Translation: Original published in Finnish on 12/17/2025 at 07:02 am EET

Digital Workforce automates customers' knowledge work processes by utilizing Robotic Process Automation (RPA) and AI. In recent years, the strategy has focused on viable selected industries, in selected growth markets, and on its own platform. The strategy resonates, but requires proof of a breakthrough. Now the company must demonstrate a return to better organic growth and its scalability to profitability. The stock's valuation picture is at least attractive from several perspectives. We reiterate our Accumulate recommendation for the share and lower our target price to EUR 3.2 (was 3.7) reflecting the decline in medium-term estimates.

Digital Workforce: a pioneer in automation utilizing RPA and AI

Digital Workforce operates in the large IT service market, in the RPA and automation vertical, where competition is smaller than in the general IT service sector. The service offering covers the entire lifecycle and includes consulting, AI applications, development, introduction, and maintenance on its platform. Currently, ~35% of revenue is expert services and ~65% continuous services, reflecting the difference to service-driven IT service companies. The purpose of the business model is to increase the absolute and relative share of continuous services, which is highly scalable revenue.

The strategy resonates, but now results are needed

The company's strategy has been refined several times in the past few years, reflecting the company's development stage in the young but large automation market. The strategy is now built around competitive advantages, its own scalable Outsmart platform, and customer verticals in healthcare, banking, and insurance. Geographically, growth focuses more strongly on the Finnish and UK markets, driven by the e18 acquisition, while the focus on the US is temporarily smaller due to the uncertain market situation. Finland accounts for almost 50% of revenue and has grown well in 2024. Considering the latest acquisition, the share of the UK and the US is now ~35% of revenue and has grown strongly. This makes it an increasingly central growth driver at Group level as well. By customer vertical, healthcare appears to be the key customer vertical. 2025 did not provide significant evidence of the strategy's effectiveness in terms of numbers. Thus, we monitor the strengthening of this trend next year, which the markets also seem to be anticipating.

Focus back on growth, without compromising profitability

Digital Workforce aims to generate revenue of 50 MEUR in 2026, of which 10 MEUR comes from acquisitions. In addition, the target is an adjusted EBITDA of over 15% by the end of 2026. We expect the company will grow by 6-20% in 2025-26, driven by the e18 acquisition. In addition, we expect the company to accelerate growth with acquisitions, for which the balance sheet provides sufficient leeway. In terms of profitability, we estimate that EBITDA-% will rise to almost 10%, driven by scalable recurring revenue growth. In addition, the company is aiming for a share of over 70% in continuous services (2026e 69%). Thus, we estimate the company's trend will improve from the current year but remain below targeted levels. The key risks relate to the disruptive threat of AI and the company's ability to keep pace with technological development, new customer acquisition, customer ramp-up, the scalability of the Outsmart platform, and potential corporate reorganizations.

Valuation picture is at least attractive

In terms of investment profile, Digital Workforce is still a turnaround company whose profitable growth turn progressed well last year. This year, the performance has been more variable, and it still clearly has to prove its competitiveness and profitable growth. Following the acquisition, it is justified to primarily consider next year's multiples, which account for the full impact of the acquisition. Next year's profitability estimates are partially scaled (EBITDA: 8%), making the valuation picture (2026e EV/EBIT 9x, P/E 12x) attractive. If growth continues and scales into profitability, the 2027 multiples (EV/EBIT 6x, P/E 9x) are already very attractive, but in our view, it is still too early to rely on this, given the risks related to the earnings growth estimates. Based on the valuation multiples, the sum of parts of EUR 3.3, and the DCF calculation (EUR 3.9), we estimate the fair value range of the share to be EUR 3.0-4.0 per share. However, the upper end requires a better outlook and execution.