Good morning, good afternoon around the world, and welcome to the Q2 presentation for the Atea numbers. It's been an eventful quarter, to say the least, with record-high revenue and a good development all around. Many of our competitors are struggling, but we feel well-positioned. I also want to remind you that we'll take a Q&A at the end of the presentation, so get your questions in digitally. To the numbers: Gross sales came in at NOK 16.8 billion, up 14.4%. I'll challenge you to find any IT company in our industry growing faster. EBIT came in at NOK 268 million, up 10.4%, and net profit at NOK 157 million, up 13.3% from the same quarter last year. As always, I will leave it to Robert to give you all the good news.
Thank you, Steinar. Driven by strong growth in sales across all lines of business, gross sales in Q2 were NOK 16.8 billion, up 14.4% from last year. After adjusting for changes in currency rates, organic growth in constant currency was 10.0%. Hardware sales increased by 11%, driven by higher shipments of PCs and data center equipment. Software sales grew by 19.6%, with high growth in sales of office productivity applications, public cloud, and IT security solutions. Services sales increased by 8.9% from last year, with higher sales of consulting and product support services. Group revenue, according to IFRS, was NOK 9.1 billion, up 9.1% from last year. Gross profit increased by 5.1% to NOK 2.8 billion. Gross margin was lower than last year due to lower vendor incentives on software and a lower proportion of Atea's services in the revenue mix.
Personnel costs and other operating expenses grew by 4.5% to NOK 2.5 billion. Adjusted for currency movements, these costs were flat from last year. With higher sales across all lines of business and lower growth in operating expenses, EBIT in the second quarter grew by 10.4% to NOK 268 million. Net profit after tax increased by 13.3% to NOK 157 million. We'll now take a closer look at sales and profit performance across the countries in which we operate. Q2 was another strong quarter of sales and profit growth for Atea, driven by double-digit EBIT growth across all countries except Finland. In Norway, gross sales grew by 1.4% to NOK 3.2 billion. EBIT grew by 11.1% to NOK 108 million. Profit improvement was driven by sales growth, higher margins, and a flat development in operating expenses. In Sweden, gross sales grew by 9.4% to SEK 6.6 billion.
With strong sales across all lines of business, EBIT increased by 17.8% to SEK 125 million. In Denmark, gross sales increased by 27.1%, with very high growth in product sales under new public sector frame agreements. EBIT grew by 19.7% to DKK 11 million, based on higher sales and a decline in operating costs. In Finland, gross sales fell by 6.0% to EUR 107 million due to lower sales to the public sector. EBIT was EUR 2.6 million compared with EUR 3.4 million last year. The Finnish economy is emerging from a recession, but market demand remained soft in the second quarter. In the Baltics, gross sales grew by 20.2% to EUR 51.3 million, with very strong growth across all lines of business. EBIT increased by 17.4% to EUR 1.8 million.
Atea Group Functions, which includes shared services and group costs, was a net operating expense of NOK 40 million, compared with the net operating expense of NOK 31 million last year. The difference was mostly due to changes in internal transfer pricing from group functions towards countries. Now, a word on our cash flow and balance sheet. Atea's cash flow from operations was an outflow of NOK 111 million in the second quarter of 2025. As you can see from this chart, Atea's cash flow from operations is highly seasonal, with very high cash inflow at the end of the year. In the second quarter, Atea typically has a moderate cash inflow due to a flat or declining level of networking capital. In Q2 2025, cash flow from operations was somewhat below the typical trend.
Working capital levels this year were temporarily impacted by a higher-than-normal level of school PC orders, which were purchased and paid for in the second quarter, but scheduled for delivery and collection in the third quarter. This impact is temporary and expected to normalize in the coming months. At the end of Q2 2025, Atea had a net debt of NOK 440 million, as defined by Atea's loan covenants. This corresponds to a net debt/EBITDA ratio of 0.2. Atea's net debt balance at the end of Q2 2025 was NOK 4.5 billion, less than the maximum allowed by its loan covenants. Atea has a strong balance sheet and significant additional debt capacity before its loan covenants would be reached. That concludes the presentation of the second quarter financial results.
I now hand the podium back over to Steinar to discuss the outlook for Atea's business for the remainder of the year.
Thank you, Robert. As we all know and have experienced, the last many months and quarters have been influenced and dominated by uncertainty. This is the reason why we guided for a full year for the first time in a long time after Q1. To be predictable, we'll keep our guiding. This is based on solid profitability and growth through the whole year as we see it. It's also based on the contract we have won during this year. It's also based on changes in the industry and the region that favors Atea. Our expectations, given after Q1, will stay the same: gross sales in the interval between NOK 57 billion and NOK 60 billion, actually in the higher part of that interval, and EBIT between NOK 1.33 billion and NOK 1.45 billion, up between 10% and 20%.
I want to remind you, when we compare to last year, that Sweden had a tough second half in 2023. It makes for a little bit of an easier comparison on the EBIT. When you look at the business and the outlook, we see a healthy business in the customer mix that we are favored by. We see Norway, Sweden, and the Baltics delivering solid numbers, having a solid backlog into the second half, and a forecast that gives optimistic views. We see that we have work to do in Denmark and Finland. Let me comment briefly on both of them. Finland is the area or the country where we absolutely have seen the weakest economy, as Robert alluded to. At the same time, we have won, over the last 12 months, several large and some smaller contracts.
We understand the information between the economy being weaker than we had hoped and Finland had hoped, and we winning some contracts can be contradictory. You have to understand the contracts are still there. People are buying on the contracts, just not as much as we had hoped. Many of these contracts are more capped by euro than by time. That means that we expect a sharp rise over the next three to four years in spending on these contracts in Finland. When it comes to Denmark, I am, as many of you know, spending quite a bit of time in Denmark, and we will update you more in detail after Q3 on findings and actions. We absolutely expect to turn both these countries into growth, both on revenue and EBIT in the quarters to come.
If we go further into business outlooks and look at the four growth drivers that we have spoken about over the last four or five quarters, I'll briefly update you on all four of them. Defense/NATO. First of all, for the first time, we have started to actually work with NATO in Central Europe. This is something we haven't done before, I said. We have worked with NATO in our region, which has been expanded, as you know, by Sweden and Finland. We are now having sales towards Brussels and other parts of the EU in Europe. Defense is the biggest single sector for us these days. It grew by 28% in Q2. At the same time, you have to remember, defense always spends more money in the second half than the first half.
Actually, more money in the last four months of the year than the rest of the year. We have expectations for the rest of the year, as you can understand. IT security is a hot topic, but I must say I'm a little disappointed in how little or how little growth we have in IT security compared to the threat picture that we see out there. We are growing double digits, so the growth is absolutely there. I'm afraid that we have to see some real damaging episodes before the real spending goes into IT or cybersecurity. On the other hand, AI is picking up. We are massively working with Microsoft and with IBM. On the Microsoft side, Copilot, of course, is central. It's not the only thing Microsoft does on AI, but it's well-known to people around the world. Copilot sales in Q2 grew by 38,000 licenses.
Some of that is renewals since we're now into more than one-year-old licenses. There were 38,000 licenses either recommitted or committed, which is sharply up from 21,000 in Q1. We have also developed some really cool and useful solutions based on, or together with IBM, based on what's next, especially against the municipality sector, with health, with education, and also with welfare. We'll talk more about these solutions as we are rolling them out to the more than 1,000 municipalities in our region. Windows 10. We are getting closer and closer to end of life in October 2025, only a couple of months away. There are still 2.5 million PCs in the Nordics, which are in use but are not ready to run Windows 11. There is a massive job to do still, and end of life is actually coming.
We don't believe that all these PCs will be upgraded before October or during October 2025. We believe this will happen over the next 12 months and are happy to see that PCs over the last 12 months are by far the fastest growing individual product group, with more than 20% quarter- after- quarter. That 70% of the PCs we sell is what we would call AI-ready, Copilot+ , AI PC, or whatever you want to call them. That increases the average spending per PC, and there are 2.5 million that have to be upgraded in the next somewhat 12 months. I also want to upgrade the information that you have on the Microsoft incentives or the change of the programs that Microsoft started from 1st of January 2025. It's been massively talked about globally and also with some of the Norwegian publicly traded companies. Let me be very clear.
The changes that have been put in front of us by Microsoft about a year ago have a negative impact for everybody that are partners of Microsoft short term. Microsoft wants us to change behavior. Changing behavior takes a little bit of time. We, and I guess everybody else who works with Microsoft, has a plan on how to recover, recoup those dollars. You are not able to do that from day one. It has to do with length of contract, it has to do with renewal dates, and it has to do with how fast you are able to change your own and the customer's behavior. In Q1, we did not recover everything.
In Q2, which is the toughest quarter of the whole year every year with Microsoft because it's end of year, end of fiscal year for Microsoft, where most people renew their Enterprise Agreements, and also this year. As you know, Enterprise Agreements are the ones where the most incentives have been taken away. We have just delivered that one single quarter in the first most difficult year where this will influence the most. When we look at the plan we have with Microsoft, we've actually recovered 50% when we look at actions. 50% of this year's loss, we're 50% into the year. It's just that it's not all in our numbers. As Enterprise Agreements are lost that one month when you sign them, while CSP is month by month by month. That's why recovery takes longer than the actual decline. In summary, the changes have come.
They have influenced the whole industry. Short term, for the bigger partners, it has a negative impact. Long term, it has a good impact. With that, we delivered the Q2 numbers. Let us look at the summary for the first half. Gross sales up to NOK 30 billion, a growth of 15.3%. I am really, really proud of what we've done in the first half. EBIT at NOK 549 million, up 10.1%. We are well in line with our guidance, and there is no reason to be scared about our future numbers. With that, we'll go to Q&A.
Thank you, Robert, for that presentation. We have several questions here. The first one here is for Steinar. As I understand, you're now the Country Manager in Denmark also. Can you give some initial observations and some actions?
Yeah, so I've been the Country Manager and the Group CEO now for about four months. As many of you know, we have not been able, over the last several, or I should say many years, to improve our business in Denmark. Stepping in, I first of all wanted to understand what is the deep-down reason for this. I certainly understand the reasons today. As I said, we will get more into details with this after Q3. In short, we are selling at a too low margin, too low price, and we are big enough to influence the whole market. Secondly, we're not cross-selling, sorry. We're not selling servers to customers that buy PCs and network to customers that buy servers, in the extent that our strategy outlines. All of this lowers the margin, as you can see in the numbers.
We are changing the sales approach and hiring more engineers. That is the short-term actions. I will get back to more details, but I'm confident that we will turn the situation in Denmark around.
Thank you. Weaker cash flow in Q2. You are normally world-class in this category. What's happened?
Yeah, we have a long track record of very strong cash flow through tight control of working capital. Still, from time to time, we'll have fluctuations in working capital which are above or below the normal or expected levels. As long as these fluctuations are temporary, it's really no big deal. It has no impact on the longer term. In Q2 2025, we had a temporary impact on working capital by a higher-than-normal level of school PC orders, which were ordered and paid for in the second quarter, but to be delivered and collected in the third quarter. This is a high volume of PCs that we do every year to the schools, but this was just simply the timing of the payments versus the collection dates on a very large project volume that we do with school PCs. This impact is temporary.
This impact is expected to normalize in the coming months. I just want to emphasize there's no structural change in either our inventory management, collection, or payment terms that should impact our business over the longer term.
Thank you. New question is, it's a bit surprising to see the local currency decline in revenues in Finland during the quarter, given that we understand you have frame agreements in place that are double the size of the previous frame agreement. Can you help us understand the weakness in Finland and how the frame agreement is performing?
Yeah, as I touched on in the presentation, the Finnish economy, overall, the economy in Finland has been the weakest, and this is not our prediction or our numbers, of all the seven countries we do business in. We are influenced by a general low spending in Finland. When it comes to the frame agreements, the frame agreements are absolutely there. They're long term. They're buying on them, but not the volumes that we expected and that we talked to the public about when they were signed. We expect that volume to pick up already in the second half of this year. The contracts are valid. The euro numbers that we have given are valid. Let's see what we can do over the next three to four years, which is the duration of the contract that we have launched.
Thank you. You've grown your EBIT 10% year-over-year in the first half. Is there anything pointing towards an acceleration in the second half?
We believe that there is, but more to the later part of the year than Q3 when it comes to accelerating the growth. Sweden was, as you can see when you look at last year, not as strong as they normally are, and as we see the first half of this year. We expect Sweden to outperform. We expect Finland to start growing, and we expect Denmark to accelerate its growth. Overall, we believe we are well within the guided interval.
Another question on Finland here. Why are you growing OpEx materially in Finland in both Q1 and Q2, despite top line and gross profit losing some momentum and slightly declining?
We are investing in value-add to our customers in Finland. It's not a short-term thing. It's a long-term thing. It's something we have talked about over the last three to four or five years. It's both on managed services and on consultancy. It's not a huge initiative, and of course, we are trying to balance it. We expect Finland to start growing in the coming quarters. We are very confident on the strategy in Finland.
Further question on Denmark. If you can give us more of an update on Steinar's work in Denmark, what actual activities are prioritized, and what margins do you expect the region could reach in a 12 month- 18 month period?
Yeah, when it comes to margins and expectations, I'll save those to after or on the Q3 presentation. When it comes to actions, what we need to do is to represent the whole of Atea in Denmark to every customer in a better way. We're changing the sales approach by strengthening account management and the very deep knowledge that those salespeople will be helped with in the sales process. In that way, we hope to utilize each one customer touch in a better way, and we can sell more on the actual value of Atea, which we do in all the other six countries, than just on price. This is the most important part of it. We're also strengthening the system engineer/consultant work that we do in Denmark, which will increase the margin, the total margin, of course. Again, we'll get back to more details after Q3.
Thank you. You mentioned Microsoft, but do you expect further headwinds in 2025 or 2026 for the year from legacy Enterprise Agreement software contracts?
Yeah, first of all, I just want to say we're focusing on Microsoft because Microsoft is way the biggest one. Most, if not all, software vendors have or will change their approach. Long term or midterm, this will strengthen the Atea relationship with the vendor, but also with the customer. We are forced to build more knowledge and more services that we can invoice to the customers. It's just that it takes a little bit of time to get over that hump. We are well on our way to neutralize, and that is the first stage, to neutralize the negative effect of those changes. We've seen them with VMware or Broadcom. We've seen them with others. We now see them with Microsoft. We don't see the same type of headwind in 2026 as we see first half 2025.
We see that we'll get a little better and a little better at neutralizing or closer to neutralizing the numbers as further out we get month by month in the coming quarters.
Thank you. New question on gross margin was soft, especially in software and services. What are your expectations on gross margin development going forward?
If you look at gross margin in total, it's down by a little bit more than 1% from last year. There are two main reasons for it. One is the softer margins that we now have spoken about several times today. Secondly, it's because product revenue grows faster than services revenue, which, you know, is obvious when you look at the numbers and is as expected as services revenue. We're not able to grow services revenue double-digit in a single quarter. It's the mix and it's the software topics around incentives with Microsoft. We expect both of them to normalize, just as you have seen over the last couple of quarters that hardware margins have normalized.
They were a little weak in Q4, and we talked about that after Q4 when we said it's going to be in the interval between 13% and 13.3%, which it has been for 10 years. That is exactly where we land in Q2. We are working on normalizing both hardware, which is kind of check that, software and services. There is no structural change other than the incentives with Microsoft that we talked about.
Certainly some interest in Microsoft. How much of a headwind in terms of EBIT margin were the Enterprise Agreements this quarter?
If you look at Q2 last year and Q2 this year and think that the volume and the contract types would have been exactly the same, which of course is not true. The volume is higher and the contract types have changed a little bit. If they were the same, we would have lost approximately $4 million of profit in this quarter. It isn't as much, but it is in the interval between $0 and $4 million in Q2 by itself.
Thank you. Final question. You choose to keep the guiding in somewhat large intervals. Can you elaborate somewhat more on this, please?
Yeah, if we hadn't guided, we would have been criticized. We guide, and some people think the guiding is not what they like. We believe that we have a sound guiding interval and a sound guiding, especially when you look at the uncertainty around in the world and all the changes that happen even in our industry. We are firm on our guiding, and we hope it gives a little bit of predictability. As I said, the revenue will be in the high end of the interval, and we will update the guiding after Q3. I guess that's the last question, and that concludes the presentation from us here in beautiful Oslo. I hope everybody has a fantastic summer. Mine will be spent on Mallorca. I'm so much looking forward to it. Thank you.