they thought that we are only in the automotive industry, and I decided that I am not going to talk about cars, but I will talk cars. On cars, you do have functionalities that are not safety critical at all. If you think backseat entertainment, and then you have brakes. That is why I am saying that I am a bit. On defense, say the same thing, that you do have applications and functionalities on defense that are not safety critical at all, and then you do. It is not so that you can say one industry, we should kind of look into functions.
But that is a very good question, and that is something that we need to look and see where we would get that.
IAR is very much in that business, and we have a Qt Framework quite a bit on that business, and our testing is more broad on all kinds. But sorry, I cannot give you an answer on that.
All right. Could you just briefly describe your momentum in your different business segments or product segments, like Qt Legacy, then you have the testing and quality assurance, and then you have IAR. You have already touched on the IAR, which seems to be doing fairly well considering that there is still reductions to be made. But in Qt Legacy and TQA, how would you characterize the momentum in those?
Sounds so bad to say Qt Legacy. Yeah.
Okay, let us define it that being everything else than testing and quality assurance.
Yeah, I get it.
The other acquired businesses.
Yeah, I'll try to describe here a bit. Before I was saying that if you look at successful frameworks tools, they are EUR 200 million plus minus something, the ones that have been really successful. Then you have quite a lot of businesses that are EUR 40 million-EUR 50 million. So you can say that Qt has been already very successful. We've been able to create a user community of 1.5 million. Many big companies been trying to do something like that and failed. So it's a great success. Qt being where it is, it's been a great success. But the thing is that there are whatever, 25 million-30 million developers in the world and 5 million-6 million C++ developers, and of course, that's the limiting factor on how big Qt can become.
We became this business model that we have the distribution licenses, which is priced per unit, and that kind of gives you another alternative growth, which we've been using, and that will continue to grow over the course of time. But of course, we were coming to a point that the growth will slow down and I said that over time, maybe Qt can be like a EUR 300 million business and where do we grow from there? Then the universe send us AI. Now AI actually means that as we go further develop this, the more people will be able to do coding and using Qt Framework, through AI. You don't have to be a deep tech C++ coder. You can be a developer. So our addressable market in that sense is growing. Well, same goes with all our products, basically.
If you look the old Qt or Qt itself, if we can keep a Qt on a 10%, give or take organic growth, that's what I'm looking for on a longer term. You asked that how would I rate the products? Squish and testing, that is something that I've said before, that I would say that over there, you're going to be looking double-digit growth with starting with the tool. Originally we said that our target with Qt is, say, EUR 100 million business, and a lot of people were smiling at us at that time. Maybe they were thinking that our target is too low. We got beyond that. I see Squish, I've said before that I see Squish like Qt 2.0. Squish has a bigger addressable market.
If you looked at it, everybody needs automated testing, it works on multiple languages. It's very well integrated into Qt Framework. If you're doing something with Qt, it makes all the sense in the world to do the testing with Squish and use also Coco for code coverage. Axivion itself is one of the best tools for static code testing, and the architecture verification is a very unique offering on that. It's very easy to see that it's going to grow into EUR 100 million business. The growth now in the early days will be that 20 plus, minus something percentage on the coming years. On IAR, it's on its own ride in its own segment. With this price increase on the next couple of years, you're going to be looking like 20 plus, minus something growth. That's kind of give you an idea.
Where do we need to spend the time with IAR on the next couple of years while it's growing through this price conversion is the fact that what product development we do over there, where do we find new customer segments and a bigger addressable market for IAR to continue that organic growth after that. That's basically it. Would I call Qt legacy because its percentage-wise growing less? Not necessarily, because it is bigger than all these others, but these others are on the earlier phase of their path. If you think the really old way of looking at the product life cycle, obviously the Qt growth is on percentage-wise slowing down, and these newcomers are faster. If you look absolute euros, then the story is, of course, a bit it kind of evens out.
What we're looking for, the design tooling, it's interesting to see. I actually don't expect huge revenue numbers out of it. I kind of see it more like an integrated tool making our offering more complete so that you can start from design and then you move on into developing the things, whatever you're doing. Let's see. It might be a product of its own right, and people are buying only that. Let's see, but I'm not counting on it. I'm counting on it more that early on, people can start this. They can do the design, they can see the result on target hardware, and then they can make it actually workable code. That's the added value for us. Only six minutes over time. Thank you so much. Thank you very much. Looking forward seeing you after fourth quarter.