OVH Groupe S.A. (OVH) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to OVHcloud Q3 FY 2026 Revenue. Today's speakers will be Octave Klaba, Chairman and CEO of OVHcloud; and Stephanie Besnier, CFO. I now hand over to OVH management to begin today's conference. Thank you.

Hello, everybody. I'm Octave Klaba, Chairman and CEO of OVHcloud. Thank you for joining us today. Let me start with the key highlights of our Q3 FY '26 on Slide 2. So this quarter, we generated EUR 290 million in revenue. We had a 6% of growth, net retention, 102%. On the revenue quarter 4 (sic) [ quarter 3 ] 9 months year-to-date, EUR 845 million, 6% of revenue like-for-like, and we confirm all guidance for FY '26. So some business highlights. We've been -- we were selected for the European Commission deal with consortium. Very happy to be part of this journey. Also, we continue to refresh and to upgrade our entry-level offers like VPS '27, Domain Names '27, Web Hosting '27 to continue to acquire and to be really aggressive on the acquisition of the new customers. Another point is the acquisition of Gladia, AI company Speech-to-Text, STT. And the goal is to build up -- to continue to build up our sovereign and multi-modal AI to our customers. And the last one is we launched the preview of OVHai Workspace during the VivaTech that is open and collaborative agentic AI platform. On the operational side, we finished organization on the corporate. So we have right now the new team in place. We know we have team in the different countries. Really happy to have done that. We still have the different things to finish on the digital cloud and web cloud that should be done in the next weeks. On the Q3, we had, of course, the anticipated increase of the CapEx, but it was fully anticipated. We don't have the -- main impact on the CapEx because we've been working very well last quarters and to avoid the bad news on the CapEx on the Q3, and this will be also on the Q4. And then, of course, strict financial discipline to maintain our cost and focus on the cash generation. Stephanie will now talk about our financials.

Thank you, Octave. Hello, everyone. This is Stephanie speaking. So as Octave said, in Q3, we delivered a like-for-like growth of 6.9%, a clear acceleration compared with our H1. So this was driven by, first, on Public Cloud, we are up 20.2% like-for-like, back above 20% and by far, the main driver of our growth, adding EUR 11.1 billion to our revenue. Second, on Private Cloud, we are up 4% like-for-like, contributing EUR 6.6 million. And last, Webcloud and others, we are up 2% like-for-like. On a reported basis, our growth stood at 6.5%. And now we turn to Slide 5 for a deep dive on each of our business segments, and we start with Private Cloud. So we are now Slide 5. So Private Cloud includes, as you remember, Bare Metal Cloud and Hosted Private Cloud. In Q3, Private cloud reached EUR 174 million in revenue, representing around 60% of group revenue and growing 4% like-for-like. Over 9 months now, it stands at EUR 511 million, and we are up 3.6% like-for-like. On Bare Metal, we continue to benefit from the repositioning of our entry range offers. Our customer acquisition and starters keeps accelerating, a direct payoff from the new entry-level positioning we took. On scalers and corporate, we keep seeing sustained upselling across our existing customer base. On Hosted Private Cloud, now the corporate segment is growing, supported by the ramp-up of strategic deals. And this momentum is offsetting an infrastructure optimizing movement as some customers rightsize an environment or churn impacted by Broadcom's price increases. On product side, we launched our new high-end hardware for Managed VMware. It's designed to support the most critical workloads. We move to the next slide. Now we are on Public Cloud. So Public Cloud clearly is a standout performance this quarter. In Q3, Public Cloud reached EUR 66 million in revenue, around 22% of total group revenue and grew 22.2% (sic) [ 20.2% ] like-for-like. So like I said, we are back above 20% for the first time since Q4 '23. Over 9 months, it stands at EUR 184 million, up 16.9% like-for-like. On the solutions now for starters, we see solid new customer acquisition and for scale and corporate, we have strong upsell driven by the breadth of our portfolio of products and the traction of our 3AZ regions in Paris and Milan. On entry-range offerings and notably on VPS, so for starters, our customer acquisition remains exceptionally strong, supported by the offer renewal despite supply constraints. Let's now turn to Webcloud. We are on Slide 7. So in Q3, Webcloud delivered EUR 50 million in revenue, representing around 17% of group revenue and growing 2% like-for-like. Now excluding Telephony and Connectivity, our legacy segment, growth reached 5% like-for-like. Our 9 months Webcloud stands at EUR 150 million, up 2.2% like-for-like. This quarter, we took a first step in the redesign of our offering. We launched our new web hosting offers, and we have now migrated our entire customer base on these new plans. We also enriched the range of new high-end -- high-value solid offers, namely Managed Hosting for WordPress and OVHcloud Video Center as we move the Webcloud business model up the value chain. Finally, in terms of dynamics, customer acquisition accelerated on the back of our offensive sales strategy, led by strong momentum in the Domain Name segment. And now I will take you through our geographic performance on Slide 8. So we start with France on the left. France represents 48% of our revenue and grew 5.8% like-for-like in Q3. So it's a slight sequential improvement versus the first half. Public Cloud growth accelerates above 20%. We saw it. It's supported again by the ramp-up of the Paris 3AZ region. Private Cloud shows positive early returns from the Bare Metal entry-range repositioning and Webcloud delivered a resilient performance, underpinned by support services and the resilience of the domain names business. Moving to Europe, excluding France in the middle of the slide, it represents 29% of revenue and grew 7.4% like-for-like in Q3. Growth rebound sharply more than double the rate of the first half, driven by accelerating Public Cloud momentum, while Private Cloud delivers steady growth on the back of our price performance repositioning. And finally, Rest of the World, which represents 23% of revenue and grew 8.6% like-for-like in Q3. Growth is led by the ongoing build-out of Public Cloud and by the resilience of Private Cloud across the region. I will now hand over to Octave for the final slide of -- on the outlook.

Thank you, Stephanie. So we confirm all the guidelines for FY '26. So like-for-like growth of revenue between 5% and 7%, it will be closer to 7% than to 5%. Adjusted EBITDA more than FY '25. Adjusted CapEx, so keep in mind, this is adjusted CapEx 33%, 35%. And then, of course, levered free cash flow will be positive. So we are now ready for the questions, if you have any.

[Operator Instructions] The next question comes from Emmanuel Matot from ODDO BHF.

Emmanuel from ODDO BHF. First, you are clearly ramping up your AI efforts with an ambition to develop LLM, if I understand well your comments from the VivaTech conference last week. Do you have the resources to become truly competitive in this market? And isn't it too late for you? Do you plan also to maintain a net debt-to-EBITDA ratio below 3x? Second question, since you took the role of CEO, Octave, it was in October last year. What remains to be done at OVH to turn the situation around and for you to feel comfortable discussing a road map with us during an Investor Day? And my last question, maybe for Stephanie. Where do we stand on price increases to offset the surge in memory component costs? Are your main competitors all doing the same? What is the additional contribution of these price increases to your revenue growth this year?

Thank you, Emmanuel. So on AI, yes, we announced different things. This is the Q3 and also as for the Q1, we want to just talk about the numbers, but it's a good question because we started to talk a little bit more about the AI and our strategy, and you will discover in the next months and the quarters, where we go and what we want to build. So we are going in the direction of building up our teams and to be able to deliver in the same time, the investment, but it's also growth -- profitable growth. So the question is AI is too late for us. No, definitely not, okay? We are in the game because you have the investment that is quite lower right now to invest in the AI. So it's 10x -- 8x, 10x less expensive. You have more teams available on the market. You have a lot of papers with the researches on the market, and you can create data, scientific data. So it's easier -- it's so easier to go in this market 4 years after. And the market is not done in Europe. We are still looking for the sovereignty in this market. The current players, they are not good. And we think that we can be good in our -- let's say, the vertical that is cloud, everything that we need, for example, code, we need securities, we need the defense. We need to manage the infrastructure at scale. All these things, our customers, they want that. So it's so aligned between what we have data -- internal data, not customer data, but internal data because we manage so large infrastructure with so many internal data that we can use in the AI. And once we have this and we have more productivity, of course, internally, we can develop faster, we can have more securities, we can go in the less OpEx but also all these tools that we will love to use, our customers will love to use also. So we want to offer them what we need internally. So this is one of the purpose where we go and why it makes totally sense for us to go for that and to making money because, of course, in this AI world, the investment they are very high. A lot of people talking about the investment, not so many talking about the revenue. And this is where we want to show, demonstrate that you can have the revenue, you can generate the revenue and all the revenue can flow the investment and not just putting the money on the table and then hoping that you will transform that in the revenue. So this is on the AI. On the debt, for me, 3, it's a red line, okay? We don't want to go on the -- more than 3. Our goal is to keep that less than 3 and because it's what I've done for 27 years more and this is where we will be. And the second question I didn't get? Sorry.

What remains to be done at this stage?

On our side, for the first year, what still remains, we need to finish on the Webcloud, digital cloud, starters, scalers organization. This is exactly what we do today. Once it's done, there was few things on the communication that we need to upgrade because as you probably mentioned, there was a lot of discussions about sovereignty, and I'm not happy how we are taking part of this -- all the discussions. So we're upgrading right now that. And then I think we will be ready to go with it. There's a lot of things they are ongoing. We didn't even start talking because we started working on the step ahead products, step ahead services, step ahead features that we will release in the next weeks, months and quarters that I hope that it will make a difference. Another one?

Yes. So on pricing, Emmanuel, first, we live an exceptional situation. As of today, we estimate that the cost of the memories have been multiplied by 6 in the last 12 months. We consider that it would be multiplied by 9 in September. We have massive price increase on the disk, and now we are hearing inflation potential on the CPUs. So what we've done, as you know, first, we have front-loaded our purchasing. We've made -- we front-loaded the CapEx for '26, front-loaded the CapEx for '27. We disclosed it in H1, so we've made some savings. Second, yes, we've increased the prices. We've been very transparent on that topic with our customers. We've decided to increase the prices, and we've implemented these increases in April and May. So we're comfortable for now with this level of price increases. The impact on the growth over the 9 first months is not significant. It's below 0.5% and clearly, for us, the key question is, yes, the right price and also the supply. So we have also on top of being careful in the purchasing, we've secured the supply, and that's also something that is very important in the sector right now. Now, and Octave, you've communicated on it yesterday night, we are going to prepare September. We are working on additional price increase in the given context. There is no need to accelerate massively right now as the price increases on the back of what we've done so far. So we are preparing and getting ready for September 26th, and we'll give more detail to our customers first in the next weeks.

Yes. It's really important that we need to focus on the customers because the increases of the prices that we have in mind are very important. So we want to first communicate with our customers first and then with market.

[Operator Instructions]

No more questions?

Thank you for your questions. I hand the conference back to the OVH management for any closing comments.

Perfect. Thank you very much for being here with us today. So just key takeaways, highlights. We generated EUR 290 million, up 6.9% like-for-like. Public Cloud is growing faster, really accelerating faster with 20%. We were selected for the European Commission. We -- our AI lab, we continue to build up with Gladia and preview of the OVHai Workspace. We finished our cooperation organization. No issue on the CapEx -- anticipated CapEx, and we are very strict on the financial discipline. And then on the guidelines, we confirm all the numbers without any changing. So like-for-like, 5% to 7%. Adjusted EBITDA more than FY '25. Adjusted CapEx 33%, 35% and positive free cash flow this year. Thank you very much, and have a good day.

Thank you.