Siemens Aktie

Good morning, ladies and gentlemen, and welcome to the Siemens 2026 Third Quarter Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to our fiscal Q3 '26 conference call. All documents were released this morning and can be found also on our IR website. I'm here today with our CEO, Roland Busch; and our CFO, Veronika Bienert. Both will review the Q3 results. After the presentation, we will have time for Q&A. With that, I hand it over to you, Roland.

Thank you, Tobias, and good morning, everyone, and thank you for joining us to discuss our third quarter results. Siemens delivered another record third quarter with strong performance across all metrics despite a persistently volatile geopolitical environment. We have been making good progress in driving customer value and fast innovation by executing our ONE Tech program. Our technological leadership across all our businesses, our focus on driving industrial AI and our strong position in attractive markets provide a solid basis for sustained value creation.

Let me now turn to the highlights. Book-to-bill reached an outstanding 1.34, lifting order backlog to a record EUR 132 billion. Group orders surged to an all-time high of EUR 27.9 billion, up 14% on the prior year. Smart Infrastructure topped the EUR 8 billion order intake mark for the first time. SI's data center vertical showed exceptional momentum, again, with triple-digit order growth over the prior year and exceeding our excellent Q2. Customer demand remains dynamic, driven by the rapid build-out of cloud and AI infrastructure.

With plus 9%, Digital Industries stayed on its path to healthy growth. Its market environment was supportive in industries such as electronics, semiconductors, aerospace and defense. Besides the beneficiaries of the AI infrastructure build-out, DI also saw some improvements in the broader manufacturing space. Mobility achieved one of its highest quarterly order volumes ever close to the prior year's exceptional level.

Looking ahead, several high-profile contracts for improving rail services in Germany are already on the books for the fourth quarter. Overall, broad-based revenue growth reached 8%, fueled by Digital Industries and Smart Infrastructure. All regions contributed to growth. The Americas led the way, up 11%, fueled by strong momentum in the United States. EMEA grew 6% and Asia, Australia was up 10%, driven by India, which was up 13%. Industrial Business profit reached a record EUR 3.5 billion, resulting in a profit margin of 17.3% on operational trends of Digital Industries and Smart Infrastructure.

Effects from tariff refunds in the U.S., primarily at Siemens Healthineers also supported profitability. Margin expansion resulted into higher earnings per share pre-PPA of EUR 3.14. Free cash flow was a standout achievement, reaching EUR 4.1 billion. After a strong year-to-date performance, we raised our earnings outlook for fiscal 2026 on the group level, Veronika will give you some more color later.

To drive future success, we have continued investing organically in switchgear capacity in Frankfurt as well as in bolt-on acquisitions to strengthen our portfolio in the real and digital worlds. We made progress regarding the plan to deconsolidate Siemens Healthineers, and Veronika will give you an update on the tax authorities' decision and the time line. In addition to contractual topics that we discussed in a constructive dialogue with Siemens Healthineers, we plan to reduce our Supervisory Board mandates from Siemens AG Managing Board members from 3 to 1 effective as of Siemens Healthineers' next AGM in February 2026. Veronika and I will drop our mandates.

Over recent years, 3 companies have developed from Siemens' roots into market and technology leaders in their respective fields. We understand Siemens Healthineers and Siemens Energy's considerations regarding the use of independent brands in the future. We are pursuing a clear strategy in this respect to ensure an orderly process with both companies in line with existing agreements and for the benefit of all stakeholders involved. Siemens will sharpen its image as the trusted technology partner for the AI age, a company with a unique ability to combine the real and the digital worlds.

Now let's look at the 4 key levers for driving our growth ambitions as ONE Tech company. And first, we start with grow digital. During the first 9 months of fiscal year 2026, we grew our digital business revenue by 18% on a nominal basis, well ahead of the ambition level of 15% that we see last November -- set last November. With Vectron X, we welcome a new member to the Siemens Xcelerator family.

Vectron X is a highly digitalized next-generation locomotive that builds on our best-selling Vectron platform. Its digital driver's cab features a smart screen app functionalities with standardized interfaces and near real-time connectivity. The result, enhanced driver experience, higher operational efficiency and optimized data-driven maintenance.

Second, grow regions. With the landmark agreement, we have deepened our collaboration with HD Hyundai to create a scalable blueprint for digital shipyards. The agreement includes a low triple-digit million contract for a broad range of industrial software and automation offerings. By connecting data, software and automation technologies across the shipyard, we are creating the operating system for industrial AI. These capabilities will help shipbuilders increase capacity, improve quality and reduce rework. We will support the launch of the U.S.-Korea Shipbuilding Technology Cooperation Center. It will be a platform for exploring modernization strategies and strengthening maritime competitiveness in the U.S. and allied markets.

Third, grow verticals. The semiconductor industry showed strong growth momentum driven by the AI flywheel. We capitalized on this demand with attractive orders across our entire portfolio. Among them was a wide-ranging electrification win for a major new fab project in the U.S. With COMPUTEX, we announced an expansion of our partnership with Intel across the entire value chain from design to chip manufacturing.

Fourth growth lever, Grow AI. Our Eigen Engineering Agent continues to demonstrate our ability to rapidly translate advances in AI into commercial industrial software. We have expanded the product globally while continuously introducing new capabilities based on direct customer feedback. Adoption has been strong. Hundreds of customers from across more than 30 countries and ranging from small system integrators to global industrial OEMs have signed on. With the launch of this agent in China at the World AI Conference, we were the only global company to receive the prestigious Super AI Leader Star Award.

The PAC Innovation Radar recognized Siemens Eigen Engineering Agent as the leading platform for Gen AI advanced industrial engineering in Europe 2026. Another example, at our global customer conference Realize LIVE, we launched Intelligence Center X, a powerful new offering to orchestrate industrial AI available as part of Siemens Xcelerator. Our customers run plenty of AI pilots, but they usually get stuck in the testing phase. Intelligence Center X breaks that pattern.

This system enables experts to orchestrate AI agents and bring industrial AI into live operations at scale. The system features 4 capabilities that work together seamlessly. First, it pulls together customer data from across the entire life cycle in our knowledge graph. Graph Studio puts individual data into their overall context, live and in real time from design to engineering, manufacturing and maintenance, but also from supply chains and customers, for example.

Second, and this is crucial, Intelligence Center X comes with industrial ontologies right out of the box. They map how assets, products and processes in industrial engineering and manufacturing relate to each other. The result is codified industry-specific knowledge ready to use. And the ontologies are linked to our Siemens Xcelerator portfolio, for example, to our market-leading most secure PLM Software Teamcenter.

Third, AI comes into play. AI Studio delivers machine learning and AI models trained on real operational data. It continuously monitors model quality and established rules, giving AI agents and LLMs access to advanced machine learning and data science to make more reliable predictions and decisions. This approach makes AI explainable and predictable and thus ready to move into production at industrial scale.

And fourth and finally, Mendix. Customers use this AI-augmented low-code platform to develop their own AI agents and connect them to existing systems and external agents. They govern their AI engines with workflows based on clear roles where humans continue to have oversight and make critical decisions. As a result, the power of automated AI delivers measurable outcomes in business processes. So in short, Intelligence Center X makes AI scalable for industry.

Early customers are already seeing real successes. It's further proof that Siemens is using AI to deliver unique value to customers. These applications show that industrial AI is becoming real and will continue to drive exceptional growth opportunities for data center infrastructure and compute power. Market fundamentals remain strong, and we are a trusted partner across the entire spectrum from hyperscalers to colos to enterprise customers. 9 of the global top 10 data center providers rely on Siemens.

The first 9 months order volume reached close to EUR 6 billion, up triple digit over the prior year. Similarly impressive, the team grew our revenue by more than 50% to EUR 3.1 billion. Our backlog and customer framework agreements provide visibility well into fiscal year 2027 and even beyond, while the sales pipeline looks healthy. Yet looking ahead, we might see some volatility in order intake due to lumpiness of large orders. Our strong position today is based on several long-term success factors, such as a comprehensive portfolio across disciplines, including prefabricated, modular and standardized solutions.

Our reliable track record of execution with the ability to grow global delivery capacities and supply chains accordingly, proven global domain know-how available in regional hubs and a strong ecosystem of partners across the full value chain. Building on this strength, we are shaping the road map towards 800-volt direct current architecture, which will be required to deal with higher rack density in AI factories in an efficient and reliable way.

Rather than being a wholesale shift, adoption of 800-volt DC is likely to progress in stages over the next 4 to 5 years with hybrid architectures dominating the early phases. As technologies mature and operational requirements and standards evolve, a centralized DC distribution architecture will become viable. But we expect that AC and DC will also coexist with mixed topologies in brownfield retrofit and greenfield installations.

We are helping major data center providers to design, test and deploy safe and reliable DC power distribution to tackle the high-density challenge they are facing and we expect the first pilots in 2027. At Siemens, we know how to handle a DC environment based on our experience in other areas such as marine applications, battery storage and industrial campuses. With our proven capabilities in digital twin, automation and electrification, we can deliver a holistic approach from design and simulating systems to innovating on the component level. We are driving organic innovation partnerships and a broadening of the ecosystem.

Now let me highlight some recent innovation examples to show our progress. We developed a reference architecture together with NVIDIA, nVent and Fluence across compute, cooling, power and control systems for the latest DSX Vera Rubin platform. The goal, maximizing tokens per watt and ensure predictable, scalable operations. Building on this architecture, we have developed a modular and scalable automation framework with ready-to-use SIMATIC libraries. Our PLCs are already automating critical OT infrastructure in several megawatt scale data centers.

In the electrification area, we are continuously optimizing our factory assembled pre-tested kits and are working on new DC products. One great example is our collaboration with Infineon, where we are integrating their silicon carbide power modules into our latest solid-state circuit breakers, a critical enabler for safe and reliable distribution of DC power.

Summing up, we are very well positioned to win in traditional and hybrid architectures and on the way forward to 800-volt DC. I'm very pleased with the momentum and performance of our DI software business. At 11% over the prior year quarter, organic ARR growth remained at a very healthy level. Integration of our Altair and Dotmatics acquisitions is progressing very well. We are bringing our simulation products together and are launching new products. Early revenue synergies are materializing as well.

Strategic partnerships such as those with IFS and Xometry complement our industrial AI offerings. With IFS, we are offering a digital twin to connect design, production and asset performance in order to deliver productivity and adaptability for manufacturers. The software business is moving fast strategically and in operations. And over to you, Veronika.

Thank you, Roland, and good morning, everyone. Let me share further details on our record Q3 and our outlook for fiscal 2026. Orders for Digital Industries at EUR 4.9 billion were 9% above the prior year with a book-to-bill of 0.98. Orders in automation were up 11% with a book-to-bill of 1.01 driven by the short-cycle business. As Roland mentioned, overall market dynamics have been further improving. In addition, I want to point out that DI saw an upswing in its core vertical of machinery, driven by China, but improving elsewhere as well. Yet capacity utilization in some of our key industrial markets, particularly in Europe, is still on a relatively low level.

DI software business delivered 5% growth over the prior year with orders close to EUR 1.7 billion. A key driver was the PLM business, including a major order with a large automation -- automotive OEM modernizing its entire system landscape. The EDA business was softer as expected. Our backlog at Digital Industries was stable at around EUR 10 billion. Revenue for DI increased 10%. The software business was up a strong 15%, driven by the EDA business growing more than 30%. DI's Automation revenue was up 7% to EUR 3.1 billion on broad-based growth in Discrete and Process Automation.

DI's profitability improved sharply to 18.7% with a strong contribution from its software business. A high share of accretive EDA revenue and the successful integration of Altair and Dotmatics drove margin expansion. Economies of scale and a clearly net positive economic equation supported margin improvement in the automation business. Sustainable productivity gains more than compensated for cost inflation and increasing pressure from rising prices for selected electronic components. Integration-related costs for Altair and Dotmatics accounted for 70 basis points in the third quarter, in line with expectations. I'm very pleased with DI's extraordinary free cash flow performance of almost EUR 1.5 billion, which is an all-time quarterly high.

Cash conversion was excellent in both software and automation. Looking at the regional top line perspective, DI's Automation businesses grew strongly across most regions. China showed good momentum with orders up 17% and revenue grew 9% on healthy sequential revenue dynamics, fueled by Motion Control. Our local China portfolio was accretive to revenue growth, up by a rate in the mid-20s.

The picture in Europe remains somewhat mixed. Order recovery is on the way with a book-to-bill above 1 and healthy growth. Revenue in Germany was still muted due to discrete automation, while the latter drove clear growth elsewhere in Europe. The U.S. continued its growth path. The AI-driven investment boom also supported core manufacturing industries. This benefited our Discrete Automation business.

Based on delivering a strong performance after 9 months, we confirm our DI guidance for fiscal year 2026 in all aspects. Revenue growth is expected in the range of 7% to 10% and profit margin is expected to reach 17% to 19%. For the fourth quarter, we see DI orders around the prior year level on very tough comps due to an exceptionally high volume of EDA bookings. Automation orders are expected to be clearly up, while the software order volume will be below the prior year's record level. Nevertheless, the software sales funnel is promising.

We anticipate that DI's revenue growth will be in the range of 5% to 7%, supported by growth in automation and software. And we expect DI's profit margin to be flat sequentially because of the business mix. Now let's turn to Smart Infrastructure, which once again delivered an outstanding performance across all businesses and key metrics. Orders were up 42%, reaching a new record level of EUR 8 billion. This increase was driven by a massive growth of 58% in SI's electrical products business and 55% in its electrification business.

Both businesses benefited again from a high volume of large order wins with data center customers in the U.S., but also in Europe, where we won, for example, a large project in the Nordics. Even without the data center-related business, order growth was strong and reached the high teens. Book-to-bill came in at an outstanding 1.25. SI's record order backlog of EUR 23.7 billion gives us a lot of confidence for sustained growth momentum into fiscal year 2027.

Revenue growth was broad-based and reached 13%. The largest contribution again came from the Electrification business, up 20% and the Electrical Products business up 18%. Consistent backlog conversion led to further operational margin expansion. SI's margin was up 120 basis points year-over-year to 20%. An impairment related to the e-mobility charging business partly offset positive effects from tariff refunds in the U.S. The net effect amounted to 50 basis points, implying an operational margin of 19.5%.

Structurally, SI's business continued to benefit from economies of scale due to higher revenue combined with improved capacity utilization and from sustained productivity improvements. Pricing measures in SI's product business compensated increasingly, but not yet fully for higher commodity costs. Free cash flow showed consistent cash conversion at 0.94 with a seasonal increase in operating working capital well below the top line growth trajectory.

Looking at the regional top line development, orders were up double digit across the board and stringent backlog execution drove revenue in all geographies. The U.S. again showed exceptional order momentum, up 81%, led by data center and semiconductor wins. Bookings in Buildings saw growth in the low double digits. Germany recorded substantial order growth in Buildings. Electrification and Electrical Products grew around 10%. The Europe and Middle East region also benefited from large data center orders in Finland and Spain.

SI's top line in China recovered further with order strength in Buildings ahead of price increase, while Electrical Products drove revenue. The service business delivered 7% growth, clearly up in Asia and in Europe. Our SI teams continue to expect very healthy end market dynamics with data centers and power utilities as key engines for growth. After delivering 11% revenue growth in the first 9 months of fiscal year 2026 and given high visibility from order backlog, we raised SI's guidance for the full fiscal year.

For comparable revenue growth, we now expect a range of 10% to 11%, up by 150 basis points at the midpoint. Building on a very consistent margin expansion trajectory, we lift SI's profit margin outlook by 50 basis points to a range of 18.5% to 19.5%. For the fourth quarter, we anticipate that SI's revenue growth will be -- will approach the lower end of the full year range and that the profit margin will be in line with full year expectations.

Mobility recorded a robust set of results in the third quarter. Orders at EUR 7.6 billion included a high share of attractive service contracts and topped our expectations with an excellent book-to-bill ratio of 2.35. Order backlog increased to EUR 58 billion with an attractive gross margin profile. As Roland noted, we see a very promising sales pipeline for the fourth quarter of fiscal year 2026, including the booking of the majority of a EUR 3 billion contract with Italo Holding. The contract includes rolling stock as well as a 30-year service agreement.

Revenue in Q3 was up 6% over the prior year, fueled by low double-digit growth in the rail infrastructure business. Margin performance was solid at 8.6% with a somewhat less favorable project mix and slightly higher severance costs compared to the previous year. As indicated, free cash flow picked up materially and cash conversion improved due to stringent collection of large payments from customers. Looking at project payment profiles and the timing of order awards, we continue to expect further substantial catch-up in the fourth quarter. After a consistent Q3 performance, we confirm Mobility's full year outlook for revenue growth in the range of 5% to 7%. We continue to anticipate that Mobility's full year margin will come in with the range of 8% to 10% with the expected outcome towards the lower end.

For the fourth quarter, we expect Mobility's revenue growth to accelerate on strong backlog execution and achieve a level between 9% and 11%. Profit margin is expected to be within Mobility's full year guidance. Page 17 in the appendix shows our below IB performance. The results included a strong SFS contribution fueled by a gain of EUR 156 million from the sale of a stake in an equity investment in the U.K. Free cash flow of more than EUR 4.1 billion in the third quarter was up more than 40% over the prior year, driven by all industrial businesses.

Free cash flow return on revenue stood at 11% after 9 months, and we are firmly on track to achieve a double-digit return again for the full year. We further deleveraged our capital structure to 0.6x for industrial net debt/EBITDA, which gives us the entrepreneurial freedom to act from a position of strength. Our leadership team remains fully committed to delivering stringent capital allocation and strong shareholder return. As Roland already mentioned, we made good progress with our plan to deconsolidate Siemens Healthineers.

Meanwhile, and as expected, we have now received binding decisions from the tax authorities clarifying the relevant tax topics. As a result, we can proceed with the spin-off of Siemens Healthineers as planned. We confirm the time line for receiving the shareholders' approval at the Annual Shareholders' Meetings of both companies in February 2027. Currently, we are working on contractual details. In connection with our Q4 earnings release, we will update you on the next steps and related decisions.

At the beginning of July, following completion of the previous program, we launched our new share buyback program for up to EUR 6 billion over a period of up to 5 years. Execution started swiftly with a buyback volume of EUR 400 million in the first month. Finally, our group outlook and expectations for our core business at a glance. Following the strong first 9 months, we raised our fiscal 2026 outlook for EPS pre PPA to a range of EUR 11.20 to EUR 11.50, up by EUR 0.45 at the midpoint. We continue to expect to reach the upper half of our group revenue growth guidance of 6% to 8%. In a time of highly volatile geopolitics, we are leveraging market opportunities and are delivering strong earnings performance with healthy growth and excellent free cash flow. With that, I hand it back to Tobias for Q&A.

Thank you, Veronika. We are now ready for Q&A. [Operator Instructions] Operator, please open the Q&A now.

[Operator Instructions] And the first question comes from James Moore from Rothschild & Co Redburn.

I wondered if I could ask about the DI automation orders in China at the 17% growth really in 2 dimensions. I think you mentioned a strong start to the quarter in April and May. So I wonder if that is showing us that June has slowed in speed a little bit. So could you talk a little bit about the momentum in the quarter, the speed into July and what's happening by end market and channel and whether you see any sign of the strong Chinese cycle where you've grown 25%, 30% now for 9 quarters slowing at all?

The second dimension is really on the 17%. It might seem slow to some against some of the locals growing closer to 40%, but you do have a different premium versus value-for-money mix. Would it be possible just to remind us of the share of sales or orders from value for money? And I think you mentioned, Veronika, that the VFM segment grew in the mid-20s in revenue, but could you say what it grew at in terms of speed on orders?

So your observation that there was a little bit of a slowdown in June, it's right. However, in July, we are picking up momentum again. So therefore, it's -- I would say it's all intact. If it comes to China, also the local products and the 40% you're mentioning, this is the value-for-money portfolio. And now let's compare value for money with value for money from our side, our China new products or smart products, as we call them, year-to-date, it's plus 30% from our side. And you compare that April to June, I'm assuming 40% of Inovance. We know that Q1 in Inovance was also not that strong. So I would say we are equally or even a little bit ahead compared to Inovance. If you compare us to international competitors at the same time, I would say, in this segment, we are definitely outperforming.

Last point is we also see a pickup in the demand for the, let's say, the higher-end automation devices, which we like very much because again this is a very strong position of ours, which we're also going to expand. So therefore, from that perspective, I would say we feel quite comfortable the way how we are working in and with our Chinese customers with our products.

Yes. And really from my side, if we look at, again, at the China portfolio, really the orders were up in Q3, up 20% and as well the revenue, the 17% I already mentioned. And if we really look at the development in July for automation, we could see in China, if we look at our dailies really in the lower 20s in order entry, the development. So the FX comparable. So therefore, we are quite confident here for the fourth quarter, even though the entire environment is mixed. So we definitely see at the K-shape development. So we have a strong continued -- we had a strong continuous growth in certain key verticals in Q3 in electronics and the like. And in the -- for the fourth quarter, the outlook is really that the automation orders are expected to be clearly up year-over-year.

The next question comes from Ben Uglow from Oxcap Analytics.

Just getting into the kind of sequential progress and the dynamics on the automation hardware side. Veronika, if we look at the margin, I think it maybe a little bit lighter than some of us expected. And obviously, we're hearing from a number of companies now in the automation world about supply chain constraints, memory shortage, lead times, et cetera. Can you give us your thoughts on if that is going to be a factor in the next couple of quarters?

And I guess a broader question, maybe for Roland is if we look at this up cycle, if we look at the growth and the uptrend that we're seeing across a number of industries, not just electronics or semiconductor, how comparable is this with what we were seeing after COVID in that sort of '21, '22, '23 period? And if we looked at the supply chain situation today, how does it compare with back then?

So I give it a start with regards to the commodity costs, which we are seeing in the DI business, and they are having a drag on DI margins. I think that is something we, in a very diligent way, work with it. And as already mentioned, we are -- we contributed, the DI team contributed with a net positive economic equation in the third quarter. And productivity, we continue to contribute it and was really reinforcing the overall economic equation and was really significantly helping to offset cost pressure as well.

And if we look at the more or less the entire fiscal year and from an overall outlook, we are as well confirming a net positive economic equation as well for the entire fiscal year and are very confident with our productivity measures and with a very continued high focus really to offset inflation and demand-related cost pressures from supply side.

Then the next question comes...

Sorry. Ben, to your question -- to your second part and comparing that with the COVID time, there are 2 dimensions. One is the go-to-market, the stocking on the one side and one on -- the supply chain on the other. Let me start with the supply chain. Since this was -- I mean, the uptick in the demand was so strong that there was really a supply chain shortage, in particular, on international semiconductors, less local Chinese ones, which was raising lead times for supply to, I don't know, 10 weeks, 20 weeks, whatever, so completely off. We don't see that. We are looking at the supply chain.

There are, I mean, certain constraints, but we don't -- there's no alarm at this point in time that we aim it will fall short. Could that be that there's a price increase? Yes, but our economic equation is positive, as I said, and it will stay positive. It even increased a little bit. So therefore, that's good. If it comes to the sell-through and we don't see an increase in stocking. We are watching that closely. So there is no sign that this happens. But we have to stay tuned, and we do that in order to avoid any signals from this perspective.

And the next question comes from Jonathan Mounsey from BNP Paribas.

I'd maybe like to ask one about software strategy, particularly in the context of what's been happening in the first half in terms of investor sentiment around software. So obviously, software revenue looks strong this quarter and SaaS transition is almost complete. But I just want to understand, I think, is the market moving away and towards new ways that you'll have to adapt to? Investors have been worried about the revenue model of PLM competitors in the first half. And I know that's been traditionally linked to the number of seats as kind of a proxy for product usage, at least historically when humans were doing the work.

But going forward, AI may drive down the number of seats. And how are you going to adapt to that future? Are you tokenizing your software? Are you able to charge for actual usage on outcomes? And are you moving your customers towards that? And if so, how are they responding? Are you having those conversations?

So this is quite a bit. Let me start. Yes, we are seeing a strong demand on our software, which underlines that what we are saying that the software which we are selling, it's not a workflow-based, rule-based software. It's physics-based simulation. It's data center with a single source of truth with a very structured way of storing your data with contextualization. So -- and this was true for our PLM as well as EDA software. So therefore, I mean, good things here, firstly.

Secondly, yes, our SaaS transition is -- we are through. We see higher growth rate. We see a very good picking up in the margins as well, which continues also in the next year. So whatever we planned at that point in time when we pull the trigger for the SaaS transformation happens, materializes as planned or even better. On the other point, you know that we are rewriting and charging our software with AI capabilities. So we are taking care that, for example, in the future, simulation was -- or simulation software was used by engineers. In the future, it will be used by engineers and agents.

So the user interface changes. We have embedded functionality in our software, which already creates revenue. And currently, we are looking into -- we are currently not charging tokens. We are running a license model and SaaS model pushing also for SaaS. We have the highest growth for SaaS, which plays out very well. So we are ready from that perspective that we run software out of a SaaS model, out of the cloud. We can update a very short notice, which is super relevant for any kind of AI functionality which rolls in as we go forward. The more we are using AI models and also underlying LLMs, by the way, we use all of them, also open source model, in particular, those because once you have your model trained, you can use cheaper tokens and any kind of model on the edge or in our software.

We are also thinking about how we monetize, would we then go into a token-based, but this is really more the future. We are looking into that. For example, I give you one example, where we did not do that, our Eigen Engineering agent, which is by design, priced as what it is, it's an engineering tool. And in that market, people used to pay license. So we are charging license fees. Customers are ready to pay. We have doubling and tripling over the last weeks of customers. So this is -- I think this is one of the fastest-growing products, which we -- at least as long as I can look back, which we launched in the market.

So it's a very dynamic environment, and we are definitely looking into how we can change our models going forward, pricing models. Of course, we are looking more and more for ARR-like models because they have a lot of advantage, again, in driving innovations faster because you can update. Last point is on this amount of seats going down, yes, but the use -- we believe the usage goes up, which we eventually then charge via a usage of agents and/or engineers because we have now much more powerful tools, which can be used, thanks to AI by many, many more people. We are democratizing our software away from scientists or physicists who are making models.

And to give you one example, when -- currently, when you simulate something, you have to mesh your object. Our software avoids this whole cumbersome mashing exercise, and you can start right away with simulations, check out for our reinvent streaming, and you can see that what we offered there.

The next question comes from Phil Buller from JPMorgan.

Just to clarify, firstly, if I may. Veronika, on your economic equation commentary, did you suggest or say you put through additional pricing actions in the quarter? My question though is on SI margins. 20% is obviously very strong. I appreciate there's some tariff refund in there, but your performance is now at or around the high end of the medium-term guidance. You're booking huge orders. Is there any reason to believe that those orders are margin dilutive by nature because of the data center dynamics? Or should we anticipate further progression in 2027? Or is there a need to step up investments?

So with regards to the economic equation in this quarter, so we could really compensate cost inflation as well with the relevant pricing measures. So therefore, we are here very well underway. And with regards to the tariff refunds, I already mentioned that really net, the impact out of tariff was only kind of 50 basis points. So therefore, the tariff impact was really on a lower level here. And going forward, the teams are extremely committed to level out the relevant price increases and to in a very diligent manner, steer that as well with the relevant kind of pricing of our products. That's the current approach.

And therefore, I confirmed as well that we are committed to a net positive economic equation for the entire fiscal year. And going forward, we will maintain this very ambitious productivity approach going forward within SI.

I guess I was asking as well in terms of the order momentum in SI is huge. Should we assume that there's a lot more investment to come? Or is that potentially higher-margin activity that might be something to consider for 2027?

So in terms of capital allocation, we are, of course, very diligent, and we are adjusting our capacities within the SI, in particular, EA and EP environment as needed and depending as well on the order intake and the relevant growth momentum we are having here. So we are kind of streamlining that in such way that we adjust our capacities accordingly.

And as I already mentioned in another context, we look very much into our global footprint to as well further diversify our manufacturing footprint. So therefore, the focus besides Europe is really on Europe to adjust really step-by-step our manufacturing footprint, but in such a way that it stays very modular in the approach so that we can, in a very fast manner, adjust as well our capacities.

Next question comes from Martin Wilkie from Citi.

I just wanted to come back to the comments you made on profitability in software. You talked about a sharp improvement. I know there's a lot of moving parts, including some lower integration costs. So just to understand that ex that integration costs, what's driving that pickup? It looks like EDA was stronger. So potentially it's mix. But we're also going through probably the final part of the SaaS transition. Has that been the driver? Is it early synergies from the recent deals? Just if you could step through what's driven that pickup in software profitability.

So I go first. And so with regards to Altair and Dotmatics, we are very happy with the integration performance. So if you look really at our synergies from a cost perspective, but we see as well the first indicators as well of revenue synergies, so we are very confident that we can execute as planned and maybe even in certain areas faster than originally planned. So therefore, that is, of course, something which is translating into our activities.

And then if we look at our SaaS transition, so we are at the end of the belly of the fish. So here as well, the performance and the conversion is increasing step by step. That is as well something which makes us very confident. And if you look -- so I already mentioned for Q3, the integration costs are 70 basis points. But since we are accelerating to our overall plan, so we are very confident going forward that we will execute as expected.

On a general note regarding the SaaS above and beyond our integration, again with Altair and Dotmatics, which we are really happy about. It runs as planned and better. There's a couple of elements in there. Number one is, if you want to cloudify your software, you have to rewrite some code, you have to bring it on the cloud, which has benefits as well because you can release figures -- features faster, which is obviously driving the usage. So therefore -- and this has to be -- this is an investment in our software. Just to get it right, we do not write all the 100% of our code. It's only pieces of that, what we are rewriting. This investment we took in the beginning of our SaaS transition.

We still continue to rewrite software code, obviously, again, now supported with AI technology. So therefore, this major investment is behind us. Again, still some forward investment, but this is the going concern as you -- once you have the SaaS transition. Then you have offerings, which we have SaaS offerings where we run the infrastructure. This comes with a higher margin, some hybrid as well. And then you have the business mix. We have customers, new customers, small and medium-sized customers and higher growth, of course, and growth drives also profitability. Remember, we have tens of thousands of small and medium-sized customers, which we didn't see before. So therefore, this is the package, and it really plays out as planned.

And is the SaaS transition now done? I mean should we assume that the drag from that will not repeat next year?

You know the saying, software is never ready. So it's done as much as software is never ready.

The next question comes from Max Yates from Morgan Stanley.

I just wanted to ask about the SI division and a little bit around the revenue conversion as we go into 2027. So there's maybe kind of 2 ways to look at this. Your SI orders will be something around EUR 30 billion this year, your revenue is around EUR 25 billion or maybe kind of zooming into your data center business where your orders may be kind of EUR 3 billion or EUR 4 billion higher than your revenues. So I guess what I'm just trying to understand within the kind of capacity constraints that you have, the duration of the backlog, how much of that additional data center orders, that EUR 3 billion or EUR 4 billion do you think gets delivered in 2027?

I guess what I'm really asking, it looks like based on your backlog, you should see quite a healthy acceleration in revenue growth next year. Is there anything we should consider in terms of timing of backlog constraints around capacity that wouldn't allow that to be possible?

Thanks for the question. So with regards to capacity constraints, of course, with such a steep order intake, the translation into revenue and the respective execution is -- for the teams is always a challenge. However, the teams are very well prepared and the respective ramp-up of capacity where needed is well underway. So therefore, we don't see as of now, any implications that we could not execute as planned in terms of revenue.

Yes and maybe just to give you another indicator in terms of execution. We reported that we have a record quarter. And if you look at SI and the last 6 quarters, the increase in revenue is really on a top level for this quarter. So it shows that the teams are very capable to execute on the respective order backlog. So you have -- you see it in the annex. Here, we have the backlog for SI. So this is the EUR 23.7 billion. And for next year, it is really close up to EUR 12 billion, which we intend to execute as of now.

Maybe a short comment. Look in our book-to-bill, if you look at that, our order intake last year, revenue, order intake projection in this year, you will see that this is -- obviously, it's building up, and we convert that as we speak. And we take care that we are fulfilling the demand of our customers in capacity expansions, driving productivity at the same time in our plants so that we are sure that we can take this momentum.

The next question comes from Alex Virgo from Evercore ISI.

I wondered if you could just help me a little bit with the margins in Q4 in DI. Given the guidance on the top line in terms of software and automation mix, I would have expected a more positive mix benefit from that software strength. So if you could just give us a sense of why the margins are flat Q-on-Q? And then if I could just follow up on SI margins. Are there any -- is there any tariff impact or tariff refund impact implicit in the guidance for SI margins?

So first, to SI with regards to our guidance for the entire fiscal year. Here, what we have reflected is really the kind of net benefit of 50 basis points in the third quarter. In the fourth quarter, it is just in kind of the regular refunds we have from a kind of daily operation, but there are no major implications baked into our outlook. So that's with regards to SI. So it's really coming from the operational execution within SI. So as of now, there are no special effects baked in out of tariffs.

And for DI, it's there as well in terms of profitability, we always need to look at the mix between automation and software. So therefore, that really plays as well a role and in particular, in the discrete industry. So that is something we take into consideration and as well in certain markets. If you further even drill down, so what is within the discrete industry, what is more tied to the machinery. So Roland and myself, we reported that we have a strong growth in the machinery environment. So therefore, that is as well reflected in the overall mix.

Today's last question comes from Daniela Costa from Goldman Sachs.

I'll try to be quick. We have seen several of your peers embarking in larger M&A in the last couple of weeks. Just wondering if you could give us an update in terms of digital versus product and sort of what are the areas where you think it might be interesting to strengthen your portfolio?

Yes, we are watching these acquisitions also with interest. So we are looking definitely in the software space, but not only in the core software pieces in our PLM, EDA, we have some bolt-on EDA acquisitions, which we talked about recently, which are super interesting. Small though, but very interesting and complement our portfolio. We are looking into also the infrastructure space if there's our grid control, grid automation infrastructure. And software is still in our focus.

We are expanding our focus, as I said in the last call also in operation software. So software coming from design space now into the operations space on the ground, but also in the maintenance space. Another dimension is the -- the whole data layer environment. This goes a little bit also with our organic development, looking into our Intelligence Center X portfolio, where we -- with the products which we have also via Altair with RapidMiner, but also Graph Studio, we're looking into ontologies and databases, which is a little bit kind of a cross-reading to Cognite, but Cognite is very focused on upstream business. We are looking into that space, too.

But we are also having a view on since you maybe refer also to the acquisition, which is done by ABB on just solid instruments with -- I think they come with good margins. If we find assets where we have data creating assets, which are connected, which is supporting our strategy or again, supporting our strong EA or EP portfolio, we would definitely look into this space, too.

Thanks a lot to everyone for participating today. As always, the team and I will be available for further questions. We wish you a relaxing summer break and look forward to meeting many of you in September on various occasions. Have a nice day, and goodbye.

Ladies and gentlemen, that will conclude today's conference call, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

[Interpreted] Good morning, ladies and gentlemen, and welcome to today's press call at Siemens AG. To begin, we would like to inform you that this call is being recorded and webcast. [Operator Instructions]

And with that, I turn the floor over to today's host, Simon Krause, Head of Media Relations and Executive Communications. Please, Mr. Krause.

[Interpreted] Good morning, and welcome to today's press call for the third quarter of our fiscal year. Today, I'm pleased to welcome our CEO, Roland Busch; and our CFO, Veronika Bienert. Welcome.

Before we begin, a few notes. As always, this morning, we released our third quarter results. The presentation, the speeches of our Managing Board members, and all other materials are available on our website at siemens.com/press. You'll also find a recording of this press call there.

Just a brief overview of the press call agenda. Following the speeches, as I said before, Roland Busch and Veronika Bienert will be available to answer your questions. Our press call will end no later than 9:00 a.m. And as always, I'd like to briefly draw your attention to the safe harbor statement, which you'll find at the beginning of our presentation.

And with that, I turn the floor over to Roland Busch.

[Interpreted] Thank you, Simon, and good morning. Thank you for joining us today to discuss our Q3 results. Siemens delivered another record third quarter, performing strongly across all metrics despite the persistently volatile geopolitical environment. We are making good progress with our ONE Tech Company program. That means above all, we are accelerating innovation and increasing customer value. Our technological leadership across all our businesses, our sharp focus on driving industrial AI, and our strong positioning in attractive markets gives us a solid foundation for our success and thus for sustained value creation.

Now let us take a look at the highlights of Q3. Our book-to-bill ratio reached an outstanding 1.34, lifting our order backlog to a record EUR 132 billion. Orders increased 14% compared to Q3 2025, surging to an all-time high of EUR 27.9 billion. Smart Infrastructure, or SI for short, topped the EUR 8 billion order mark for the first time. SI's data center vertical, in particular, showed exceptional momentum, again, delivering triple-digit order growth year-over-year and thus even exceeding yet again our already excellent Q2.

Demand remains strong, driven by the rapid build-out of cloud and AI infrastructure. Up 9%, Digital Industries, or DI, remained on a healthy growth trajectory with very strong support from the market environment in sectors such as electronics, semiconductors, aerospace and defense. DI benefited also from the expansion of AI infrastructure, but we are seeing improvements in the manufacturing sector as well. Mobility, or SMO, delivered one of its highest quarterly order volumes ever, close to the exceptional level of Q3 2025.

Now this is how it continues. Looking ahead, several high-profile contracts are already on the books for Q4 in Germany, for example. Overall, revenue grew 8%, fueled by DI and SI. All regions contributed to this growth. The Americas led the way with an 11% increase, driven primarily by momentum in the U.S., Europe, the Middle East, and Africa, and EMEA grew 6%. Asia, Australia was up 10%, led by India, where growth was a strong 13%.

Profit Industrial Business reached a record high of EUR 3.5 billion, resulting in a profit margin of 17.3% on exceptional strength at DI and SI. Profitability was also supported by tariff refunds in the U.S., particularly at Siemens Healthineers, or SHS. Margin expansion translated into higher earnings per share before purchase price allocation accounting, or EPS pre-PPA, of EUR 3.14. Free cash flow was a standout achievement, reaching EUR 4.1 billion. Due to this strong performance, we are raising our outlook for fiscal 2026 at group level. Veronika will provide you with more details in a moment.

To drive our future success, we are continuing to invest. We're expanding our switchgear capacity in Frankfurt, Germany. We're also focusing on bolt-on acquisitions to strengthen our portfolio in both the real and the digital worlds.

And now a few words about Siemens Healthineers. We've made progress with our deconsolidation plan. Veronika will give you an update on the German tax authorities' related decision and the further timeline in a moment. In addition to all the contractual issues that we are currently discussing in a constructive dialogue with SHS, we've made a decision to reduce from 3 to 1 the number of positions held by Siemens Managing Board members on SHS' Supervisory Board. This change will take effect as of SHS' next Annual Shareholder Meeting. In February 2027, Veronika and I will resign from our current positions on the SHS Supervisory Board.

And another point, 3 companies have grown from Siemens roots in recent years. All 3 are now market and technology leaders in their respective areas. For this reason, we understand Siemens Healthineers and Siemens Energy's considerations regarding their more independent positioning in the future. We now are pursuing a clear strategy in this regard to ensure an orderly process with both companies, in line with existing agreements and for the benefit of all stakeholders. Siemens will further sharpen its profile as the trusted technology partner for the AI age, because we have the unique ability to combine the real and the digital worlds, and that's how we'll grow as ONE Tech Company.

Now let us take a look at our 4 growth levers. First, Grow Digital. During the first 9 months of fiscal 2026, we grew the revenue from our digital business 18% on a nominal basis, well above the ambition level of 15% that we set last November. With Vectron X, we've added a new member to Siemens Xcelerator, our open digital business platform. Vectron X is a new highly digitalized locomotive that builds on our best-selling Vectron platform. The locomotive features a smart driver's cab, app functionalities with standardized interfaces, and near real-time connectivity. The result: enhanced driver experience, higher operational efficiency, and optimized data-driven maintenance.

Second, Grow Regions. We've deepened our collaboration with HD Hyundai in South Korea. Together, we are creating a blueprint for digital shipyards. The agreement with Hyundai has a volume in the low triple-digit million range and covers a broad array of industrial software and automation. By connecting data, software, and automation technologies across an entire shipyard, we are building the AI-driven operating system for the industry. This system will help shipbuilders accelerate production, improve quality, and reduce rework. We are also supporting the development of a technology center in Washington, D.C., which will foster collaboration between the government, industry, and technology leaders to secure shipbuilding's digital future while strengthening maritime competitiveness in the U.S. and allied markets.

Third, Grow Verticals. The semiconductor industry is also booming, thanks to AI. This increased demand has generated attractive orders across our entire portfolio. At the COMPUTEX Trade Fair, we expanded our partnership with Intel along the entire value chain, encompassing everything from chip design to manufacturing. And finally, our fourth growth lever, Grow AI. Our Eigen Engineering Agent is an excellent example of our ability to rapidly scale AI. As you'll recall, up to 50% greater efficiency and up to 80% higher quality in the production of industrial software. Our agent doesn't just make proposals. It supports engineers from start to finish with engineering in the Totally Integrated Automation Portal, our leading platform for complex automation projects.

We've now expanded the product globally and introduced 2 new capabilities. The Eigen Engineering Agent can now understand the system's electronic setup in a matter of minutes. Engineers previously needed days to enter this data manually. The agent also masters our customers' regulatory systems. It structures a project's software within a few minutes, so that it precisely fulfills thousands of individual tasks. Hundreds of customers in more than 30 countries and ranging from small systems integrators to large original equipment manufacturers, or OEMs, have signed on.

At the World Artificial Intelligence Conference in Shanghai, we launched the agent on the Chinese market as well. For this step, we received the prestigious SAIL Star award, the only global company to be so honored. The PAC INNOVATION RADAR has just named the Eigen Engineering Agent best-in-class for advanced industrial engineering in Europe for 2026. And another example, at our Realize LIVE Global Customer Conference, we recently launched Intelligence Center X, a powerful new offering available as part of Siemens Xcelerator to orchestrate industrial AI.

Our customers run plenty of AI pilots, but they usually get stuck in the testing phase. Intelligence Center X breaks this pattern by enabling experts to orchestrate AI agents and bring industrial AI into live operations and at scale. The system features 4 core capabilities that work together seamlessly. First, it puts together customer data from across the entire life cycle in a knowledge graph. Graph Studio puts individual data, data from design to engineering, manufacturing and maintenance, but also from supply chains and customers, for example, into their overall context live and in real time.

Second, and this is crucial, Intelligence Center X comes with prebuilt industrial ontologies right out of the box. They map how assets, products and processes in industrial engineering and manufacturing relate to each other. The result is codified industry-specific knowledge, ready to use. And the ontologies are linked to our Siemens Xcelerator portfolio, for example, to Teamcenter, our market-leading most secure Product Lifecycle Management software.

Third, AI comes into play. AI studio delivers machine learning and AI models trained on real operational data. It continuously monitors model quality and establishes rules, giving AI agents and large language models access to advanced machine learning and data science to make more reliable predictions and decisions. This approach makes AI explainable, predictable, and that's ready to move into production at industrial scale.

Fourth and finally, Mendix. Customers use this AI augmented low-code platform to develop their own AI agents and then connect them to existing systems and external agents. They then govern their workflows based on clear rules where humans continue to have oversight to make critical decisions. As a result, the power of automated AI delivers measurable outcomes in business processes. In short, intelligence seems to make AI scalable for industry and early customers are already seeing real successes, yet further proof that Siemens is using AI to deliver unique value to customers.

All these applications demonstrate that industrial AI is becoming a reality and further driving growth in data center infrastructure and computing power. The fundamental data for this market remains strong, and we are trusted partner across the entire spectrum from hyperscalers and co-location suppliers to enterprise customers. Nine of the top 10 global data center providers rely on Siemens. In the first 9 months of fiscal 2026, our order volume reached nearly EUR 6 billion, a triple-digit percentage increase over the prior year. Revenues soared from (sic) [ by ] more than 50% to an impressive EUR 3.1 billion. Our order backlog and existing agreements provide visibility well into 2027 and even beyond, and the pipeline looks healthy.

There could be some volatility in order intake because several orders are very large. Our strong position is based on a number of long-term success factors. We have a comprehensive portfolio with modular solutions. We execute reliably globally and with a stable supply chain. We offer global expertise in several regional hubs, and we have a strong partner ecosystem. And yet another key point, we are shaping the road map towards an 800-volt direct current, or DC, architecture for the data centers of the future, which will be required to deal effectively and reliably with high rack densities in AI factories. There won't be an abrupt or wholesale shift. The adoption of 800-volt DC is likely to progress in stages over the next 4 to 5 years with hybrid architectures dominating the early phases.

As technologies mature and requirements and standards evolve, a centralized DC distribution architecture will become economically viable. But we expect that alternating current, or AC, and DC will also coexist in brownfield retrofits and greenfield installations. We're already helping major data center providers design, test and deploy safe and reliable DC power distribution to tackle the high-density challenge they are facing. We expect the first pilot in 2027. At Siemens, we know how to handle DC environments based on our extensive experience in other areas such as marine applications, battery storage and industrial campuses. And we have a comprehensive offering with our proven capabilities in digital twins, automation and electrification. We can design and simulate entire systems or improve individual components.

Let me highlight some recent innovations that illustrate our progress. Together with NVIDIA, nVent, and Fluence, we've developed a reference architecture across computing, cooling power and control systems for NVIDIA's latest DSX Vera Rubin platform, the goal to maximize tokens per watt and ensure predictable, scalable operations. For this architecture, we've developed a modular and scalable automation framework with ready-to-use SIMATIC libraries. Our controllers are already automating the critical operational infrastructure in several megawatt scale data centers.

In the electrification area, we are continuously optimizing our preassembled and tested systems and are working on new DC products. One excellent example is our collaboration with Infineon, in which we are integrating the company's silicon carbide power modules into our latest circuit breakers, a critical enabler for the safe and reliable distribution of DC power. All in all, we are excellently positioned to succeed in the area of traditional and hybrid data center architectures, and we have 800-volt DC for the future.

I'm very pleased with the momentum and performance at DI's software business. At 11% above Q3 2025, organic annual recurring revenue, or ARR, growth remained at a very healthy level. The integration of our Altair and Dotmatics acquisitions is progressing very well. We are bringing our simulation products together and launching new products on the market.

Early revenue synergies are materializing as well. We are complementing our industrial AI offerings with strategic partnerships such as those with IFS and Xometry, an online marketplace for relaying production orders. Together with IFS, a global leader in industrial AI and enterprise software, we are offering, for example, a digital twin that connects design, production and system performance in order to increase manufacturers' productivity and adaptability. The software business is moving fast strategically and at the operational level.

And with that, I'll hand over to you, Veronika.

[Interpreted] Thank you, Roland. Ladies and gentlemen, good morning, everyone. Good morning, and welcome to our press call today. Allow me to jump right into the details of our record quarter and our expectations for the rest of fiscal 2026. We will begin with Digital Industries. Orders for Digital Industries at EUR 4.9 billion were 9% above the prior year quarter. The book-to-bill ratio was 0.98. DI's automation business increased orders 11%, and it achieved a book-to-bill ratio of 1.01. In particular, short-cycle business drove this growth.

As Roland mentioned, overall market dynamics have been increasingly improving. I'm also glad to say that DI saw an upswing in its core vertical of machinery due mainly to China, yet we also observed improvements in other regions as well. Despite this positive development, capacity utilization in some of our key industrial markets, particularly in Europe, is still at a relatively low level.

Digital Industries' software business delivered 5% growth over the prior year quarter with orders close to EUR 1.7 billion. A key driver for this growth was DI's Product Lifecycle Management or PLM, business, including a major order with a large original equipment manufacturer from the automotive industry. This customer is modernizing its entire system landscape. As expected, the Electronic Design Automation or EDA business was softer. Our order backlog at Digital Industries was stable at around EUR 11 billion.

Let's now turn to revenue for Digital Industries, which increased 10%. Now revenue for DI's software business was up a strong 15%. The EDA business, which grew more than 30%, was the main driver. Revenue in DI's automation business rose based on broad-based growth in Discrete Automation and Process Automation; it rose 7% to EUR 3.1 billion. With a strong contribution from its software business, Digital Industries' profit margin improved sharply to 18.7%, so a significant improvement. DI's profit margin benefited from a high share of accretive EDA revenue, and it also benefited from the successful integration of Altair and Dotmatics.

In the automation business, economies of scale and a clearly net positive economic equation supported margin improvement. This economic equation benefited from sustainable productivity gains that more than compensated for cost inflation and for increasing pressure from rising prices for selected electronic components. Integration-related costs for Altair and Dotmatics reduced the DI profit margin in the third quarter by 70 basis points, in line with expectations. I'm very pleased with Digital Industries' extraordinary free cash flow of almost EUR 1.5 billion, and that's an all-time quarterly high. Digital Industries' cash conversion rate was excellent in both the software and the automation business.

Now looking at the geographical or regional top line perspective, Digital Industries' automation business saw strong growth in most regions. China showed positive momentum. Orders rose 17%. Revenue grew on healthy sequential revenue dynamics, they grew 9%, and this was mainly fueled by the Motion Control business. Our local portfolio of products in China was accretive to revenue growth, up by a rate in the mid-20s. The picture in Europe remains somewhat mixed. Order recovery is on the way with a book-to-bill ratio above 1 and with healthy growth.

Revenue in Germany was still muted due to discrete automation, while the latter drove clear growth elsewhere in Europe. U.S. continued its growth path. There, positive effects from the AI-driven investment boom trickled down into the core areas of manufacturing and benefited our discrete automation businesses. Based on delivering a strong performance after 9 months of this fiscal year, we confirm our Digital Industries' guidance for fiscal '26 in all aspects for all metrics. On a comparable basis, we expect revenue growth in the range of 7% to 10%. In addition, we continue to expect Digital Industries' profit margin to reach 17% to 19% as a target range.

For the fourth quarter, we expect Digital Industries' orders to come in at around the same level or the level of the very strong prior year quarter, which had an exceptionally high volume of bookings in the EDA business. Here, we expect that DI's automation business will see a clear increase, while its software business will be below the prior year's record level. Nevertheless, our sales funnel for DI's software business is promising. We anticipate that Digital Industries' revenue growth will be in the range of 5% to 7%, supported by growth in its automation and software businesses. In addition, we expect DI's profit margin for the fourth quarter to remain at the level of the third quarter because of the business mix.

So now let's turn to Smart Infrastructure. With an outstanding performance across all businesses and key metrics, the SI team stayed on its successful path again in the third quarter. Overall, SI's orders were up 42%, reaching a new record level of EUR 8 billion. This increase was driven in particular by very strong growth of 58% in SI's Electrical Products business and 55% in its electrification business. Both businesses benefited again from a high volume of large order wins from data center customers in the U.S., and it also included wins in Europe, where we won, for example, a large project in the Nordics.

Even without considering the data center-related business, order growth was strong and reached the high teens. SI's book-to-bill ratio came in at an outstanding level of 1.25. Smart Infrastructure's record order backlog of EUR 23.7 billion gives us really a lot of confidence with regard to fiscal '27. SI's revenue growth was broad-based and reached 13%. The largest contributions to this growth again came from its electrification business, up 20%, and its electrical products business, up 18%.

Consistent backlog conversion led to further expansion of the operational profit margin. SI's profit margin was up 120 basis points year-over-year to 20%. An impairment related to the e-mobility business partly offset positive effects from tariff refunds. The net effect amounted to 50 basis points, implying an operational margin of 19.5%. Structurally, Smart Infrastructure's business continued to benefit from economies of scale due to high revenue combined with improved capacity utilization and from sustained productivity improvements.

In Smart Infrastructure's product business, pricing measures compensated increasingly, but not yet fully for higher commodity costs. Smart Infrastructure's free cash flow was consistent at a cash conversion rate of 0.94. There was a seasonal increase in operating working capital, but the rise was below the top line growth trajectory. From a regional perspective, Smart Infrastructure saw double-digit growth in orders across the board. Stringent backlog execution drove revenue in all geographies in all regions.

U.S. again showed exceptional growth momentum in orders, up 81%, led in particular by demand for data centers and from customers in the semiconductor industry. The Buildings business saw growth in the low double-digit percentage range. Germany recorded substantial order growth in SI's Buildings business in SI's electrification and electrical products business as orders grew around 10% each. Europe, together with the Middle East, also benefited from large data center orders in Finland and Spain. SI's business in China -- SI's orders and revenue in China recovered further. The very strong order growth in SI's Buildings business was caused by orders placed before anticipated price increases. The increase in revenue, on the other hand, was driven by the Electrical Products business. Smart Infrastructure's service business delivered 7% revenue growth, clearly up in Asia and Europe.

Our SI team continues to expect very healthy end market demand with data centers and power utilities as key engines for growth. After delivering 11% revenue growth in the first 9 months of this fiscal year, '26, and given high visibility from the order backlog, we are raising Smart Infrastructure's revenue guidance for full fiscal 2026. For revenue growth on a comparable basis, we now expect a range of 10% to 11%. Building on a very consistent margin expansion trajectory, we are lifting Smart Infrastructure's profit margin outlook by 50 basis points to a target range of 18.5% to 19.5%. For the fourth quarter, we anticipate that Smart Infrastructure's revenue growth will approach the lower end of the full year range, and we also anticipate that the profit margin will be in line with our expectations for the full fiscal year.

Mobility recorded a solid set of results in the third quarter. Orders included a high share of attractive service contracts and topped our expectations at EUR 7.6 billion. The book-to-bill ratio reached an excellent level of 2.35. Mobility's order backlog increased to EUR 58 billion with an attractive gross margin profile. As Roland already noted, we see a very promising sales pipeline for the fourth quarter of fiscal '26. So it looks very promising, including the booking of the majority of the EUR 3 billion contract with Italo Holding. This contract includes rolling stock as well as a 30-year service agreement for the German market.

Mobility's revenue in Q3 was up 6% over the prior year, fueled by low double-digit growth in the rail infrastructure business. Mobility achieved a solid profit margin of 8.6%. Well, a somewhat less favorable project mix as well as slightly higher severance costs compared to the previous year weighed on the margin. As indicated, Mobility's free cash flow picked up materially and its cash conversion rate improved, due in particular to large payments from customers. Looking at project payment profiles and the timing of order awards, we continue to expect further substantial catch-up in the fourth quarter.

After a consistent Q3 performance, we confirm Mobility's full year outlook for revenue growth in the range of 5% to 7% for fiscal '26. We continue to anticipate that Mobility's full year profit margin will come in within the target range of 8% to 10% with the expected outcome to be toward the lower end. For the fourth quarter, we expect Mobility's revenue growth to accelerate on strong backlog execution and achieve a level between 9% and 11% on a comparable basis. We also expect Mobility's profit margin to be within its full year guidance.

The results of our activities outside our industrial businesses are shown on Page 17 in the appendix. These results included a strong contribution from Siemens Financial Services, which was fueled by a gain of EUR 156 million from the sale of a stake in an equity investment in the U.K. Ladies and gentlemen, free cash flow in the third quarter came in at more than EUR 4.1 billion and was thus up more than 40% over the prior year. This increase was driven by all our industrial businesses. Free cash flow return on revenue after 9 months of the fiscal year '26 stood at 11%. For full fiscal '26, we are firmly on track to achieve a double-digit free cash flow return. We further leveraged our capital structure metric to 0.6x for industrial net debt/EBITDA, which gives us the freedom to continue to act from a position of financial strength.

Our leadership team also remains fully committed to delivering stringent capital allocation and strong shareholder return. As Roland already mentioned, we've made good progress with our plan to deconsolidate Siemens Healthineers. Meanwhile, and as expected, we have now received binding decisions from the tax authorities, clarifying the relevant tax topics. As a result, we can now proceed with the spin-off of Siemens Healthineers as planned. We confirm the time line for receiving the shareholders' approval at the Annual Shareholders' Meetings of both companies in February of 2027.

Currently, we are working on the contractual details in connection with our earnings release for the fourth quarter of fiscal '26. We'll update you in November on the next steps and the related decisions. At the beginning of July, following completion of the previous program, we launched our new share buyback program for up to EUR 6 billion over a period of up to 5 years. Execution started swiftly. In the first month already, the share buyback volume was EUR 400 million.

Ladies and gentlemen, finally, I would like to come to our outlook and expectations for the Siemens Group at a glance. Following the strong first 9 months of the current fiscal year, we raised our fiscal '26 outlook for basic earnings per share before purchase price allocation, accounting pre-PPA to a range of EUR 11.20 to EUR 11.50. This change corresponds to an increase of EUR 0.45 at the midpoint of the range. We continue to expect to reach the upper half of our full year guidance range of 6% to 8% for comparable revenue growth for the Siemens Group. In a time of highly volatile geopolitics, we are leveraging market opportunities and delivering strong earnings performance with healthy growth and excellent free cash flow.

Thank you for your attention. We are now looking forward to your questions. And with this, I'd like to hand back to Simon Krause.

[Interpreted] Well, thank you, Roland and Veronika. Now we have time until 9:00 a.m. for any questions you would like to submit. And as always, for technical reasons, it's not possible to mix the German and English-speaking questions. And we are going to start with the questions in German. If you dialed into the English speaking conference call, please submit your questions in English and they will be answered in English. And with this, I'll hand back to the operator.

[Interpreted] [Operator Instructions] The first question comes from Axel Höpner from Handelsblatt.

[Interpreted] I have 2 questions on your business performance. Can you already see whether the momentum is going to continue in the next fiscal year in terms of order backlog and orders? It looks quite good. Second question, now the data center and Siemens boom, is it a special Siemens boom? Or do you see more optimism among your industrial customers and more readiness to make investments?

[Interpreted] Good morning, Mr. Höpner. As far as momentum for the new fiscal year is concerned, of course, we don't have a plan for '27 yet. The plan is yet to be developed or established, but we have a record order backlog of EUR 132 billion. And that, of course, gives us really confidence for our starting to the new business year of new fiscal year. So maybe my answer is more indirect. I'm going to take a look at the market. What we do see, for instance, when we look at China, is an upswing in machinery. And this is, of course, an upstream delivery chain for other areas. There's still a certain excess capacity, but we expect further positive development.

So also, we do not expect a quick change. As far as data centers are concerned, I'll come back to that second part of your question. Obviously, the momentum seems to continue definitely in the year '27 and also beyond. And what we also see is a certain momentum in terms of investments or CapEx and benefit from this in the U.S. as well. Industrialization in the U.S. is going on and there are other areas, aerospace and defense and semiconductors where massive investments are made. So in terms of the markets and what we see in the markets, we are really very confident.

Data centers. Now first of all, I have to say one thing. And I think in the presentation, it was really made clear that we only do a certain share of our SI revenue with data centers. And data centers, of course, also result in investments to be made in utilities. Those 2 belong together. We see that too. But in fact, this is on a broader basis. Our customers in the data center industry play an important role. But in addition, we also see other verticals, if that was the background to your question. And by the way, data centers, this is not just hyperscalers, but also colos, smaller ones. Focus at the moment on the United States. This is where most of this trend is emerging, but a lot is going to happen in China as well. And we do hope that Europe is going to catch up as well.

[Interpreted] And now the next question, Alexander Huebner from Reuters.

[Interpreted] I've got 3 questions actually. One can be answered relatively quickly, I think. You talked about tariff refunds, which you didn't see only at Healthineers. We know the figures there, but also with Smart Infrastructure. Now could you tell us how much it was, whether you can expect more, or whether that was it, so to speak?

And the second question, you mentioned the forecast for SI, you raised the outlook. Now you left it for the group. So you might assume or conclude that this is in a different area, in a different domain, meaning that things are not so good in other domains or maybe I'm just thinking in the wrong direction.

And the third question is, you talked about the spin-off of Healthineers. Now did you -- or were you forced to adjust your original plans in order to satisfy the tax authorities? Or are things running as you've shown us? Well, yes, what are the decisions still to be taken, which are still on the horizon, so to speak? So thank you. That was it for the moment.

[Interpreted] Well, thank you very much for your question. I'm going to start with the last question. This is the one around Siemens Healthineers. So looking at the time line, I can say, and this also applies to our expectations, I can say that the tax authorities have given us the confirmations. And this means that like we expected, we can handle the situation as is planned, and this refers to the Annual Shareholders' Meetings of Healthineers and Siemens AG. We can continue in our activities. We stay on course. And this is also the further approach. So there are no corrections, but these are the things that have been mentioned before.

Now then the next question about the tariffs. Here, I must say that the situation looks like this. In total, I can say that the tariff, say, influences, that is the tariffs paid and those refunded, meaning those referring to Siemens Healthineers, have had a positive influence of about EUR 200 million. And this, of course, also influenced the tariff refunds in Q3. Now looking at the Siemens core business, I can say that mainly Smart Infrastructure was affected by it, mainly, like I explained before. So we had a net effect of about 50 basis points. But in principle, I can say that the influence, the impact is limited when talking about the other Siemens businesses.

[Interpreted] All right. For the forecast, I can talk about it. As you will remember, in the last quarter, we had an outlook or a forecast for AI. And this means that we are going to fulfill the expectations which we mentioned in our outlook. So no further adjustments are necessary. SI. Here, I can say that we didn't adjust the things and therefore, because of the very good business performance, we readjusted these figures.

Now tariffs and the tariff effects, this is certainly also a deliberation on your part that something can be expected in the third quarter. But again, we can say that this mainly refers to the respective area.

[Interpreted] All right. And then the next question, Marilen Martin, please.

[Interpreted] I hope you can hear me. I would like to ask you about the outlook for the industrial business in Germany and Europe. Could you elaborate on this, what the outlook is and what things will improve?

[Interpreted] All right, I'd like to answer this question. Here, we see a mixed picture. You can imagine that automotive is a real growth driver. And in global terms, things go down. We also see some restrictions in China as well. This refers to capital expenditure, and this also applies to the supplier industries. We do not see quick recoveries here. Now Europe, Germany, here, I can say that aerospace and defense sectors are the ones where we see investments also related to semiconductors.

Pharmaceuticals, that's moderate chemicals or chemistries, less so. But we hope -- now looking at Germany, we hope that faster decisions are taken because there's a reform package being worked out, so that we can take decisions faster when it comes to infrastructure projects and that the respective structural fund will come alive, so to speak. And we see it in the infrastructure areas. There are certain areas which have fared very well. And in addition, this also depends on to what extent we can generate profits and can take decisions faster. I believe that's a very important point.

Another example, and we've got a data center, if you want to build one of those and you have to wait 2 to 3 years until you get a permit for location and site, then of course, it will be built in another area. And the last point is, and this refers to 2 levels referring to Europe. It also depends on regulations, how decisions are taken. This refers to Data Act. And in its current form, it is not industry-friendly because it does not distinguish between personal data and machine data. And this, of course, is a decelerator, you might say. Regulating is important, but you want to do it with a perspective and not forget that you have to distinguish.

So that's one aspect. And the other aspect is reform package. And I hope that the reform package, which was announced, will be, say, allowed. And then, of course, there's some other homework we have to do in industrial area. Mrs. Reichl this morning said that this will go up in a few years' time. But nevertheless, the outlook is something that this is helpful because here, we are talking about investment, which will cover several years. You need some kind of security and reliability, and we hope that these topics will be covered appropriately.

[Interpreted] Then the next question, Marcus Schuler from FAZ.

I hope you can hear me. I have a question about your net income after 9 months, which declined 18%. I think this includes proceeds from sales in the previous year. Ms. Bienert, maybe you can update me here. What was the reason? Without special items, what would be your net income, excluding special items? And Mr. Koerte is now in charge of Smart Infrastructure. In addition, he was in charge of Technology and Strategy, Mr. Koerte. Now do you think -- in the Managing Board, do you think about a reallocation of responsibilities? And last but not least, now the ONE Tech Company, why is it not a secret restructuring program?

[Interpreted] Okay. I'm going to start with the 2 questions before I hand over to my colleague, to Veronika. Now today, this was published. And yesterday, we discussed it on the Supervisory Board. We decided upon a reallocation of responsibilities within the Managing Board. And as far as Peter Koerte is concerned, he's going to remain in charge of Strategy and SI. Now Technology will be reallocated to Cedrik Neike, while Peter is still in charge of Data and AI, our AI activities. That's his responsibility. And we also have a certain realignment of responsibilities in terms of the regions, who is in charge of which regions. So altogether, this is a very balanced portfolio of responsibilities now, but also balanced workload shared among members of the Managing Board. So, so much on this allocation of responsibilities.

And then maybe just one other item. You mentioned the ONE Tech Company. Now there is a new department, in fact, which reports directly to the Managing Board, we call it Foundational Sales. And this is not about operational sales or sales operations, but it's about processes, the processes and tools we use in sales, and also what we want to roll out across the entire company. Cedrik Neike will be in charge of this, and it is one possibility to allow us that what we've done for automation, the improvements and changes to our sales organization automation, that this can be rolled out to the entire company, which will make us more productive.

ONE Tech Company. Now it's clear. It's a growth program. And when you look at our figures, you can see it's reflected there. We are accelerating our growth. We're accelerating momentum, and it's a program with a target for higher profitable growth by offering better customer benefit, customer centricity, faster innovation. Now in my report, in my speech, I gave you a couple of examples showing you what we already do there. And as a matter of fact, naturally, as part of the ONE Tech Company program, there will also be changes to the functions.

Now global responsibility, this is what we have for our functions. We want to make our services more professional, those services who then give those functions to our businesses. We want to roll out our tools globally to make ourselves more productive. Naturally, that's also part of the game. It always means we have to be stringent on costs, growth, customer orientation or centricity on the one hand, but also cutting costs, being cost efficient, so that we have the necessary headroom or room for maneuver to make incremental investments.

And yes, AI is going to change jobs. So some jobs will change. Some jobs will no longer be needed, but new jobs will be created. It's not a restructuring program. It's a growth program. But again and again, we'll have to take a look at the cost and make adjustments to our costs, and that's part of normal business.

[Interpreted] So about our net income. To make it clear, let me just check back, or maybe you can be more specific. What exactly you mean when you ask this question about net income? I don't really understand what you mean here.

[Interpreted] After 9 months in your key data, in your key figures, it's EUR 7.04 billion net income. That's 18% less than in the same period in the previous year. But I also see that for discontinued activities in the previous year, there's a difference.

[Interpreted] Yes, that was Innomotics, the Innomotics sale, which had an effect last year. So that was probably the effect that you referred to, the EUR 2.1 billion sales proceeds from Innomotics in the previous year, and that was the reason why there was a change. And naturally, we don't have this kind of effect every year. We don't. Okay, that was a special item, special effect from Innomotics, EUR 2.1 billion.

[Interpreted] Right. We don't see any further questions in the German line. So now we're going to switch to the English line, where we have John Revill, if I can see this correctly, and the operator is going to connect you.

[Operator Instructions] And the next question comes from John Revill from Thomson Reuters.

Can you hear me?

Yes, we can.

Super. So a fairly simple question to begin with. With the following agreement with the tax authorities regarding Healthineers, what does this actually mean then? Does this actually mean that the distribution to Siemens shareholders will be tax-free? That's the first question.

So with regards to the Siemens Healthineers procedure. So the transaction structure really aims to ensure really a consistent and beneficial withholding tax treatment for shareholders. And the tax effects at shareholders' level really depend on various factors. I think that's what you mean. So there is, for instance, like residency shareholders, or whether they are held private, the shareholding, or whether they are business assets. So therefore, that's the background. And I assume you asked whether it is a similar kind of approach for withholding tax like for spin-offs we had, for instance, like for OSRAM or Siemens Energy, and that could serve as a proxy.

Right. The bottom line is -- ultimately, does it mean that the agreement now will be generally tax-free then for Siemens shareholders? Is that the bottom line? I was a bit confused there.

So this is something we cannot confirm from our side. So we assume, as of today, that it is in the same manner -- will be in the same manner like for OSRAM or Siemens Energy, yes.

Right. Okay. And then tax-free in that case?

Right. And the entire transaction structure really aims really to ensure really a consistent beneficial withholding tax treatment for shareholders. That is how we understand that, and that's how we will proceed. So there's much more comfort right now. Yes.

Okay. I was just generally looking at the results -- maybe for Mr. Busch here. How much of the DI improvement was also linked to artificial intelligence, do you think? I mean, was that linked to demand for more chip building from chip builders? Or how much was the sort of AI linked to the recovery and the improvements at factory automation, do you say, the DI?

So it was a little bit noisy, but I think the question was how does AI create a pull on the demand of our automation portfolio, right?

Yes.

So several areas. Number one is data center and AI factories themselves. They are more and more loaded with high-performance GPUs, call them AI factories then. And these AI factories have a very interesting phenomena. They are much more dynamic in the way how they are consuming energy up and down. So that means that normal building control units are not powerful enough. So we see in the future more and more really industrial PLC controlling the shop floor. Valves have to be opened and shut much, much faster. So we have to control the whole system much faster.

This is why we released a SIMATIC with special functions. So they are geared now for usage in high-performance data centers/AI factories, number one.

Number two, guess what? I mean, all these AI factories, they need racks, and these racks, they have blades, and these blades, they have electronics, the server kind of. This is a kind of a tremendous demand for electronics, Foxconns and the like, Lenovos. So they are building, of course, more and more factories and they need to be automated. This is where definitely Siemens business is pulled.

Next thing is AI will also enable more and more capabilities on robotics, autonomous robots or humanoids. In the industrial space, maybe this is where we see the first pickup of humanoids. They need to be manufactured, more robots, more humanoids. And whenever you want to manufacture them, obviously, you want to do them fully automated. And that's where Siemens has a strong play.

And maybe the last element is that you know that we are working also on new ways of automating. We call it virtual PLCs, software-defined automation, which enable a much, much more dynamic rollout. You have to have more flexibility. You can control a whole plant out of a control center. And this goes also via AI technologies, which are then also pulling a demand in our hardware, so to speak.

And the last element would be, the more AI functionality you will see on the shop floor, the more compute you need. We call that edge. We have edge devices. They are powered by GPUs. And this is part of our core portfolio element that we also see kind of a pull for automation back to back on more AI capabilities on the shop floor. So short answer is yes.

Okay. So overall then, how much of this result was actually driven by AI, whether it be the data centers or the digital factory kind of stuff? How much this result this time around linked to AI?

Yes. I mean that's what I explained.

I mean, how could you quantify it though? I mean, is it substantially linked to AI you think today, or...

I mean, I don't have precise -- I mean, going forward, we are looking into the market. Currently, we see an automation market, which grows by, let's say, something between 3.5% and 5% eventually. These numbers are, I assume, not baked in the eventual new functions. So you have to differentiate, and this is really one of the topics which we are going to address. The conventional way of looking at markets, on the one side, this is a plan for, for example, semiconductors. By the way, they were also semiconductors, then you need more semiconductors and we will automate semiconductor plants. So this is one piece.

But the additional market demand from, let's say, ramping up robotics faster, that's not baked in because it's unclear how performance robots are. So we take it as how many AI enablement you have on a shop floor. If you look at current market numbers, it's not reflected, but I believe this is something which is just adding on top of any growth numbers we see in the markets as of today. Hard to quantify now. Yes.

I know you can't give a number, but I mean, just sort of in words, how important was AI to these figures today, do you think just in words? I mean, with the data centers, but also the increasing demand on the factory floor. Is it kind of a substantial contribution today? Or how important was AI to the result?

What we said, we made an estimation. We made an estimation in the -- we said in the last quarter that we have a 3-digit million, something like EUR 300 million of AI-enabled functionality, which goes in our software portfolio, for example. And it's hard to really separate out how much additional volume or volume is really linked to AI because, as I said, for example, if Foxconn ramps up plans, how much of this ramp-up is driven by AI, how much is driven by a demand for normal laptops and whatnot? Hard to say. So I cannot really give a kind of estimation even. So I would look at it more from a total perspective, how these markets are developing.

All right. So thank you. We are out of time, and we do not see any more questions in the line. So thank you very much for your interest. And next up is the conference call for the analysts with Roland Busch and Veronika Bienert, and that will begin shortly at 9:30 a.m., and the analyst call will be broadcast live at siemens.com/analystcall, and you'll hear from us again at the latest on November 12, 2026, when we will release our fourth quarter and full year results. Thank you very much, and goodbye.

Ladies and gentlemen, this concludes our conference call. A recording will be posted at siemens.com/conferencecall. We say thank you and [Foreign Language]. Goodbye.

Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.

Good morning, ladies and gentlemen, and welcome to the Siemens 2026 Second Quarter Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties.

At this time, I would like to turn the conference call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to our fiscal Q2 '26 conference call. All documents were released this morning and can be found also on our IR website. I'm here today with our CEO, Roland Busch; and our new CFO, Veronika Bienert, for her first earnings call. Both will review the Q2 results. After the presentation, we will have time for Q&A. With that, over to you, Roland.

Thank you, Tobias, and good morning, everyone, and thank you for joining us to discuss our second quarter performance. I'm pleased that we continued our successful path of profitable growth, creating value for all our stakeholders despite an overall environment that was geopolitically demanding. In the Middle East, our top priority has been on supporting and safeguarding the well-being of our employees affected in the region.

From a business perspective, we expect our direct revenue exposure in this region to be limited to 3% to 4% in fiscal year 2026. Direct supply exposure at around 1% of purchasing volume is very low and mitigation measures are in place. Obviously, we are closely monitoring developments as well as the magnitude of secondary effects regarding inflation, global supply chains and investment sentiment. So far, however, we have not seen material changes in broader customer buying behavior, and we are benefiting from our technological strengths and strong positioning in key growth markets.

Now let me walk you through the key highlights. Book-to-bill reached a strong 1.22, lifting orders backlog to a record high level of EUR 124 billion. Nominal top line growth rates were again materially impacted by the strong euro as anticipated. Group orders reached EUR 24.1 billion, up 18% on the prior year, with double-digit growth in all 3 core businesses.

Smart Infrastructure again reached a quarterly order record with strong demand across most end markets. SI's data center vertical clearly stood out with unprecedented triple-digit order growth in the quarter, even topping the excellent Q1. Demand continues to be vibrant, driven by the build-out of cloud and AI infrastructure. Digital Industries continued its growth path. The market environment has shown some early signs of improvement that are now being challenged by renewed geopolitical volatility. The ICE automation business was strong across regions. Our software business seized several larger opportunities across the portfolio and is successfully upselling with its customer base.

Mobility won attractive large orders in Q2. Two weeks ago, another high-profile contract came finally to a close, which will be accounted for in Q3. We will deliver up to 200 double-deck trains based on the Desiro platform to SBB. This is the Swiss Bundesbahn for the Swiss commuter rail networks. The order value is around CHF 2 billion.

Overall, revenue growth reached 6%, driven by Digital Industries and Smart Infrastructure. A very strong contribution came from Smart Infrastructure's electrification business, up 18%. The software business at Digital Industries achieved compelling 14%. It is good to see that revenue was up in all regions. The Americas led the way, up 10%, fueled by strong momentum in the United States. EMEA grew by 2% and Asia, Australia was up 8%, driven by India, which was up 21%.

Industrial business profit reached EUR 3 billion, translating to a profit margin of 15.4%. We saw operational strength at Digital Industries and Smart Infrastructure, while Mobility was impacted by U.S. tariffs. Currency headwinds amounted to 80 basis points and are expected to ease in the second half. These results translated into earnings per share pre PPA of EUR 2.81, including, as previously indicated, a gain from the divestment of our airport logistics business in the U.S. Compared to the first quarter, free cash flow picked up to EUR 1.7 billion.

We confirm our outlook for fiscal year 2026 on the group level with some adjustments in the individual businesses, Veronika will give you some more color later. In addition, we continue to shape our portfolio. As planned, we clarified the time line for the spin-off of Siemens Healthineers shares. The shareholder vote is now planned for our next ordinary Annual Shareholders Meeting in February 2027.

Four key levers drive our growth ambitions as one tech company. First, digital growth. In the first half of the fiscal year 2026, we grew our digital business by 19%, well ahead of the ambition level of 15% that we set last November. Digital business was driven by a good mix of organic growth from expanding our Siemens Xcelerator's software and digital service offerings combined with a strong growth trajectory of our recent software acquisitions.

Second, grow regions. A great example of where Siemens strengths across business come together as one is Vulcan Energy's project Lionheart in Germany's Upper Rhine Valley. This is Europe's first integrated lithium and renewable energy project, and it will create local lithium supply. As a result, it will strengthen growth and competitiveness in Germany. The backbone of Lionheart will be our advanced automation and digitalization technologies as well as smart buildings solutions. Bringing them together will help in ramping up production faster.

As a key partner, Siemens Financial Services will become a minority investor in this project and has supported the structuring and arrangement of the debt financing. Third, grow verticals. Data center demand has been soaring and it reflects our trusted systems integration and delivery capabilities. The team grew our revenue in the first half year by more than 45% to EUR 1.8 billion. We are confident that we will be able to keep up this stunning pace throughout fiscal year 2026.

To meet accelerated demand, we will ramp up further low and medium voltage production capacities in the U.S. at several locations in the Carolinas. And we are continuously expanding our data center partner ecosystem to scale next-generation AI infrastructure. The goal: we are creating more flexibility across compute, energy and infrastructure systems. Data center operators can connect to the grid faster, scale efficiently and operate reliably in a power-constrained world.

Fourth growth lever: grow AI. Bringing AI to the real world was our key theme at our first RXD Summit held in Beijing, which was a major customer and partner event. We deepened our partnership with Alibaba to bring our advanced industrial software together with their cloud and AI capabilities. Now engineering teams at our customers in China can flexibly run complex simulations more efficiently.

And we introduced 26 new products for edge automation and control to execute AI-driven applications in industry and in its infrastructure. These products were locally developed at China speed, as we say, for the Chinese market and beyond.

Those of you who visited our booth in Hanover saw firsthand how we are bringing industrial AI to the shop floor together with our partners. Let me highlight just a few examples. First, we launched our Eigen engineering agent, with which we are moving industrial AI from providing assistance to autonomously planning and executing industrial automation engineering tasks. The impact is impressive with up to 50% greater engineering efficiency and up to 80% higher solution quality, proven in more than 100 global pilot deployments.

Second, we showed that physical AI is becoming reality in our own factories. We are automating complex and unpredictable logistics tasks with AI-powered robots. After receiving the task, they figure out by themselves how to solve challenges and optimize the required actions. A huge opportunity to address the scarcity of skilled labor.

With KION, we entered a strategic partnership to shape the supply chains of the future. Using comprehensive 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 part of this collaboration is exchanging selected areas of industrial data and domain expertise to accelerate AI-enabled solutions. All these applications will lead to increasing demand for electricity for AI factories.

We launched a comprehensive new direct protection and switching portfolio, the basis for offerings more efficient and sustainable DC grid solutions. I'm very pleased with the momentum and performance of our DI software business.

Organic ARR growth trended upwards to a very healthy level of 11% over the prior year.

The integration of our Altair and Dotmatics acquisitions is progressing very well. We have achieved an important milestone by implementing the targeted cost savings measures of $150 million following the Altair integration. The bottom line impact will follow subsequently.

At the same time, we are working on accelerating cross-selling revenue synergies where customer opportunities are gaining more and more traction. As AI capabilities are evolving rapidly, our top priority is ensuring that all our teams fully embrace AI to leverage the full productivity gains of AI-powered coding. We are uniquely positioned to build on our strengths and meet key customer needs when implementing AI-powered industrial software.

First, deterministic. Our customers require the management of physical laws and deterministic outcomes. Embedding AI in our physics-based solutions enables better and faster deterministic intelligence that unlike probabilistic results can be trusted. Our tools have the capability for sign-off and verification.

Second, contextualization. Industrial-grade AI requires precise contextualization of data. Our industrial software understands design intent and all of our product configurations. AI that is built on systems of record uniquely preserves all necessary rules and relationships.

Third, multi-domain. The complexity of innovation is rapidly increasing in a world of personalized and software-defined products. Customers require AI to be built on systems that understand the multi-domain design intent across the enterprise. We are the only company that can do this across PLM, EDA, simulation, and shop floor execution.

And fourth, live. Real-time intelligence that will drive action requires a live digital twin that is infused with real-world physical data. Siemens is the industrial leader in bringing the real and digital worlds together to drive better, faster real-time intelligence and government actions.

With focused investments, we are speeding up the development of AI-enhanced products and new applications in 3 ways. First, faster engines. Our physics AI solution doesn't replace deterministic CRA resolvers -- solvers. It makes them dramatically more efficient. Engineers can rapidly screen thousands of options and identify the most promising candidates. Then they run full deterministic solvers on only the top few. The result, dramatic faster design iterations and earlier validation.

Second, faster engineers. Another key innovation is our new agentic industrial-grade AI platform that autonomously plans, executes and validates. We have stress tested this capability where the stakes are at the absolute highest, which is in the semiconductor design. The Fuse EDA AI system securely orchestrates highly complex workflows across very specialized tools, and it delivers real engineering productivity for industry leaders such as TSMC and NVIDIA. Even more, this is a platform approach for scaling. We are taking this agentic intelligence and will extend it to more than 20 agents across our product software portfolio.

Third, increased design intelligence. One of the key challenges in adapting and implementing comprehensive digital twins for factories is the complexity of integrating data across ecosystems. Siemens has resolved this issue by introducing the Digital Twin Composer, which can merge all these data streams from the digital and real worlds into one experience. You saw this compelling concept in Hanover, with PepsiCo and KION examples. We enabled those companies to build an ever-evolving engineering mirror of the physical product and factory constantly driving operational improvement. Customer interest is massive. So far, we have been working on more than 300 inquiries from large enterprises since the launch at CES.

To sum it up, our foundation is strong. It's built on team center, the industry's #1 trusted and secure system of records. On this basis, we are bringing the benefits of faster engines, faster engineers and enhanced design intelligence to life. We are building an AI native experience that is secure, trusted and governed. We aim to lead this transformation.

And now over to you, Veronika.

Thank you, Roland, and good morning, everyone. Let me share more about our successful Q2 and our expectations for the remainder of the fiscal year. Orders for Digital Industries at EUR 4.8 billion were 12% above the prior year with a book-to-bill of 1.03. Overall market dynamics in the automation business have been gradually improving. At this stage, however, we have limited visibility into the future impact that the conflict in the Middle East will have on investment sentiment. DI software business again delivered strong growth over the prior year with orders close to EUR 1.8 billion. Book-to-bill was clearly above 1, driven by structural tailwinds from sustained AI momentum and by several large order wins in EDA and PLM. Our backlog at Digital Industries increased moderately to EUR 10.2 billion with a gradually increasing software share.

Revenue for DI increased 8%. Therein, its software business was strongly up by 14% on broad-based double-digit growth across PLM, simulation and EDA. DI's automation revenue was up by 6% to EUR 3 billion, led by the short-cycle factory automation business. Process automation was up modestly. DI's profitability was higher than expected at 18.5% with a strong contribution from its software business. DI is increasingly reaping benefits from the fact that the SaaS transition is nearing completion and from executing cost synergies in connection with Altair.

A favorable mix with the high share of short-cycle business supported healthy profit conversion from automation as well. Sustained productivity gains remain the engine for a clearly net positive economic equation in Q2. Integration-related costs for Altair and Dotmatics had 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 full fiscal 2026.

Finally, as anticipated, negative currency effects weighed on DI's margin development with around 90 basis points. I am pleased that Digital Industries improved its free cash flow performance to EUR 760 million.

Looking at the regional top line perspective, DI's Automation business grew across the board. China was robust, clearly up in orders and revenue after a strong first quarter, which was supported by some pull-forward effects due to the expected price increases. In Q2, the book-to-bill was above 1 in China, where motion control drove revenue growth. Our local China portfolio is well on track, growing by a rate in the mid-20s. Germany showed 13% order growth on easy comps, while revenue was up modestly. The U.S. showed positive trends driven by brownfield modernization and greenfield activity in selected industries. Among them were semiconductors, data center, power generation, grid modernization as well as aerospace and defense-related manufacturing.

After a successful first half year, we raised our fiscal year 2026 guidance for DI's revenue growth 100 basis points at the midpoint to a narrowed range of 7% to 10%. We now expect DI's profit range to reach 17% to 19%, up 100 basis points at the midpoint versus our previous guidance. DI is driving growth and margin expansion by simplifying its setup, optimizing its sales approach, fostering innovation and ensuring stringent post-merger integration. For the third quarter, we see DI orders clearly up over the prior year level with a strong contribution from its automation business.

DI software will grow moderately on lower order volume from EDA year-over-year. The sales funnel for EDA is skewed towards the fourth quarter again. We anticipate that DI revenue growth will see a high single-digit increase, supported by growth in automation and software. And we expect a profit margin of around 18%.

Now let's turn to Smart Infrastructure, which continued its success story with an excellent performance across all businesses and metrics. Orders were up 35%, reaching a new record level 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. Both businesses benefited from surging contract wins from hyperscalers and colocation providers, but also from leading semiconductor firms.

Data Center orders amounted to a record high EUR 1.9 billion with customers globally building out capacities for surging AI workloads. Book-to-bill reached an outstanding 1.27. SI's record order backlog of EUR 22 billion now already provides visibility well into fiscal year 2027. Revenue growth was broad-based and reached 10%. The largest contribution came from the electrification business up 18%. Stringent backlog execution led to further operational margin expansion, up 10 basis points year-over-year to 18.6%.

SI's business continued to benefit from economies of scale due to higher revenue and from sustainable productivity improvements. This offset a material currency headwind of 110 basis points as well as higher commodity costs. For the second half of fiscal year 2026, we expect pricing measures in SI's product business to increasingly compensate for higher commodity prices.

Free cash flow showed excellent cash conversion at 1.02 with a reduction in operating working capital despite strong top line growth. Looking at the regional top line development, there was healthy demand across the board and stringent backlog execution drove revenue. The U.S. demonstrated exceptional order momentum, up 72%, led by data center demand. It was also good to see bookings in buildings up by low teens. Germany recorded double-digit order growth in buildings and electrical products. The Europe and Middle East region also benefited from large data center orders in the Nordics and from some power utilities wins. SI's top line in China showed further improvement, driven by electrification and electrical products despite a continuously soft real estate market.

The service business delivered 7% growth, clearly up across all regions. We anticipate that the service business will accelerate in the second half year. Our teams continue to expect very consistent end market dynamics with data centers and power utilities as key pillars for growth. After delivering 10% revenue growth in the first half of fiscal year 2026, and given high visibility from backlog, we raised our guidance for the full fiscal year. For SI, we now expect comparable revenue growth in the range of 8% to 10%, up by 150 basis points at the midpoint.

For full fiscal 2026, we continue to expect SI's profit margin to be in the upper half of our guided range of 18% to 19%. For the third quarter, we anticipate that SI's revenue growth will be at the upper end of the full year range and profit margin in line with 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 with a book-to-bill of 1.76. Order backlog stands at EUR 53.5 billion with further improvement of the gross margin profile. Around 30% represents attractive service business. As Roland mentioned, the sales pipeline for the second half of fiscal 2026 looks very promising. Revenue in Q2 came in 2% below the strong prior year level on tough comparables, held back by the impact of U.S. tariffs mainly in rolling stock.

In addition, we saw conversion delays in large-scale rail infrastructure projects due to delayed call-offs under 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 assessment impacted both top and bottom line equally. The negative impact on Mobility's profit margin of 6.9% was 170 basis points.

In addition, severance charges at 80 basis points were somewhat higher due to some factory network optimization measures. Free cash flow was soft as expected because the timing of milestone payments led to a temporary buildup of operating working capital. Looking at project payment profiles and the timing of order awards, we continue to expect a material catch-up in the second half of fiscal 2026.

After the first half year, we take a prudent perspective on the current geopolitical challenges and having taken into consideration the current situation of U.S. tariffs, as a result, we lower our full year outlook for revenue growth at Mobility to the range of 5% to 7%. Despite this change, we confirm the full year margin outlook in the range of 8% to 10%. Also, it is now expected to be towards the lower end.

For the third quarter, we see Mobility's revenue growth and margin within its full year guidance. Our below IB performance, as shown on Page 19 in the appendix was as expected. The results included a gain of EUR 172 million from the sale of our airport logistics business in the U.S. Free cash flow of EUR 1.7 billion in the second quarter was well above the prior year.

As discussed, we saw a significant catch-up in the industrial businesses and lower tax payments below the line. We are very confident that we will achieve a double-digit cash return once again in fiscal year 2026. With a capital structure of 1.2 for industrial net debt over EBITDA and strong ratings, we continue to act from a position of financial strength. Our leadership team is fully committed to delivering stringent capital allocation and a strong shareholder return. Therefore, we retired 18 million shares in March, and we have almost finished our current EUR 6 billion buyback program after less than 2.5 years.

Since we will conclude the buyback in a few weeks, we are already announcing today a new program of up to EUR 6 billion over a period of up to 5 years. These parameters allow sufficient flexibility. However, we have built a track record of accelerated execution when feasible.

Now let me point out our updated outlook assumptions for full fiscal 2026. Incremental investments in AI-based innovation will lead to R&D intensity slightly above prior year levels. Selected investments in optimizing our sales channels will keep SG&A as a percentage of revenue on par with the prior year. We will continue to support midterm growth momentum by increasing CapEx in targeted growth fields to expand capacities. Severance costs are now expected in the range of EUR 300 million to EUR 350 million. We will continue working on ensuring competitiveness across our businesses and functions, primarily with regard to Digital Industries. As expected, FX was a strong burden in the first half of fiscal 2026. However, based on current rates, we expect the headwinds to ease over the second half year.

Finally, let me conclude with a confirmed outlook for the Siemens Group and the updated guidance for the businesses at a glance. We continue to expect to reach the upper half of our group revenue growth guidance of 6% to 8%, and we anticipate that we will reach EPS pre PPA in the range of EUR 10.70 to 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, I hand it back to Tobias for Q&A.

Thank you, Veronika. We are now ready for Q&A.

[Operator Instructions]

Operator, please open the Q&A now.

[Operator Instructions]

The first question comes from the line of Philip Buller from JPMorgan.

I'd like to dig a bit deeper into the triple-digit data center momentum, please. Is this just an easy comp? Is it a one-off? Or are you gaining share? And if so, why is that? Anything you can help to offer to build out that huge headline order momentum would be great.

So we do our homework when we compare our growth as far as we can, obviously, see it from -- we call it electrification. So this is a some of medium-volt, low-voltage. And from that perspective, we -- I would say we slightly gained market share, but we are growing, let's say, with the key competitors likewise, maybe a little bit stronger in that quarter.

So I mean, this is all about delivering capabilities. So you know that we continuously expand our manufacturing footprint in the United States in Carolinas. We invested more. We are ramping up high-quality manufacturing, very much automated. So we are able to do that. We have our supply chain under control, and we are having a strong focus on that. And so therefore, this is the way to keep momentum.

The other part is that we are not only growing with the hyperscalers. We are diversifying also to others -- data center builders. And the last point is, and that's more looking forward, we are launching new products. You saw that 800-volt DC switching technology, which hits the market anytime soon, launched right now, so which gives hopefully another momentum going forward.

And is there any kind of thing to bear in mind from our side in terms of gross margin dilution or a material margin profile difference for what we're seeing coming through on the order book, please?

No, it's supporting a great margin in that business.

The next question comes from the line of James Moore from Rothschild & Co. Redburn.

I wondered if I could ask a little bit about the automation momentum and broadly similar environment to last quarter. And the Chinese environment could potentially have been even a little bit faster. I wondered if you could talk a bit about market share in China. Was it that a year ago, you've done the launch, so it was a tougher comparative. You mentioned some pre-buys. Could you talk a little bit about global automation momentum into April as well?

Okay. Well done. So let me start and maybe that's one of the key message we are also looking for is that April shows really another strong growth, which is even above our forecast. I mean, just to give you that sense. And this is automation globally.

So let me start maybe in China. The -- in general, the industrial market is recovering. In particular, you know that China is going more for high-tech manufacturing, but they're also driving export for eco semiconductors and the like. We see stable distributor stock levels, which is good. And what's really exciting is our China new products they grow extremely well. They hit the market really to the point. And here we talk about broad portfolio, edge drives and controls.

I'm super excited about our Smart PLC, which was part of the last 26 products we launched, but also switching technology. So it's not only automation, it's also electrification and FI business there. So we continue to see China new product growth. And this growth is really gaining -- we're gaining market share definitely in that case and a strong growth in OEM business, too. So the -- if you ask for the verticals, there are a couple of government-supported verticals, AI semiconductors, obviously, e-car, solar, batteries, logistics, marine, and at the other level, maybe a short one on pricing. You saw that there was a price increase in Q1. Currently, the pricing is on a stable level. So all in all, that's doing well.

Regarding prebuy, we currently see indicators which suggest that prebuying may be partly driven by our order dynamics, fueled by maybe component scarcity or a price increase. So we cannot rule out some of these effects. However, if we look at our KPIs, we see no meaningful shifts in order patterns or requested lead times that would point out prebuy distortions in our performance. So that's very, very important to say, but we are staying obviously very vigilant on this point.

On a global basis, if you ask for the automation, we see in the automotive space, there is, I mean, limited growth in early '26, partially U.S. recovery. Europe, Japan, flat. China softened sequentially. It's overcapacities in China. So therefore, cautions in CapEx spending.

Machinery, there's a moderate moment ahead of us. The Europe is slightly positive and the automation demand is expected to grow modestly, low single digit to mid-single digit. Chemicals, we see chemical output shows moderate growth driven by China, Europe weakening further. Pharma, solid growth there, led by China, Japan. Pricing remains under pressure, I mean, also from this by tariffs. Food and beverage production growth remains modest. So there's a more cautious near-term outlook. Electronic semiconductors, super strong exceptional momentum due to the AI chip demand and aerospace and defense, likewise here, key growth drivers. Aerosense is a high dynamic market, and Siemens can play a key role in scaling up capacities and in a closed-loop production. So I hope that covers your question somehow.

The next question comes from the line of Ben Uglow from Oxcap Analytics.

Unsurprisingly, it's also about China. I guess my puzzle here is what is new and what could be driving this? In terms of your conversations, Roland, I guess, with either the customers or government, et cetera, why do we think we may now finally be seeing some form of improvement in China? I -- is this to do with the 15th 5-year plan? Is this to do with just catch-up? Is it stimulus? Just your sense of what might be going on? And then could you just talk a little bit specifically about the machine building segment, one of your end markets, which I see on your slides are kind of flattish, but other people are calling out Germany getting better, Italy getting better. Could we just drill into that vertical a little bit more?

Yes. So talking about China. On a high level, we said it over the last quarters, remember, is that we expect China to improve gradually. There will be no V-cycle, whatever, it will improve gradually. And this is a combination of, let's say, getting step-by-step more consumer confidence of having the Chinese government strategy working out, remember, high-quality manufacturing, but also being able to divert their export to -- away from United States to other regions, Asia, in particular, but also Europe. So this is a combination which somewhat drives it.

And the last one I would say is, I mean, China is really good in embracing new technologies. So AI technologies, and let me take that now one by one. So the -- let me talk about the exports. And this is cars, for example, but also machines. They are quite competitive. They diverted their export to other markets, as I said, amazingly fast. So their export is increasing despite the tariffs and, let's say, the throttling of export to the United States. So this was a surprisingly fast way to really find new ways that helps.

The other one is there's clearly a kind of a pivot to this high-quality manufacturing, which is also higher price, higher value added. So if you go away from, let's say, clothing to a machine, that makes a big difference. And that goes along with technology, the embracement of technology. I mean we see that for local competitors, but also the international ones acting there. And maybe here, that's something what I really believe we are sticking out if we look around and compare ourselves to number one, local Chinese competitors, and we really -- we win customers back.

I mean our RXD Summit was extremely successful. We had roughly 3,000 people, 42 partners exhibiting in our summit. I mean we had, I think, more than 1 million streamings that really hit the market, including forging partnerships. I had Alibaba on stage. We are going now offering our software in China on the cloud, so it can be deployed super fast, and we see a lot of interest there. So this is coming together.

And coming to your point about machine building, you know that, Ben, that the machine builders in China, they really made a step up, super competitive. Would I see them already in the super high-end market? So the -- let's say, the DMG MORIs or the high-end TRUMPF machines, maybe not. But the working horses, standard machines, they are quite good and they take advantage out of that. So overall -- and coming back maybe to the customer sentiment, so the private consumption, we believe that this comes back gradually, as we say. I mean, another sideline, obviously, the real estate thing is improving also gradually. Don't expect any kind of fast pivot here. But this package, what I was talking about seems to be a very, let's say, somewhat slow but gradually improving momentum there.

Super interesting.

And maybe, Ben, just to add to the China performance really in the way how we are really monitoring that in a very prudent way. So therefore, what is really important for us that we look at the distributor stock levels. And here, we see for the -- for Q2, really a stable distributor level. And what is as well quite interesting that if we look at the market development that what was really driving was the high-tech manufacturing, what Roland mentioned, but as well the export growth, for instance, really for e-cars in semis, which is a very important element. And that is something which we expect as well to develop going forward in this.

And since we are talking about it another one is, I mean Q1 is normally strong Q2, normally, we see a little bit weak. This is not the case going into April, again, you see a good momentum there. So that's really encouraging.

The next question comes from the line of Benjamin Heelan from Bank of America.

I wanted to touch on M&A. There were some reports yesterday and you were linked to a potential rail acquisition. If you could maybe comment on that. But just broader, how are you thinking about M&A? Can you talk about the pipeline? Are there any divisions that you're particularly focused on right now?

The first part of your question, I can make very short. We do not comment on that.

On the second one, I can speak a little bit longer. I mean we -- number one is, obviously, we have a lot of focus, which is supporting our strategy, which is combining the really in the digital world. Any kind of digital asset, I mean, software assets is super interesting. It's getting harder. The more -- I mean, the more market leadership you're expanding with Altair, for example, then the harder it gets. But there's another space we call operational software, which is really I think going away from the design world of software into the operational world that's super interesting. I mean, obviously, we're looking also into any kind of AI or data-related assets, which is interesting.

But we do not shy away from also going into hardware, particularly connected hardware, hardware, which supports our electrification growth. I mean, is it bolt-on acquisitions or looking also into adjacencies? I mean you know that the AI factory market is very fast changing. We see a change in technology. You have to control data AI factory differently from a data center. That has an impact on the controls itself, on the -- so the evolves the mechanics, the controls, but also the DC technology, which you see there, we're looking in that space as well.

So anything what is -- and we love connected hardware. The hardware who delivers data is connected is super relevant for us because finally, it has not only memory on it, but also silicon, so you can really run AI technology on it. So therefore, broader space to look at. And regional expansion, obviously, India is a place we always would like to do more. Remember, our CNS acquisition, we love it. This was low-voltage stuff. If we find any other options there, we will do this as well.

The next question comes from the line of Andre Kukhnin from UBS.

Could we talk about the industrial software momentum and how you assess your performance there versus your respective peer groups? And also, could you talk about if your stance has changed at all on the potential AI impact on the space I think at Hanover Fair, we actually talked to a lot of people who are excited about prospects for simulation and how much can be done with agents. Are you ready to price for that hike in consumption?

Yes. So let me start with the industrial software. Number one is -- and I said it in my presentation and I spend a little bit more time on that, that we have -- we are developing software, industrial software is based on physics. It is -- has a difference between AI technology, which is nondeterministic to that one which you require. For us, the combination is making the beauty. So having simulation, which you can enrich with AI. By the way, also rewriting and running on a different hardware on GPUs makes it already faster, but AI is really making a big difference. So -- and with our software and the combination, you can make non-deterministic AI suggestions to deterministic and roll it in the real world. Is it on the shop floor, but also on the design. You cannot make a mistake in the design of your semiconductors that costs you billions if you make a mistake there. So that's what we love.

The other one is General PLM Team Center. This is the trusted secure system of records. It also contextualizes. So -- and this is super important because if you throw AI on nonstructured, nonconextualized data, it doesn't really do well. If you work it on a contextualized way, you really do magic. And this is the reason why Team Center is such a powerful platform, and we offer it not only also with the X version for small and medium-sized enterprises to scale it faster.

Now we are developing an agent platform and an agent studio to supply a variety of agents that enhance team center capabilities for customers and for all products. So AI stack an own agent framework across and now listen EDA, PLM and simulation. That's unique -- that's unique in the market. And again, with our X expansions, we're offering that also from the cloud. So that's kind of a competitive edge.

The other elements are going then across now moving from the design space to the operations space. Our digital twin composer, for example, you have digital twins of products and manufacturing and compose it into one, which creates this digital thread, which is unique. And then we make it able, make it open for a round-trip of data. So real-time data going into that and have a chance to really operate them out of the cloud. So this is another unique element, which requires actually having an enhance-on operations and getting real-time data into our software stack.

So we believe that we have, number one, a super strong position there, including -- I mean, Altair was really closing a gap in our simulation. Now we go cross domains, so to speak, super relevant cross domains and domains is either the supply chain, as I said, EDA, PRM simulation, but also cross disciplines like hardware, software, electronics and the like. And the other one is the capabilities to increase it. Maybe 2 more things. One is we're writing our software also in a sense for the -- how our customers use it. Currently, it's engineering using our software. In the future, it will be a blend of engineers and agents, which is obviously you can imagine a different way.

And this now to your other question, this spills over to the way how we monetize -- we also look into AI-driven monetization, tokens usage-based, which is changing the model. And that's something which is -- it's premature yet, but we see that this is a huge opportunity as well to leverage the portfolio I was talking about also into the way how we monetize it. I talked a lot, but I don't know whether I hit all your -- the points you wanted to know.

No, that's really helpful. And I guess in H1 performance, do you feel like you've taken share or performed more in line with the market?

No, I would say we took share. I mean, remember, for the first half, our digital business grew by 19% in the quarter now Q2, our cluster by 14. So we feel very confident we were happy about the performance...

And maybe just to briefly add to monetization. So we are convinced that user-based licenses will continue to exist. But if required for AI, we can really fully leverage new monetization models, and we are testing this on new AI solutions and our AI capabilities in the product. So therefore, we are convinced that the mix of both will really help to grow our top and bottom line.

I'll give you one more since this is so exciting. Engineering agent. I don't know whether you have a chance to be at our Hanover trade fair, but what is it? It is an agent which really helps engineers programming industrial PLCs, typically using our TIA portal, but that can go much, much broader. What it does, I mean, it receives -- actually, you interact with a prompt. This is the first thing. And you go for a task. For example, I would like to give you a welding task, including the clamping, the welding and the unclambing and moving on. And then the agent goes out and checks out for all the necessary documents, I mean whatever you need in order to do that for your machine. So it looks around in all the documents, upload it, creates a software to run on your PLC, validate it over and over again until it really works. And then it comes back and say, okay, here's the ready-to-release software. And finally, a human can decide and push a box and upload it. And guess what? It works. I mean this is so amazing.

And that's something what was really done by our Seattle team based on a prework for our team here in Germany. They did made it work. And this is first of its kind engineering agent. And by the way, we call it Eigen because, number one, it's yours and Eigen is a German, it's yours. Number two, it's linked to the state of in physics, which means that -- and this is a very interesting point because physics is nonderministic if it comes to quantum but an eigenstate is deterministic. So -- and that's the beauty of it. We make out of a nonderministic technology and deterministic output, which is hardened and can run on the shop floor. Sorry for being a little bit technological here, but we love it. And our customers, too, they have very strong interest.

The next question comes from Max Yates from Morgan Stanley.

I just wanted to ask about the Healthineers spin. Obviously, in the quarter, you made the announcement that the vote would take place at the AGM next year. I was just wondering, could you give us a little bit of context around kind of why that's now at an AGM as opposed to maybe an extraordinary general meeting earlier? And then maybe sort of once the vote happens at the AGM, what kind of time line after that would we expect the transaction actually to take place? What are the hurdles that need to happen once it kind of -- that we need to get through once it has shareholder approval?

Yes, I'm happy to take your question. So we are working on an unprecedented transaction. And while such processes naturally take time, the alignment with the tax authorities is progressing well and in a very constructive and positive manner. And we cannot give you details on the ongoing proceedings. However, the alignment with the tax authorities is progressing well. And so we are very confident there.

So -- and I assume you are as well aware that there are certain key contractual aspects, which need to be solved between Siemens Healthineers and Siemens AG. So all existing contractual relationships like service contracts, rent leasing contracts or financing agreements, they have been checked. And their continuation or termination evaluated from both sides. So we are confident that we will have satisfactory solutions to the questions at the time of the spin-off. And so we have a very straightforward approach. So we will go to the regular AGM and then execute on the relevant spin-off activities. That's how we move forward.

So you are aware, we currently hold 67%, and we will deconsolidate with the effectiveness of the spin-off. And while reductions are planned in the midterm, as previously communicated, we are in no rush and we'll approach reductions as we always do with a very steady hand and taking into account that the market and operational development of Siemens Healthineers.

The next question comes from the line of Alexander Virgo from Evercore ISI.

I wondered if you could just talk a little bit about DI margins. And in particular, I'm thinking about whether you can give some clarification about what you've included in terms of basis point headwinds, FX, price cost, in particular, I suppose, in the full year guide. And then I guess really what I'm getting at is thinking as we exit this year, we're looking at well north of 20% on an underlying basis. So I'm just sort of trying to get a framework for thinking about 2027.

Yes. So as previously explained, so for Q2, we see 80 basis points impact in terms of FX. And then for the entire fiscal year, 50 basis points. So our expectation is that in the Q3, Q4 and the difference to previous year will kind of flatten out. And with regards to the different impacts in terms of supply chain inflation and alike. So we are heavily working to keep economic equation up and to compensate in different areas so that we have a very strong purchase price approach here. So therefore, we are quite confident to fulfill our targets for the course of the fiscal year.

The next question comes from the line of Daniela Costa from Goldman Sachs.

I just wanted to follow up on some -- there were some news articles a couple of weeks ago regarding sort of you considering reorganizing how the divisions, DI and SI are structured. I just wanted to check sort of like whether you've considered anything of that sort or if we should dismiss those. And in case you would consider what is the logic behind?

Yes. Thanks, Daniela, for asking that one. So for the time, dismiss it, we keep on going with what we do. But we do -- it's maybe behind the scenes to give you a little bit of background. So there's -- and remember, we had our -- with our One Technology program, we also had -- which is targeted for 3 elements. Number one is stronger customer focus; number two, faster innovation, so increasing our innovation velocity. And number three is ultimately going for -- gearing for higher profitable growth. So -- and we thought of what do we need to do in order to make a step up.

And to give you a little bit of background and some things -- there is a reason why I say disregarded because hopefully, you don't see what we do because while delivering, we're increasing our performance. Take you an example. We basically reworked our sales organization in the automation business. It was -- currently, it was driven by actually 4 business units and segments, and this whole structure was duplicated in the regions. We don't think that this is a good idea. So we bring that now under one control. It's one CRM, so one sales organization, which is really having a much, much more better grip on what products to sell, how to sell it. It's a common way to address it. It goes live. I mean we already work in that direction. It goes live then 1st of October, but we are ready to do that. And we believe that with the same portfolio, we can do better impact because we have better transparency. We get our productivity of our salespeople up. This includes also how we steer new products when we go to the market.

But then we're also strengthening our marketing -- product marketing. So once we are launching products, you saw that in China, that we have a product marketing and a campaigning behind to really create impact much, much faster. So in short, this is professionalizing the CRM, our sales organization in automation as an example. That's what we do.

And the other one is -- we're working on our -- the way how we are delivering products and I'm still on automation so that we don't have redundant platforms, which creates, kind of, a headroom for investing in new innovations like I mean, China new products, super successful. We keep on going. We talk about virtual PLC software-defined automation, which already starts hitting the market. So we need that headroom to deliver and grow faster in doing that.

And then the next thing is that we -- once you start doing that, you think also about what is it what our functions can do. And so we create a fabric of functions, which are able to scale also technology. We talk IT and AI technologies across the company much faster while having a clear focus on supporting the businesses. So world-class support for businesses in scaling.

I give you one detail, one idea behind. We have currently -- because we didn't really put too much attention on it, I mean, I think something like 600, 700 engineering tools in our company, which is maybe not the right idea to really scale productivity also. I mean, using GitHub and all the new technologies and AI. So we are consolidating that now and driving them within doing that, not only operational productivity of our coders, but also developers, but also having a tool chain, which is supporting them to be much, much more productive.

On top comes scaling that for the company, it makes us also more productive if we move people around and the like. So this is what we do. We do not touch things which are not broken. So you don't see a very limited change in our medium voltage, low-voltage business. You see an improvement in our building business.

So therefore, we are very selective, but we are very clear what we want to do and how we want to do it to come again back stronger customer focus, faster innovations and higher profitable growth.

We have time for 2 short questions.

The next question comes from Martin Wilkie from Citi.

It's Martin from Citi. Just to come back to the margin in DI and particularly on software. I think you said that software was an important part of that margin improvement inside DI. Can you remind us where we are in the SaaS transition in terms of the drag from that sort of beginning to reverse or improve? And just to understand, was it largely driven by the timing around that? Or is there also an underlying pickup in profitability inside software?

So we are on our way with the SaaS transition as planned and -- but still some activities are underway, but we are progressing very well. And you're very well aware that we are not disclosing the software margins. But what we see as well from the Altair integration activities in terms of synergies, revenue synergies, we see as well the translation into profitability. So therefore, we are very confident in the overall SaaS transition.

And maybe to add, coming back to when we started off also taking you with us on the SaaS transition, this is something what is really -- I mean, high credit to our team. They execute as planned. I mean this goes back now, I don't know, 4 years or whatever, 5 years. They deliver as planned. So you will see the expected pickup in margins. They deliver on the integration of Altair and Dotmatics measures for the $150 million savings are in place, which are kicking in, in our bottom line going forward. So from that perspective, we are very happy that they pick up as planned and also on the top line, so we see the pipeline building up for our cross-selling and upselling.

We take one last question, please.

Today's last question is from Gael de-Bray from Deutsche Bank.

My question is for Veronika. I'd be really interested in hearing about your early observations in the role. Where are your priorities and focus as CFO? Is there anything you'd like to do differently from your predecessor? And if I may, in terms of the capital allocation strategy, why only EUR 6 billion of buybacks given the strength of the balance sheet and the expected deconsolidation of the debt from Healthineers in less than a year's time?

Yes. So happy to take your question. And with regards -- you mentioned it on your own.

You make me stay tuned now.

Capital allocation is, of course, one of the focus areas, which is on top of my mind. But in addition, as well, stringent execution in terms of delivering our free cash flow. That is something which is very important to show the healthiness of our businesses. And another area is something, in particular, in this challenging geopolitical environment. And if you think about increasing inflation and volatility in different areas, it's, of course, our economic equation because that is something which shows as well whether our different businesses are healthy and resilient in order to navigate in challenging environments.

And yes, to come back to capital allocation -- this goes into different directions. So of course, our announced share buyback program, it's one of the building blocks. So it's more or less a one instrument which we are looking at. But capital allocation goes into the direction when we look in a very prudent manner at M&A activities. So of course, we are doing that in the same manner as before. So no change, yes, a very prudent approach.

However, if you look at the multiples in different areas, we are in industries we are acting in. So therefore, we really need to show or to see evaluating such targets, how does it look like with synergies about revenue, cost synergies and is it the strategic fit in terms of top, bottom line and many other areas, you are very well aware of our 5 to 6 focus areas from a strategic point. So that is something which we further pursue.

But when we talk about capital allocation, it's not only about share buybacks and M&A activities. It is as well if you look kind of inside the company, R&D activities, R&D efficiency, such topics we really need to look at in a very close manner and the way how we allocate resources.

So just to translate it into a resilience of our company, so we really need to diversify. We need to diversify the way -- where are our production locations, where are we running our R&D activities, and that is something which we started to do, but we will do that in an even more focused manner that we really ensure in a very stringent way, but in a very forward-looking way for the value creation of our company. So I hope this gives you a certain insight on my focus areas going forward.

Thanks a lot to everyone for participating today. As always, the team and I will be available for further questions. We're looking forward to our sell-side meeting, I should say, call later today and meeting many of you on our roadshows over the upcoming weeks. Have a wonderful day, and goodbye.

Ladies and gentlemen, that will conclude today's conference call, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

[Interpreted] 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. [Operator Instructions]

And with that, I would like to hand over to Simon Krause, Head of Media Relations and Executive Communications. Mr. Krause, over to you.

[Interpreted] 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.

I have a few remarks ahead of time. This morning, we published our Q2 results. The presentation as well as the presentation of our Board members and any other 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 presentation, Roland Busch and Veronika Bienert will be available for your questions. The conference call will end sharp at 9:15 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.

[Interpreted] 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 a business perspective, we expect our revenue share from this region to be limited in the current year to 3% to 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 3 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 percentage 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 sees 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, Veronica 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 time line 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 4 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, combine 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 the 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 Hannover 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 are 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 DI 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 USD 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 four 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 products' 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 life cycle management to electronic design automation to simulation and shop floor execution from a single source.

And 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 world 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 we've tested it? Well, we've stress tested this platform where the stakes are at their absolute highest. In semiconductor design, our FUSE EDA AI system orchestrates highly complex workflows across very specialized tools securely and reliably. In addition, 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 world 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 #1 trust and secure PLM software for the centralized administration and development data and processes. On it's 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.

[Interpreted] 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.

Now 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 1, driven by structural tailwind from sustained AI momentum and by several large order wins in the electronic design automation or EDA business and in the product life cycle 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 the DI's automation business was up 6% to EUR 3 billion, led by the short-cycle factory automation business. The process automation business was up modestly. Now with a strong contribution from its software business, DI's 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 remain 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. And finally, as anticipated, negative currency effects weighed on DI's margin development with around 90 basis points. I'm 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% to 10%. In addition, we now expect DI's profit margin to come within a target range of 17% to 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 a recent acquisition.

For the third 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 fourth 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 third quarter.

Now let's turn to Smart Infrastructure, or SI. In the second 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 products business.

Now that being said, both businesses benefited from surge in contract wins from hyperscalers and colocation providers but also from leading semiconductor firms. SI's data centers orders amounted to a new record high of EUR 1.9 billion with our customers globally building out their capacities for surging AI workloads.

The book-to-bill ratio reached an outstanding EUR 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 regards 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 of 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 by the lower teens or by the low teens, I should say.

Germany recorded double-digit order growth in SI's buildings and electrical products 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 orders and revenue in China showed further improvement driven by its electrification and electrical products business. Smart Infrastructure's 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.

Now 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% to 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% to 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 represents 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 reduced Mobility's profit margin of 6.9% by 170 basis points. In addition, 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. Nevertheless, 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 '25.

After the first 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% to 7%. Despite this change, we confirm our outlook for Mobility's profit margin for the full fiscal 2026 year in the range of 8% to 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 2.5 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 it's feasible. And 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 divestments and optimizing our sales channels will keep selling and general administrative expenses as a percentage 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 to EUR 350 million.

We will continue to work rigorously on ensuring competitiveness across our businesses and functions, primarily with regards to Digital Industries. As expected, foreign exchange effects were a strong burden on our results in the first half of fiscal 2026. However, based on current exchange rates, we expect the foreign exchange headwinds to ease over the second half year.

Now finally, ladies and gentlemen, let me conclude with our confirmed outlook. For fiscal 2026, we continue to expect comparable revenue growth to reach the upper half of our guidance range of 6% to 8%, and we anticipate that we will reach basic earnings per share before purchase price allocation accounting in a range of EUR 10.70 to EUR 11.10. In a time of highly volatile geopolitics, we are delivering a resilient performance with healthy growth and strong free cash flow.

And with that, thank you very much for your attention, and we're now looking forward to your questions. And with this, I would like to hand back to the Simon Krause.

[Interpreted] Thank you very much, Roland and Veronica. 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 on to the English conference call, please do ask your questions in English. We will answer your questions in the very same language.

And with that, back to the operator.

[Interpreted] [Operator Instructions] The first question comes from Axel Hopner, Handelsblatt.

[Interpreted] I have two questions. The first one regards Mobility. Is there a further need for action? Do you need to make any structural changes with respect to personnel adjustments, reallocation of projects and the like? And with respect to data center, 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?

[Interpreted] Mr. Hopner, 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.

Where does the revenue weakness come from? Well, tariffs is the one thing we've already mentioned. They go from the top to the bottom. And on top of that, we had a weaker framework condition, especially in the DACH region, 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, but 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. So this trend is continuing.

Of course, 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. But 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.

So 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.

[Interpreted] The next question comes from Alexander Huebner from Reuters.

[Interpreted] I don't know if you can hear me.

[Interpreted] Yes. It sounds as if you're in the bathtub.

[Interpreted] No, no, I'm actually sitting in my office.

[Interpreted] Well, it does sound as if you were in a bathtub or in a bathroom, but we can understand you.

[Interpreted] 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 perhaps? What exactly does your personnel restructuring plan encompass?

And Altair and Dotmatics, the integration synergies, can you give us some more information on that? And the revenue share of Altair and Dotmatics, can you quantify that for the second quarter?

And 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?

[Interpreted] 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.

Now 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. And these EUR 350 million are measures that we've already implemented, and 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 platforms as well, the Siemens Xcelerator. We're not going to report separate figures for the revenue share there. Now we also have claims, now 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. But 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.

[Interpreted] If I may add, when it comes to tariffs, they are of two different kinds. Some tariffs were withdrawn and there are possibilities to receive refunds and, of course, we take our fiduciary responsibility seriously and will fully fulfill it. And 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. But rest assured that we monitor these developments very closely on a daily basis.

[Interpreted] This brings us to Michael Flamig from Borsen-Zeitung with the next question.

[Interpreted] 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?

[Interpreted] Okay. I'll begin with the purchase behavior. So we're talking about the purchase behavior of our customers, not consumers in general. Is that right?

[Interpreted] Yes. I believe that, that would probably have an impact on your business, right, inflation.

[Interpreted] You're talking about inflation? Yes, well, I was going to talk about that. 2.9, Germany, 1.8, U.S. Of course, higher inflation curves 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. But 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. But 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 United States, 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. And 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.

And 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 going to change the production network. If at all, we may make some acquisitions. Verona?

[Interpreted] Yes. Mr. Flamig, 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. And of course, here, what comes into play as well is that we do see inflationary impact, which, of course, translates into pricing effects. And we, of course, see those reflected in our pricing in the purchasing department. So we're keeping a keen eye on that, and therefore, I can -- of course, balances.

So I can only, of course, yes, 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 to EUR 350 million.

[Interpreted] Then moving on to the next question, Markus Fruehauf of FAZ.

[Interpreted] I have a question on the Mer Mec acquisition in Italy. Can you tell us anything more about that?

[Interpreted] We can make that brief. No. Since you're already on the line, do you have a second question?

[Interpreted] Sure. The macroeconomic uncertainties that you spoke of in your presentation, how could they impact Digital Industries' market environment?

[Interpreted] The geopolitical macroeconomic uncertainty -- I'm sorry, well, 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. So 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.

So it's nothing which is currently majorly on our radar except for the war-related topics that we spoke of that you also mentioned. But there is no specific pressing matters that we have on our radar. Of course, tech restrictions can hit you very quickly if certain restrictions are imposed. But at the moment, there is nothing really there. Nothing specific.

[Interpreted] Yes. Sorry, maybe I can just add on to this, Ms. Bienert. What we, of course, also see is -- this is about the Middle East crisis, is potential secondary effects that could result from that, so supply chain impact and such. Of course, we also are monitoring that very closely on a daily basis. But 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 impact on our business.

[Interpreted] I currently see no more questions in German. [Operator Instructions] We have one other question from Stephan Grossmann, Frankischer Tag.

[Interpreted] 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 a earlier opportunity? And why did you not take that opportunity?

And 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 Ms. Bienert also said that competitiveness is supposed to be strengthened further especially in the DI, which presumably also entails restructuring. So how will this continue?

[Interpreted] Well, on to Healthineers, we did cover that in great detail here. It's about simply figuring out certain topics regarding services, regarding loans, simply financial topics that have to be moved from A to B. But I think the biggest point is the tax impact. We need a reliable statement from the authorities, which we have not received so far. And before we have that, we cannot initiate even an extraordinary Annual General Meeting.

And that timeline has been breached. We've given the timeline. So all of that has to be prepared, all the necessary reports and so on. And so yes that is now -- 2, 3 weeks ago would have been the perfect deadline. We still don't have a firm, reliable statement. But the good news is the conversation 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. So we are optimistic.

But once we have it, we can get started. And of course, that moved us to say, okay, we will just continue with the regular process. By the way, this is just a regular process regarding such spinoffs, right, that you do it via the AGM. And that's exactly what we will be doing as announced in the regular way.

And 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. So those are simply measures that we have to take in order to maintain our competitiveness, That's, of course, also the cost position on the one hand. But then 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, the UAI for also our customers also in Germany, in Europe. We've shown what we can do in the software space there. And so 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.

[Interpreted] We now have no more questions in the German lines so we're going to switch into the English line. The operator is going to switch to the English line. So please bear with us. This is going to take a second.

[Operator Instructions] And the next question comes from John Revill from Thomson Reuters.

Maybe let's jump to the next one and...

Then we try the next one for this. The next question then comes from Marilen Martin from Bloomberg News.

I have a question on China and the value from money products that you mentioned. So is that impacting your margins in China as well? And then as well, like related to that, which segments -- which products are you most under pressure already from local competitors, like Inovance? And then 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?

Yes. Thank you. Super relevant questions. Starting with the margins. In Q1, we saw our competitors increasing their prices. So we didn't do that again in Q2. So 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. So then you have a very strong position. And we do that.

On top comes that we are leveraging our technology, which we have gives us a competitive advantage, I mean, technology which scales globally, so which is really scaling, which gives us another advantage. So we are very happy with these products. They land extremely well in the market, both the first 16 and the other 26 products. which are -- 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. And this is basically the focus which we have, drives and controls. We work on both, but also including some switching technology where we also launched new products which has successfully hit the market. And we are very proud to also talk about our smart POC controller, which is really setting a new benchmark in price performance in the market. And this is where we really have a good chance to defend our market and market share.

The clear idea is not only defend but to win market share, and we could win customers back with our strong product which we launched. And which brings me to the last one. Selectively some of these products go also on the global markets. And you see already a demand coming, for example, from India and other places, where these products -- we will see these products in these markets, too. And Veronika has another point.

Maybe as well about our sentiment for the third quarter. So building really on March's very strong performance, April sustained 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.

So it looks like there are no further questions in English. [Operator Instructions] We can see Mr. John Revill has signed up for our questions, Mr. John Revill from Thomson Reuters.

Hello? Can you hear me now?

Yes. We can hear you now.

Super. Sorry about that. I'm a bit with technology. There we go. And welcome, Frau Bienert. So 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? And how much of this is to do with ForEx and the tariffs? Could you just explain what's going on with them? What's been -- where the ForEx has come from, the ForEx impact there and also the tariff thing there? Because 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. So that's my first question.

And then the second one is just on your outlook. You're saying you see no impact thus far from the Middle East. But I was wondering, just as a general if it's a global economic slowdown. I mean, the IMF lowered their forecast for the year. So do you see any kind of economic slowdown globally affecting you guys? Or if not, why not? And what gives you kind of confidence to keep things going?

So let me -- you come later with the margins. I'll talk a little bit about the tariffs. So the tariffs, this is an impact which hits our Mobility business with 170 basis points top and bottom line, and that's basically material, I mean, which is they're working on aluminum and other components which are affected. So this is something what we -- this was through the recent changes. They don't know the change. Sometimes they include the material within components, like they did from machine builders. This is the point.

The outlook -- so 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, then it 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 can really make a judgment. So far our -- let me start with our revenue coming from the Middle East. It's 3% to 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.

So therefore, in the indirect impact we talked about, so if inflation would go up further for the rest of the year, then we would see that in our markets. But the base assumption is, as I said before, that it will not drag on for the rest of the year.

But 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. But because of -- I mean, the oil prices are still kind of rising. That's still coming. So you don't see that as a kind of particular headwind moving forward?

Again, it's hard to say. It's indirect. Now how much does an increased inflation now impact on the investment behavior. 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. So this is not fully directly coupled. To some extent, it is. And if it drags on for longer, it would. But some investments, they go despite a short-term impact on, let's say, buying behavior of customers.

It's different for food and beverage. If people then stop buying more expensive food or whatever, then they have an impact. But again, since you're an investment cycle, it's a second derivative on this eventual and continued increase in inflation.

And on the first question, I'll hand over to Veronika.

So yes, with regards to margins, I think it's very important to highlight that the FX impact in Q2, I mentioned the 80 basis points. And this goes really along the different businesses. So we had in Digital Industries, you could see an impact of 90 basis points, or in Smart Infrastructure, 110 basis points negative. So this is really something we see there.

And with regards to tariffs in our businesses, it's only Siemens Mobility which has been impacted and then overall for Siemens Healthineers. But the other businesses, DI and SI, were not impacted by tariffs. So this is really something which we can see on our margins. But as you might recall, I mentioned as well the FX impact, in particular out of the U.S. dollar. So we expect that for the second half of this fiscal year, we see a lower impact going forward in comparison to the previous year quarter. So therefore, this is our assessment in terms of margins.

And you mentioned global economies. So 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. But we really run our efficiencies and productivity activities, and there's a very stringent follow-up in terms of our economic equation how we really run that. And then we said on a high diversified approach on across global -- on a global perspective and see where we really can make a difference with our offering there. So therefore, we are still in a very opaque environment. I'm confident that we can reach our outlook.

Could you explain us the mechanics of the FX thing, though, please? I'm not clear because I thought you basically you made things, say, in the U.S. for the U.S. So how does FX affect your margins? I don't -- can you explain the mechanics of that? Sorry.

The mechanics, so that's what you can see there. And so maybe what is very important for us is really that we ensure with 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. So therefore, that's what Roland outlined before, that we increased our production facility, for instance, in the U.S. so that we can net that. And similar, we do that, for instance, in Asia, where we can see as well a volatility from an FX perspective.

But could you explain the mechanics of how it actually works, as in like 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 the weakness of the dollar? How does that reduce your margins overall then?

So then maybe there was a misunderstanding. Really on a comparable basis, if you look at our margin quality on a comparable basis, then of course, the relevant FX margin impact is deducted. So therefore, that's what I highlighted, that if you really deduct the margin impact on the different businesses, then you can see that we have a very favorable performance in the different businesses. So if you have it on a comparable basis, then we run -- for instance, for Digital Industries, we are FX comparable at 19.4%, for Smart Infrastructure at 19.7%, yes, if you deduct the FX impact.

I just wanted an explanation, sorry, of how it actually worked in terms of why did your margins go down, though, because of -- what, because you're just getting less euros now as a result. It's just a translation effect?

We still have traffic of flows between Europe and United States, for example. I mean, it's local for local content at 85% level. So obviously, the rest is also not local for local.

But maybe one more point on the margin. Remember that last year, we had a 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-net effect, so to speak, which doesn't repeat this year. So therefore, this explains our -- basically the drop in absolute terms of our profitability.

But maybe just to add from my side. So we really need to differentiate translation effects and transaction effects and our hedging process. So Siemens is exposed to certain currency effects, so mainly involving in the U.S. dollar area, British pound and currencies from other emerging markets, particularly the Chinese yuan. But Siemens is still as well a net exporter from the Eurozone to the rest of the world.

And so as a result of a weak euro, this principle is favorable for our business and a strong euro in principle is unfavorable. So therefore, we mitigate a significant portion of our currency risk through natural hedging, what I just tried to explain, for instance, factory production site which we are diversifying. We do the similar thing, for instance, for R&D activities, that we are diversifying that as well on a global basis. So therefore, we are looking for a global distribution of production facilities.

And then in addition to this natural hedging strategy, which I mentioned, we also hedge currency transaction risks, and so using derivative financial instruments. But of course, if we 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 effects, especially in the product business. So here, we minimize the currency risk through rolling hedges at least for 3 months in advance, yes.

And 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's term. And the translation risks are arising over the conversion of the company financial statements into the group currency plan, yes.

Excellent. So it's a twofold thing then. It's mainly translation.

John, we are running out of time so maybe we can take this off-line.

Okay.

Exactly. So 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 off-line, John. Thank you very much for your interest.

And our conference call for analysts with Roland and Veronika will begin shortly at 9:30. And the analyst call will be broadcast live at siemens.com/analystcall. And you will hear from us again at the latest on August 6, 2026 when we will release our third quarter results.

And 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, [Foreign Language]. Goodbye.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Good morning, ladies and gentlemen, and welcome to the Siemens 2026 First Quarter Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are, therefore, subject to certain risks and uncertainties.

At this time, I would like to turn the call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to our Q1 conference call. All documents were released this morning and can be found also on our IR website. I'm here today with our President and CEO, Roland Busch; and our CFO, Ralf Thomas, who will review the Q1 results. As always, we will have time for a lively Q&A. Please be aware that our AGM starts right after and therefore, we must limit the time of the conference call to 45 minutes.

With that, over to you, Roland.

Thank you, Tobias. Good morning, everyone, and thank you for joining us to discuss our first quarter performance ahead of our AGM. We delivered a strong start to fiscal 2026 and generating clear momentum for continued value creation for our stakeholders. While geopolitics are making headlines and creating substantial volatility, we are focusing on opportunities to drive collaboration, competitiveness and customer value. I will share some more examples in a moment.

Now let me outline some of the key highlights of the first quarter and give credit to our hardworking team, which has earned our customers' trust again. Book-to-bill reached a healthy 1.12, lifting orders backlog to a record high of EUR 120 billion. Nominal top line growth rates were materially impacted by strong euro as expected. Group orders reached EUR 21.4 billion, up 10% on the prior year, led by massive momentum at Smart Infrastructure. The team reached a quarterly order record in healthy end markets. It was supercharged by several large data center orders mainly in the United States to build out cloud and AI infrastructure.

Digital Industries posted an encouraging start, although the macro environment is still offering only limited support for key customer verticals. Both Automation and Software delivered double-digit order growth on easy comps. Our Automation business was particularly strong in China, where our fully localized portfolio has gained further traction in a competitive environment. We continue to launch new products in the first quarter, and there are more to come during fiscal year 2026.

The Software business is capitalizing on strong demand in healthy end markets. Mobility orders were clearly up, and we have a compelling pipeline of awarded larger contracts. A great success was announced last week. We will deliver more than 200 train sets for the world's largest open rail system for fully automated train operation in Copenhagen. Overall, revenue growth reached 8% with broad-based growth across all businesses. A very strong contribution came from Smart Infrastructure Electrification business, up 22%. And the Software business at Digital Industries achieved 11% growth.

Automation increased a healthy 9%. I'm pleased to see that revenue was up in all regions. The Americas led the way, up 11%, fueled by strong momentum in the United States. EMEA grew 8% and Asia, Australia was up driven by India, which was up 15%. Stringent execution and sound operating leverage converted into a strong Industrial business profit of EUR 2.9 billion.

Profit margin expanded to 15.6% and topped market expectations despite a currency headwind of 60 basis points. These results translated into earnings per share pre PPA of EUR 2.80. After an extraordinarily strong fourth quarter for free cash flow, we saw a seasonal swing back and delivered EUR 700 million.

After a strong start, we raised and narrowed our group profit for earnings per share. Ralf will give you some more color. In November, we laid out our ONE Tech Company program for focusing on highly synergetic portfolio to drive scale. We are working diligently on all necessary steps to execute our plan to deconsolidate Siemens Healthineers, and we are making good progress. In early Q2 of the calendar year, we will update you on further details as planned.

Just a few days ago, we divested our Airport Logistics business in the United States to Vanderlande and have thus now closed this remaining portfolio topic entirely. Four key levers drive our growth ambitions as ONE Tech Company. First, Grow Digital. At the world's leading tech event, Consumer Electronics Show in Las Vegas, we showcased how customers and partners are harnessing AI to transform their businesses. With our AI-enabled technologies, deep domain know-how and trusted partnerships, we are accelerating the industrial AI revolution. More in a minute. Second, Grow Regions. Together with the EPC expertise of Samsung C&T, we will deliver customer-centric, smarter and more sustainable solutions in infrastructure projects such as for airports, hospitals and data centers.

This is another great opportunity for us to bring together our strengths in digitalization, electrification and automation across Siemens. Six landmark projects in Saudi Arabia, Thailand and Canada have initially been identified for collaboration.

Third, Grow Verticals. Data centers demand has materially exceeded our expectations and reflects our design and delivery capabilities. The team grew our revenue in Q1 by around 35%. We are confident that we will be able to keep up this space through fiscal 2026. We will achieve this by combining our strengths with a best-in-class partner ecosystem. For example, together with nVent, we developed a liquid cooling and power reference architecture, purpose-built for hyperscale AI workloads based on the latest NVIDIA systems.

Our technology partnership with Delta Power Solutions will provide prefabricated modular power solutions. Together, we will cut data center deployment time by up to 50% and CapEx by up to 20%. Equally important, we will reduce carbon emissions as well. Fourth growth lever, Grow AI. One of the best reference cases is our own native and AI-powered manufacturing factory for motion control in Nanjing, China. Our team there has improved lead times, time to market and productivity decisively through constant digital transformation and by using more than 50 AI applications.

Now our Nanjing factory was recognized as the 5th Siemens location to earn the World Economic Forum's Global Lighthouse Award. I briefly talked about the importance of mutually beneficial partnerships to bring AI to the real world, use it to create impact and then scale it. At the CES, we showcased a number of examples.

Together with our long-standing partner, NVIDIA, we are building the industrial AI operating system throughout the entire value chain, from design and engineering to manufacturing operations and into supply chain. Our customers can develop products faster with the most comprehensive digital twins, simulate complex systems and processes in software and then adapt production in real life.

Our primary product launch was the Siemens Digital Twin Composer which does exactly that. It creates a virtual 3D model of any product process or plant. At CES, our pilot customer, PepsiCo, shared how they have used it with real-time data to simulate plant operations for selected manufacturing and warehouse facilities. The results are impressive. Within weeks, our teams optimized and validated new configurations to boost capacity and throughput by 20%, a highly scalable approach.

As another element of our partnership with NVIDIA, we will build an AI accelerated portfolio on GPU technology, including AI native electronic design and simulation as well. And we will closely collaborate to design the next generation of AI factories and optimize each other's operations through shared innovations. We deepened our high-profile partnership with Microsoft as well.

Looking ahead, we are expanding the co-build and award-winning Industrial Copilot to form a comprehensive suite across the industrial value chain. In addition, 9 new AI-powered copilots are being deployed in our software offerings, such as Teamcenter or Polarion, to streamline product data navigation and drive operational efficiency and cost savings. This steady stream of innovations is also supporting our growth in Digital Industries Software business.

Organic ARR growth, again, reached a very healthy level of 10% over the prior year. In addition, our acquisitions, Altair and Dotmatics are adding to our success by delivering a business performance in line with our expectations. The integration of Altair is progressing well. There, around 2/3 of the measures for achieving the cost synergy target of USD 150 million have already been implemented. As key measure from a financial as well as a cultural perspective was bringing our teams together by consolidating our own 100 sites. At the same time, we're continuously strengthening our EDA portfolio with tuck-in acquisitions.

With these positive perspectives, over to you, Ralf.

Thank you, Roland, and good morning, everyone. Let me share more about our strong start to the new fiscal year and our expectations. Orders for Digital Industries at EUR 4.8 billion were 13% above the prior year with a book-to-bill of 1.07. It was encouraging to see that DI's Automation business showed a clear uptick sequentially and improved for the third consecutive quarter. Book-to-bill was clearly above 1 in both Discrete and Process Automation. However, overall market dynamics are only gradually improving and provide limited visibility only.

On top of a record fourth quarter, DI Software business again delivered significant growth over the prior year with orders close to EUR 1.7 billion for a book-to-bill slightly above 1, driven by some large orders in EDA. Our backlog at Digital Industries increased moderately to EUR 9.8 billion driven by automation. Revenue for DI increased 10%. Therein, its Software business achieved strong growth of 11%, driven by healthy double-digit growth in EDA and simulation.

The core PLM business was up 7%. Automation revenue was up 9% to EUR 2.9 billion on the back of strength in the short-cycle factory Automation business. Discrete Automation increased 11%, while Process Automation was slightly up. Strong profit conversion on the improved top line in automation, supported by a very healthy product mix and a solid contribution from the Software business drove DI profitability to a higher-than-expected 17.8%. Executing adequate pricing measures and productivity gains resulted in a clearly net positive economic equation in the first quarter, which we will maintain in fiscal '26.

Integration-related costs for Altair and Dotmatics had a magnitude of 70 basis points in the first quarter, and we expect this number to reach around 100 basis points for the full fiscal year. Both numbers are without severance, which will play a minor role in the further integration process. Finally, as anticipated, negative currency effects were a material burden on DI's margin development and amounted to around 110 basis points.

After a very strong Q4, Digital Industries had a softer start in free cash flow at close to EUR 400 million. Looking at the regional top line perspective, the DI's Automation businesses delivered growth across the board on easy comps, albeit with varying dynamics. As mentioned, China showed particular strength, up double digit in orders and revenue with a book-to-bill clearly above 1. The contribution of our local Chinese portfolio increased further. Growth was driven by discrete automation supported by healthy demand from distributors.

Germany was solid, while other parts of Europe and the U.S. showed some improvement trends driven by localization and to some extent, also by supply chain resilience efforts in several of our end markets. Verticals like Electronics and Semiconductors as well as Aerospace and Defense are supporting growth. DI Software business again executed well in favorable end markets. A key contributor was the United States with substantial growth.

After a successful start, we confirm our fiscal '26 guidance for revenue growth of 5% to 10%. We expect the profit margin to move towards the direction of the upper half of our guidance range of 15% to 19%. DI is continuing its transformation by driving structural improvement measures, optimizing its sales approach and launching innovative products.

For the second quarter, we see DI orders up over the prior year soft level with the contribution from the automation business and growth in software despite a lower large order volume from EDA, both sequentially and over prior year. We anticipate that DI revenue growth will be up mid-single digits supported by growth in automation and software. For the second quarter, we anticipate a profit margin around the midpoint of the annual guidance range.

Now let's turn to Smart Infrastructure, which again delivered an outstanding performance in the first quarter. The team achieved strong top line growth in healthy end markets along with further margin expansion once again. In total, orders were up 22%, reaching a record level of EUR 7.2 billion. This increase was driven most notably by growth of 38% in SI's Electrification business and 22% in its Electrical Products business. Their order growth benefited from a high volume of large data center wins across numerous hyperscalers and colocation providers.

Data Center orders amounted to a record high of EUR 1.8 billion, of which a bit more than half were larger in size. Book-to-bill reached an outstanding 1.30. SI's order backlog at an all-time high of EUR 20.2 billion provides excellent visibility for the remainder of fiscal '26. Revenue growth was broad-based and reached 10%, which was above expectations with the largest contribution coming from the Electrification business, up 22%.

Stringent backlog execution again led to further margin expansion, which rose 210 basis points year-over-year to 19%. The Q1 margin included commodity hedging effects of plus 100 basis points due to volatile copper and silver prices, which more than compensated for a negative currency impact of 60 basis points. The business continued to benefit from economies of scale due to higher revenue and ongoing productivity improvements. Free cash flow showed a solid start for cash conversion. As expected, we saw a seasonal buildup of operating working capital.

Looking at the regional top line development, there was robust demand across the board. The U.S. stood out with massive order momentum, up 54%, led by data center demand, but also on strong bookings in buildings. It's good to see that Germany as well as Europe and the Middle East delivered healthy top line growth across businesses and along with stringent backlog execution driven by the Electrification business.

China showed some improvement on low levels amid continuously soft real estate market. SI Service business delivered 7% growth, driven by double-digit growth in the Americas and Asia, Australia. We continue to expect a very consistent end market trend with data centers and power utilities as primary growth engines.

For the second quarter and for the full fiscal year, we expect the comparable revenue growth to be in the upper half of the guidance range of 6% to 9%, strongly supported by order backlog. For the second quarter, we anticipate a profit margin within the full year's guidance range of 18% to 19%, yet heavily depending on development of commodity prices and exchange rates. For full fiscal '26, we expect the profit margin to be within the upper half of our guided range. And of course, we will diligently work on adequate pricing measures to pass on higher commodity costs, if needed.

Mobility started fiscal '26 with a solid performance. Orders at EUR 2.9 billion were above the prior year, yet the book-to-bill was at 0.90. Order backlog stands at EUR 51 billion with a further improvement of a gross margin profile. This includes EUR 15 billion of highly attractive service business. As Roland mentioned, several high-volume contract awards are in the pipeline for actual booking over the next few quarters. In the second quarter, we already recorded our share as consortium leader of the EUR 3 billion S-Bahn Copenhagen project.

Revenue in the first quarter was up 9%, driven by strong rolling stock and customer services contribution. Profit margin improved to 9%, supported by margin expansion in the rolling stock business. Free cash flow saw a swing back in the first quarter after an exceptionally strong performance in the prior year's fourth quarter.

Looking at project payment profiles and the timing of order awards, we expect the second quarter to be rather soft before we see a material catch-up in the second half of fiscal '26. Our assumption for the second quarter is that revenue growth will be temporarily softer on tough comps in the low single digits. Our full year outlook for revenue growth is unchanged in the range of 8% to 10%. Second quarter margin is seen within our full year margin guidance of 8% to 10%.

Our below IB performance, as shown on Page 16 in the appendix was as expected. Let me point out that we recorded a gain of around EUR 200 million from contributing Fluence shares to the Siemens Pension Trust in the first quarter. It had been mentioned in our annual report as subsequent event already and was already part of our guidance in November '25.

Free cash flow performance in the first quarter at close to EUR 700 million was off to be a seasonally solid start. After an exceptionally strong fourth quarter, operating working capital increased by approximately EUR 1.3 billion. By paying a settlement of around EUR 400 million, we closed the long-time legacy chapter of the removal of nuclear waste in Hanau in Germany. The obligation stems from a public law contract, which was approved in September '25.

We are very confident that we will continue to achieve industry benchmark levels of double-digit cash return once again for fiscal '26. With a capital structure of 0.9x for industrial net debt over EBITDA and an industry-leading AA rating by both Standard & Poor's and Moody's, we continue to act from a position of financial strength.

On top of the dividend of EUR 5.35, we are materially adding to shareholder return through our accelerated share buyback. Over the last 2 years, we have accumulated a buyback volume of EUR 4.4 billion in the current program, well ahead of the initial schedule. In addition, we intend to retire 18 million treasury shares in March and will reduce our capital stock to 782 million shares accordingly.

Finally, let me conclude with our raised outlook for the Siemens Group. Following our strong start to fiscal '26, we now expect to reach the upper half of our revenue growth guidance of 6% to 8%. And we increased our EPS pre PPA guidance for the Siemens Group and now expect to reach a range of EUR 10.70 to EUR 11.10, up EUR 0.20 at the midpoint. In a time of highly volatile geopolitics, we continue to create value by delivering profitable growth and resilient cash generation.

With that, I hand it back to Tobias for the Q&A.

Thank you, Ralf. And congratulations to a remarkable milestone, representing or presenting the quarterly results for the 50th time. We are now ready for Q&A. [Operator Instructions]

Operator, please open the Q&A now.

[Operator Instructions] The first question comes from the line of Benjamin Heelan from Bank of America.

If we can't hear Ben, then we take the second one.

The next question comes from the line of Ben Uglow from Oxcap Analytics.

I guess it's more of a kind of theoretical one, given some of the price moves we've seen in the market in the last week or so is the whole issue of software and SaaS. And I mean, frankly, we're all pretending to be experts and we're not. Roland, you are an expert. Could you give us your kind of candid, honest simple assessment for your Industrial Software businesses, what are the real risks versus what are the opportunities? So if we kind of balance out how you are thinking about it internally, between EDA, the PLM business, whether you have to make more investments or whatever, how are you thinking about this, we say, debate? What would be your perspective?

Yes. So I'll give it a try. And it's hard to be an expert on technology, which is changing so fast. But so you have basically 3 levels of software, and I make it rather simple. The first one is, call it, call center kind of software, which is more the interaction with human beings and the like chatbots. This is already gone. I mean, this was AI dominated. So take that off.

The second one is, I call it more deterministic software, workflow-based software, multi-workflow-based software, which number one, has a very strong database, a structured database, but then does repetitive tasks. This is the next one, which has a chance to, let's say, see substantial changes. Where we feel very comfortable is what we call deep software, physics-based software, which is really adding value to AI. So it avoids hallucination. Is it hallucination in the design? Is it hallucination on the shop floor? It always gives you a confinement on what really is true and what's not, what's physics and what's not.

So take an example of simulation, you simulate something. And of course, AI can give you a lot of benefit. You can, for example, you don't have to simulate in all corners of this space. You can simulate only in certain areas and come very quick to a conclusion. That can accelerate simulations 10,000 times. However, you always want to double-check then, is that still within the boundaries of physics.

And that's a reason why we believe this kind of software, and that's basically our software stack, which we have in why this software is more enhanced, and in doing -- in enhancing the software with AI, it can also spread faster. So more people will use it and simulate it. So digital twins can -- the adoption and the usage of digital twins can be even enhanced in using AI technology because, again, it goes faster and you have a much, much more -- have a higher adoption rate.

Last point, what's definitely a safe bet is things like Teamcenter and Dotmatics. This is authorization tools, database with domain know-how embedded. Teamcenter, for example, which holds the BOM in a structured way -- in a very, very structured and domain-based way of holding data. That's something where you really -- this is a safe bet because this can only grow in that dimension. I hope that helps.

The next question comes from the line of Phil Buller from JPMorgan.

Roland, you made a question -- reference to an update on Healthineers in calendar Q2. Should we infer from that, that's a reference to time line for approvals, a potential EGM type vote or something lighter like a publication of deconsolidated financials, just to better understand what we may get an update on, please?

So number one is -- we just said that we will come in Q2, the calendar year to come with an answer. And there are a lot of things which we are looking at. Number one is obviously tax impact. We will have clarity by then. We still have services which Siemens delivers to Healthineers. We talk about license fees. There's financial aspects. So we have -- we put that all side aside and come to a conclusion what's best for the share of -- for the Siemens shareholders and Siemens Healthineers shareholders. The delta between the 2 options are 6 months, plus or minus. So you have to have that in mind. But we make diligent decisions once we have all the facts in our hands and then inform you accordingly.

The next question comes from the line of Benjamin Heelan from Bank of America.

The question I had was on your comments on the DI margin. You talked about being in the upper end of the range. But can you talk through some of the items a little bit? Why can you not be towards the very top end of the range? Because on my numbers, the FX headwind becomes a little lighter as you go through the year, software should continue to grow. So any comments around that would be super helpful.

So thanks for that question, Ben. And let me first start saying that we've feel that DI is doing a terrific, good job on acting in a really challenging market at the moment. And I think you agree also from that what you hear from peers and general statements on the market development, that it makes a lot of sense to stay vigilant and look at matters because visibility may be there for given -- at a given point in time, but it's very volatile. So we will do that and continue to be very, very diligent in our assessment for the way forward.

But talking about the performance of the first quarter, as I mentioned, I mean, we had a strong showing in software again with a big portion of EDA and also Simulation business. I mean the new acquisitions, Altair and Dotmatics, they are integrated and working really like Swiss clockwork. So we are very happy with the assessment of the current momentum being created there. But the driving force when it comes to profitability and also growth momentum for the first quarter was automation.

First and foremost, we are very happy to see factory automation with a high conversion and growth back that has massive and positive impact on the mix, obviously. Growth momentum is there, including China. I had been mentioning in the press call that our local-for-local developments in the value-for-money category that is gaining momentum and is gaining ground. So we do see growth rates of 40% plus in that field, even though the overall volume still being low triple-digit million, but it's definitely contributing and is clearly showing that we can do that. We are in a position of strength, and we can also compete in a highly competitive market environment like China.

By the way, public sources are clearly telling us that we are not losing market share there. There's very encouraging news also from neutral sources like MIR, data that brokers are commenting on. So we feel encouraged by that as well, fact based, not own sources. That's important to us in that field to validate our own perception of the market. And then as you do know, we have been putting a lot of measures in place, adjustments being made that now start bearing fruit. We are very, very actively driving productivity, including AI features being used by ourselves.

And we also, as you do know, and as to the competitors and peers, pricing is also something we are looking at. So new product, adjustments bearing fruit, productivity is driving matters forward. The markets themselves, I mean there's still a couple of question marks around automotive with a very diverse picture globally when it comes to geographies. But momentum building up, as you do know, and as we reported on in semis in Aero and Defense and also in Pharma, and also machine builders, there is at least some green shoots that we can see and also can book, which is more important than seeing them only.

However, there is going to be challenges on the way forward. The investment sentiment is pretty shaky. We see that time and again, markets are also nervous, and there are lots of debates around geopolitics, around potential tariffs back and forth that are not encouraging the sentiment of investments being made on a broad basis continuously and foreseeable in the quarters to come.

And last but not least, I would like to mention again that the exchange rate impact is massive. We had been indicating that to you when we gave our annual guidance in November. You saw that DI was hit by 110 basis points in the first quarter. The quantum leap of the exchange rates from the first to the second half of last fiscal year, still needs to be digested. And I would also like to use the opportunity to clearly point out that the second quarter will also not be a walk in the park in that regard.

So in a nutshell, we see very good momentum in an extremely attractive business in which we are clearly a technology leader. And with that, we see the opportunities arising, we grab them, but we are also mindful of the risks. And therefore, we stay with that what we said so far, which we believe is encouraging for the quarters to come.

The next question comes from the line of James Moore from Rothschild & Co Redburn.

I wondered if I can make a clarification before a question. Just, Ralf, on the DI margin, you talked about it being led by software. Could you comment whether the operating margin progressed as well? My question is on Smart Infrastructure. Great to see such good data center orders. Roland, I wondered if you could comment on the architectural changes to 800-volt DC and whether you would agree that we're going to switch from low voltage towards a higher low voltage or medium voltage AC to DC and mechanicals to solid state? And what you think the time line on that looks like as to when those new architectural orders will come in?

And where you really are positioned in DC in solid state across circuit breakers and switchgear? Do you have any new products coming? Or is it just the existing hybrid solid-state products that you already have?

So let me start with the clarification on the DI margin. I just started my little talk on that with software. But I clearly said that the driving force was automation. When it comes to conversion, I said with regard to Software that we had after a strong fourth quarter, again, a good quarter when it comes to EDA and Simulation business. These are very attractive markets. And also we are an important player there, obviously.

So therefore, there was software contribution, but the main driver for the conversion into profitability was clearly coming from automation bouncing back, if you wish, and doing their homework when it comes to the adjustments bearing fruits and also productivity gains. And the new products that we have been introducing in China for China, we said the last time that we are out there to stand the heat of the Chinese kitchen, and we certainly do.

James, yes, we are launching a new product and stay tuned. This will go out as 800-volt DC. Actually, I put it on stage today. You can have a look at it. And yes, there will be a change from AC to DC for many reasons. Number one is the losses, you can reduce losses. And number two is the switching speed. Our solid-state switching switches 1,000x faster than the normal AC or mechanical connector switch, which prevents any kind of impact on GPUs, Obviously, this is a very expensive stuff.

Solid-state transformers is a way to go. And there are 2 alternative concepts, so to speak. We believe solid-state transformers will make its way, and we are working on it about, also in a partnership bringing new products. The question of penetration is that, obviously, you need to release the new AI factory code, so to speak, because this thing has to work. I mean it's -- we are working on it together with NVIDIA, by the way, to define this reference concept. And once that's released, I believe it will penetrate very quickly.

Why would it? Because the next generation of chips, they're going from $150 to $300 per unit. And that's a tremendous amount of heat you have to dissipate, which requires you to automate an AI factory completely differently. For example, you will go from a BCM, so building control units to really industrial-grade control units, which are much, much faster, which can react really much faster to the demand, which these chips have. You have to bring them into a very, very narrow band of temperature in order to protect them from degrading. And that has to be done really extremely fast and liquid cooling does its own because this allows you to make a very fast change.

So therefore, the pickup rate really depends also, by the way, on the customer. We have some hyperscalers, which are pushing very hard. Some others are more reluctant. So this is the reason, obviously, you can see that there's a certain, let's say, they are cautious to adopt new technology because once you have it on the ground, you better make sure that it works. But the trend is clear, and the pickup really depends on the next step of experience bringing DC technology. So we are quite -- we are very clear that this will work. And you're right, the more powerful these things get them the more you're pushing from a low voltage and medium voltage, medium voltage to high-voltage level. That's quite obvious. I hope that helps.

The next question comes from the line of Andre Kukhnin from UBS.

May I just follow up first on the Software side, and thank you for your perspective, Roland, very insightful. I just wanted to specifically ask about that potential risk about engineers starting to engage their agents and therefore, getting higher utilization per seat effectively and hence, maybe having less seats. Is that something that you can address with Altair like token model? Can you roll that out across your other offerings?

And the main question I had was really about pricing. You've touched on that. I just wanted to check in terms of the raw material price increases that we've seen, we've seen some evidence of price increases in China for, I think, both DI and SI products, especially DI. Could you share with us what your plan for Europe and U.S. in terms of price increases to offset that headwind?

On the first one, I mean, there's -- obviously, there's -- I don't know whether it's a risk because if you have so much more powerful tools, you eventually have more people using this technology. That's one thing. On the other side, yes, the utilization rate can't go up. Once we are embedding AI into our offerings, obviously, we would also charge for it. And that goes in the business model in direction of tokens because you want to charge once you use it, it's a little bit similar to the SaaS models, which we have. And you're right, this will be the path going forward.

We are -- and I think we are not alone that we didn't figure out completely how this monetization goes. It goes also back to the question on whether you're not using open or proprietary models behind it, how you use them. But that's exactly the direction which we see. And again, there will be a higher utilization rate per seat. For example, I said it before, when you don't have to simulate the whole different space, you can select, preselect. And by the way, we have a tool, we have a software tool, which also enables you once you are in the design phase that you just check out for 4 or 5 design points and then you come to a conclusion faster rather than going all the way through another couple of hundred simulations. Yes, super powerful, super speed, increases the productivity per seat. But at the same time, we believe this is rather than driving growth than hindering it.

Yes, Andre. With regard to pricing and raw material. I mean, you do know that we run our operations on the basis of what we call economic equation. It's a mandate for every business leader to make sure that any kind of cost increase, including material, of course, will be compensated with pricing and productivity measures. And we are very successfully applying that concept for many years. And we are also net positive for both SI and DI in the first quarter and will be that clearly for the full fiscal year when it comes to that economic equation.

We wanted to share with you, that's why we have been so explicit that raw material commodity hedges have been having massive impact on the first quarter's result, in particular on the SI side, not really material for DI. So it's obvious that spot prices are very volatile these days, and it can backfire in the quarters to come. That's why we are cautious on that matter, obviously. So short-term hedging is only a remedy for a relatively short period of time.

We typically are hedging and covering 75% plus for the next 3 months. That's what we do for exchange rate and also for commodities at the end of the day. So short term, we feel pretty confident that we can master those challenges. Mid and long term, however, it's obviously the task of the businesses to come up with a meaningful and prudent judgment how to compensate for that if it's staying higher for longer on the material cost side, we are prudently assessing that. We don't overreact.

You probably also witnessed in the past that our price increases have been fairly moderate compared to our peers, in particular in China. And that's what we did again. I hope you have understanding and I apologize that we, of course, do not share pricing strategies, and not by geography. But what I can share with you is that the overall impact is in the area of 1% to 1.5%, pricing impact in the first quarter. I guess we're going to stay with that for the rest of the fiscal year.

And we have been introducing a new price list in China as per January 1. I think that's public knowledge. Meanwhile, we don't intend at this point in time and do not have plans to change that again anytime soon. And with regard to the other geographies, it's pretty much along the same lines. We are running, and we are executing pricing strategies with a steady hand.

And also with respect to the trust that our customers do have in us. So therefore, it's, if necessary, one of the levers, it's not the only driving force that we do have to make sure that we stay successful with our operations time and again. And I would like to underpin that again, it's not only that we sell productivity tools to the market. We drink our own champagne, and we do that for many years quite successfully. So we feel encouraged that we can master that challenge in the quarters to come. However, we wanted to flag it out as a source of uncertainty to you.

We will take one last short question, please.

The last question for today comes from the line of Daniela Costa from Goldman Sachs.

I'll keep it short. I wanted to ask about free cash flow and then how should we think about that for the rest of the year, particularly the working capital buildup, given how strong the growth trends are? Should we think this is more of a next couple of quarters buildup? Or will we see a strong recovery?

Thanks, Daniela, for that question. I mean you can imagine that we are very intensively looking into that matter. We have been building up, I think, what we may call a successful track record throughout the last 6 years on that regard. So we saw a very, very strong fourth quarter.

I don't want to talk around the main focus of the exercise. Therefore, it wasn't a surprise that assets and the working capital environment have been building up, also preparing ourselves for higher volumes and the growth perspectives we are pursuing. Nevertheless, there was an extraordinary. That's why we have been so precise on the matter. The Hanau asset retirement obligation that we still had to pay for. It was booked in the years before, and there was an accrual form for that.

Now finally, after we got permit. I really mean it to pay for that after quite some time. It was unfortunate that it happened in the first quarter of the new fiscal year, which was a bit slow anyhow when it comes to cash conversion, in particular, in mobility. You heard that a couple of projects have been shifting. But in a nutshell, we are extremely, extremely convinced that we have installed all the processes around free cash flow generation so deeply into the organization.

I dare to say it's a cultural issue in the meanwhile that everyone knows what he or she needs and can contribute in that regard. It will be backloaded for mobility. I was very explicit on that one. I think we had quite a meaningful start for SI and DI in that regard. So I'm not worried about the matter, but the extraordinary EUR 0.5 billion impact of that onetime effect. It just had a massive impact in the first quarter, and we will come back.

Thanks a lot to everyone for participating today. As always, the team and I will be available for further questions. Have a wonderful day and goodbye.

Ladies and gentlemen, that concludes today's conference call, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.

Good morning, ladies and gentlemen. Welcome to today's conference call at Siemens AG. At the beginning, we would like to inform you about the fact that this conference is going to be recorded and broadcast as a webcast. [Operator Instructions]

With that, over to today's host, Simon Krause, Head of Media Relations and Executive Communications. Mr. Krause?

Good morning. And again, welcome to today's conference call for Q1 of this new financial year. As always, we have our CEO, Roland Busch; and our CFO, Ralf Thomas, in today's conference call. This quarter, of course, is a very special one. It is the golden quarter of our CFO, Ralf Thomas, his 50th quarter in this role. Congratulations.

Now before we get started, a couple of remarks. We, of course, published our Q1 earnings this morning. The presentation as well as the speeches of our Board members as well as any of the documents can be found at our website, siemens.com/press. There, you will also be able to find today's conference call recording. On top of that, of course, today, we have Siemens Annual Shareholders Meeting. Jim Hagemann Snabe and Roland Busch's speeches on the opening for the Annual Shareholders' Meeting are going to be available at siemens.com/press/annualshareholdersmeeting.

After the presentations at this earnings call, Roland Busch and Ralf Thomas will be available for your questions. And this conference call will end at the very latest at 8:15. I would like to once again 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.

Yes. Thank you. Good morning, ladies and gentlemen. Thank you for joining us this morning. At our Annual Shareholders Meeting later today, I'll be explaining to our shareholders what Siemens is doing to achieve the next level of growth. In a word, we are individually positioned -- ideally positioned to implement industrial AI in the real world and scale it with our partners. I'd be very pleased if you take the time to follow our Annual Shareholders' Meeting later.

But now let's take a look at the Q1 results and how we assess them. We got off to a strong start in fiscal 2026. Geopolitics are currently dominating the headlines and generating considerable uncertainty. Siemens is focusing on the opportunities we are creating. We are relaying our partnerships to increase our competitiveness and customer value. Before diving deeper, I'd like to outline the highlights of Q1, and I'd like to begin with a big thank you to team Siemens. All our people have worked hard to deliver great results once again.

Our book-to-bill ratio, that is the ratio of orders to revenue was a healthy 1.12. As a result, our order backlog hit a record high of EUR 120 billion. As expected, the strong euro materially impacted our nominal revenue growth. Orders at group level increased 10% year-over-year to EUR 21.4 billion, led by a massive momentum at Smart Infrastructure. The team set a quarterly record for orders with major contracts to expand cloud and AI infrastructure for data centers, mainly in the U.S., which is still a booming market.

Digital Industries got off to an encouraging start, even though the economic environment in the key industries offered only limited support. Both automation and software delivered double-digit order growth compared to a weak prior year quarter. Our automation business was particularly strong in China, where we are developing more and more products in the country itself. As a result, we're increasingly successful vis-a-vis our local competitors. We launched a number of new products into the market in Q1 with more to follow in the course of fiscal 2026. Our software business benefited from strong demand in various industries.

Orders at Mobility increased significantly and more are likely to become -- to come because we are the preferred bidder in a number of tenders. And we've just scored another great success. Last week, we landed an order to deliver more than 200 new trains to Copenhagen suburban rail system, which will be the world's largest open rail system with automated train operations.

Overall, revenue growth totaled 8% to which all businesses contributed. Smart Infrastructure's electrification business was again very strong, posting an increase of 22%. Digital Industries software business grew 11% and its automation business was up a healthy 9%. I'm particularly gratified that revenue increased in all regions. The Americas, fueled by the U.S. led the way with an increase of 11%. Europe, Middle East and Africa or EMEA grew 8%. Asia, Australia was up 5%, driven particularly by India, which achieved an increase of 15%. Profit Industrial business totaled EUR 2.9 billion. The profit margin rose to 15.6% and exceeded market expectations, although negative currency translation effects cost us 60 basis points.

Basic earnings per share before purchase price allocation accounting or EPS pre-PPA reached EUR 2.8. Free cash flow in Q4 2025 was extraordinarily strong. We experienced a seasonal swing back in Q1 '26. Free cash flow in the quarter totaled EUR 0.7 billion. After these impressive results and our strong start, we are raising our outlook for earnings per share at group level and narrowing its target range.

In November, we concretized our ONE Tech Company program and announced an important portfolio-related decision regarding Siemens Healthineers. We are working diligently on the steps necessary to execute the company's planned deconsolidation. We are making good progress. We'll provide you as planned with more details in the spring. One further note about the portfolio topic. Just a few days ago, we sold our airport logistics business in the U.S. to Vanderlande. As a result, we are now completely close to the chapter on this topic.

To reach the next level of growth, we are applying the levers. First, grow digital. At the Consumer Electronics Show in Las Vegas in January or the CES for short, we showcased how our customers and partners are harnessing industrial AI to transform their businesses. With our AI-enabled technologies, deep domain know-how and strong partners, we are accelerating the industrial AI revolution. I'll have more to say about that later. Second, grow regions. We've entered a strategic partnership with Samsung C&T. The offerings from our ONE Tech portfolio will enable us to provide solutions for smarter and more sustainable infrastructure projects such as for airports, hospitals and data centers.

The partnership is a great opportunity to utilize our unique combination of digitalization, electrification and automation for the benefit of our customers. To start off with, we've already identified infrastructure 6 infrastructure projects in Saudi Arabia, Thailand and Canada for the collaboration, airports, data centers and hospitals.

Third, grow verticals. The demand for data centers has considerably exceeded our expectations in this area with 2 advantages. First, our products are in demand because we are also closely involved in designing data center architecture. And second, we can deliver because we've expanded our capacities. Our team increased revenue in Q1 by around 35%. We are confident that we'll be able to maintain this pace throughout fiscal 2026.

We'll do it by combining our strengths with a first-class partner ecosystem. For example, we've joined forces with nVent to develop a liquid cooling and energy supply architecture for data centers, especially designed for the AI workloads generated by the latest NVIDIA systems. And with Delta Power Solutions as technology partners, we are providing prefabricated modular power solutions. Together, we cut data center deployment time by up to 50% and reduce capital expenditure, that is CapEx by up to 20%. Equally important, we will also reduce carbon emissions.

Fourth, grow AI. One of the best examples of how we ourselves are profiting from industrial AI is our digital native factory for motor control in Nanjing, China. Our team in Nanjing is rigorously exploiting digitalization in AI and using more than 50 AI applications. The result, faster production, shorter time to market and higher productivity. The Nanjing facility has just received the World Economic Forum's Global Lighthouse Award, the fifth Siemens location to gain this honor. At the CES, I discussed how we are bringing industrial AI into the real world and how we are scaling it at our customers by harnessing our technologies, our domain know-how and our strong partnerships.

We've been collaborating with NVIDIA for years. Today, we are cooperating even more closely in order to build an AI-based operating system for all industries across the entire value chain, including everything from design and engineering to manufacturing, operations and supply chains. Our customers can develop products faster, use comprehensive digital twins to simulate complex systems and processes in the digital world and adjust production in real time. We presented our digital twin composer, which makes exactly this possible at the CES. The composers innovative software combines complex digital twins and connects them with valuable data in real time. It produces the connection to reality, so to speak. Via our operational automation software, we can also directly control real machines and systems.

At the CES, PepsiCo, our pilot customer reported on how they use real-time data to simulate production and logistics at some of their locations in the U.S. The results are impressive. Our teams optimized operations in the digital world. Within a few weeks, they succeeded in increasing capacity and throughout by 20%. It's a highly scalable application for industrial AI. Our software for chip design is another component of our partnership with NVIDIA. We are making our software up to 10% -- sorry, 10x faster by rigorously using NVIDIA technology. We'll also collaborate closely with NVIDIA to build the next generation of AI factories. In addition, we'll use NVIDIA technologies to optimize our own operations. NVIDIA will do the same with our technologies.

We've also deepened our partnership with Microsoft, another key partner. Together with Microsoft, we're expanding the co-build and award-winning Siemens Industrial Copilot to form a comprehensive suit across the entire industrial value chain. In addition, we're integrating 9 new AI-powered copilots such as Teamcenter and Polarion into our industrial software to streamline product data navigation and make our customers' operations more efficient and cost effective.

Let's take a look at Digital Industries software business. Annual recurring revenue, or ARR, grew organically 10% year-over-year, a very healthy level. Altair and Dotmatics are also contributing to our success. Their businesses are developing as expected. The integration of Altair is progressing well. Our goal is to achieve cost synergies of USD 150 million. About 2/3 of the related measures have already been implemented. We've consolidated around 100 locations. This is a key financial measure, but it's also important for our company culture since we've brought our teams together.

My last topic, our electronic design automation or EDA portfolio. We're continuously strengthening it through targeted acquisitions, most recently by the acquisition of ASTER Technologies, a move that will improve our circuit board test. Siemens is growing as ONE Tech Company. We are ready for the next level of growth.

And now I'd like to hand over to you, Ralf.

Thank you very much, Roland. Ladies and gentlemen, good morning as well from my side, and welcome to our press conference call. I am pleased to now share further details with you on our strong Q1 of fiscal 2026 and our expectations for our business performance over the rest of the fiscal year.

We will begin with Digital Industries. Orders for Digital Industries at EUR 4.8 billion were 13% above the prior year quarter. The book-to-bill ratio came in at 1.07. And the automation business, of course, also had significant upticks and improved for the third time in a row. The book-to-bill ratio was clearly above 1 in both discrete automation and process automation. Overall, however, I have to say that the market dynamics are only gradually improving and they provide limited visibility only.

On top of the record fourth quarter, DI's software business again continued its clear growth path from fiscal 2025 with orders close to EUR 1.7 billion for a book-to-bill ratio slightly above 1. This increase was due to a series of larger orders in the electronic design automation or EDA business. Our order backlog at Digital Industries increased moderately to EUR 9.8 billion, driven by the automation business.

Now let's turn to Digital Industries revenue, which increased 10%. Here, DI software business achieved a strong growth of 11%, driven by healthy double-digit growth in the EDA and simulation business. The product lifecycle management, or PLM -- that business without simulation was up 7%. Revenue in DI's Automation business was up 9% to EUR 7.9 billion, in particular, due to strength in the short-cycle factory automation business. Discrete automation increased 11%, while process automation was up slightly. The pronounced revenue growth in DI's automation business supported by a very healthy product mix and a solid contribution from the software business also drove Digital Industries profit margin to a higher-than-expected level of 17.8%.

In Q1, adequate pricing measures, combined with productivity gains resulted in a clearly positive economic equation, which we will also maintain for the overall fiscal 2026 year. Costs related to the integration of Altair and Dotmatics had an adverse impact of 70 basis points in -- on DI's profit margin in Q1. For full fiscal 2026, we expect this spur to reach around 100 basis points. Both numbers are without severance charges, which will play a rather minor role in the further integration process.

As anticipated and indicated back in November, negative currency effects are a material burden on Digital Industries profit margin and amounted to around 110 basis points. Digital Industries free cash flow at close to EUR 400 million got off to a somewhat softer start in fiscal 2024 compared to the very strong Q4 of fiscal 2025.

Looking at the regional top line perspective, DI's automation business delivered growth across the board compared to the relatively low levels of the prior year quarter, albeit with varying dynamics. As mentioned, China showed particular strength with double-digit growth rates in orders and revenue. The book-to-bill ratio was clearly above 1. The contribution from our portfolio of local Chinese products further increased. This growth was driven by discrete automation and was supported by healthy demand from distributors.

Orders and revenue for DI were fairly solid in Germany. Other European countries and the U.S. showed some improving trends in demand driven by localization efforts and to some extent, by the intended strengthening of supply chain resilience in several of our markets. In particular, verticals like electronics and semiconductors as well as aerospace and defense supported this growth.

Digital Industries software business again executed well in favorable end markets. A key contributor here was the United States, which saw substantial growth. After a successful start to the new fiscal year, we confirm our fiscal 2026 guidance for revenue growth in the range of 5% to 10% on a comparable basis at DI. We expect DI's profit margin to move towards the upper half of our guidance range of 15% to 19%. Digital Industries is continuing to drive its transformation rigorously by implementing structural improvement measures, optimizing its sales approach and launching innovative products.

Now for the second quarter, we see DI's orders up with a clear increase over the prior year quarter's soft level with growth contributing from its automation business and software business. We expect this development despite a somewhat lower number of large volume orders from the EDA business, both sequentially and compared year-on-year. We anticipate that Digital Industries revenue will grow at a rate in the mid-single digits, supported by growth in both its automation business and its software business. In addition, for Q2, we anticipate a profit margin around the midpoint of DI's annual guidance range.

Now let's turn to Smart Infrastructure, which in the first quarter once again delivered outstanding performance. In the end market with healthy development, the SI team once again achieved strong growth in orders and revenue along with further improvements in its operating margin -- its profit margin. In total, orders were up 22%, reaching EUR 7.2 billion, which is a record level for our quarter. Now this increase was driven most notably by growth of 38% in SI's electrification business and 22% in its electrical products business.

Order growth in these businesses benefited from a very high volume of large wins for data centers for hyperscalers and colocation providers. Data centers and their orders amounted to a record high of EUR 1.8 billion, about half of these were larger in size. SI's book-to-bill ratio reached an outstanding level of 1.30. Smart Infrastructure's order backlog rose to an all-time high of EUR 20.2 billion, and it thus provides very good visibility for the remainder of fiscal 2026.

SI's revenue growth was broad-based and reached 10%, which even exceeded our own ambitious expectations. The largest contribution to this growth came from the electrification business, which was up 22%. Our stringent order backlog execution once again led to further expansion of the profit margin, which rose 210 basis points year-over-year to an impressive level of 19.0%. SI's Q1 profit margin benefited from the commodity hedging effects of about 100 basis points due to volatile copper and silver prices.

These effects more than compensated for a negative currency impact of around 60 basis points. As in the previous quarters, Smart Infrastructure continued to benefit from economies of scale due to higher revenue and ongoing productivity improvements. For both free cash flow and its cash conversion rate, Smart Infrastructure got off to a solid start in fiscal 2026. Now here, we saw, as expected, a seasonal buildup of operating working capital.

Looking at Smart Infrastructure's regional top line development, we saw robust demand across the board. The U.S. stood out with a massive growth momentum in orders, up 54%, led by data center demand, but also by the strong buildings business. Now it is good to see that Germany as well as the rest of Europe plus the Middle East delivered healthy growth in orders and revenue across all of SI's businesses. This development was combined with stringent backlog execution and was driven by the electrification business in particular. China showed some improvement on low levels despite a continuously soft real estate market. Now SI's services business delivered 7% growth in revenue, driven by double-digit growth in the Americas and in Asia and Australia.

We continue to expect very consistent trends in SI's global end markets. The build-out of data centers and power utilities have been and will remain the primary growth engines for this. As a result, for Q2 and for the full fiscal year, we expect Smart Infrastructure's revenue growth rate on a comparable basis to be in the upper half of the guidance range of 6% to 9%, with support again from the high order backlog. For the second quarter, we anticipate that Smart Infrastructure's profit margin will be within the full year guidance range of 18% to 19%, depending on the development of commodity prices and foreign exchange effects. For full fiscal 2026, we expect SI's profit margin to be within the upper half of our guidance range. Of course, we will also dedicate ourselves to implementing adequate pricing measures to, if necessary, address higher commodity costs.

Let's now turn to Mobility, which began fiscal 2026 with a solid performance. Mobility's orders at EUR 2.9 billion were above prior year levels. The book-to- ratio was at 0.90. The order backlog at Mobility stands at EUR 51 billion with further improvement of the gross margin. The backlog includes EUR 15 billion of attractive service business. As Roland mentioned, several high-volume contract awards are in the pipeline for actual bookings over the next few quarters.

In Q2, for example, we already recorded our share as consortium leader of the S-train Copenhagen project for commuter trains, which has an overall volume of EUR 3 billion. Revenue in Q1 was up 9% at Mobility. This growth was driven by considerable contributions from the rolling stock business and the customer services business. Mobility's profit margin improved to 9%, primarily supported by margin expansion above all in the rolling stock business. Free cash flow at Mobility saw a swing back in Q1 after an exceptionally strong performance in Q4 of fiscal 2025.

Looking at project payment profiles and the timing of order awards, we expect Q2 to be rather soft again. However, we then expect to see a material catch-up in the second half of fiscal 2026 as was the case in fiscal 2025. Now our assumption for Q2 is that compared to the strong prior year quarter, Mobility's revenue growth will be temporarily softer in the low single digits. Yet we can very clearly confirm our full year outlook for revenue growth at Mobility in fiscal 2026 in the range of 8% to 10% on a comparable basis.

We also assume that in the second quarter and for fiscal 2026 overall, Mobility's profit margin will be within our full year margin guidance of 8% to 10%, which we are thus confirming. The results of our activities below our industrial businesses, as shown on Page 16 in the appendix were as expected. Let me point out that we are recorded -- that we recorded a gain of around EUR 200 million from contributing Fluence shares to the Siemens Pension Trust in Q1. Now this transaction had already been mentioned in our annual Siemens report for fiscal 2025 as a subsequent event and was already part of our guidance in November 2026.

Ladies and gentlemen, free cash flow performance in the first quarter at close to EUR 700 million got off to a seasonally solid start in the new fiscal year. After an exceptionally strong Q4 of fiscal 2025, operating working capital increased by approximately EUR 1.3 billion. By paying around EUR 400 million, we have now also fully closed the long-time legacy chapter of the removal of nuclear waste in Hanau, Germany. This payment obligation stemmed from a public law contract that took effect back in September 2025. Nevertheless, we are very confident that we will continue to achieve industry benchmark levels of double-digit cash return on revenue once again in fiscal 2026.

With our capital structure metric of industrial net debt over EBITDA at the level of 0.9 and with an industry-leading AA investment-grade rating by both S&P and Moody's, we continue to act from a position of financial strength. On top of the dividend of EUR 5.35, we are materially adding to shareholder return through our accelerated share buyback program. Now over the past 2 years, we have accumulated a buyback volume of nearly EUR 4.4 billion in the current program, well ahead of our initial schedule. In addition, we intend to retire 18 million shares -- treasury shares in March of this year and will reduce our capital stock to 782 million shares accordingly.

Finally, let me conclude with our raised outlook for the Siemens Group. Following a strong start to fiscal 2026, we now intend to reach the upper half of our guidance range of 6% to 8% for the comparable revenue growth. And we increased our guidance for the Siemens Group for basic earnings per share before effects from purchase price allocation or EPS pre-PPA, and we are now expecting to reach a range of EUR 10.70 to EUR 11.10 for fiscal 2026. This corresponds to an increase of EUR 0.20 at the midpoint of this corridor. Now even in these times of highly volatile geopolitics, we continuously create value at Siemens by growing profitably and generating cash reliably.

Thank you very much for your attention. And Roland and I are now looking forward to your questions. And with that, back over to Simon Krause.

Thank you very much. We now have until 8:15 for your questions. And as always, we are unable to mix the German and English questions. We start with German. If you have logged into the English language conference, please ask your question in English. We will then also answer in English. And with that, over to the operator.

[Operator Instructions] The first question from Michael Flamig from Borsen-Zeitung.

Mr. Busch, a short question. First, Mr. Busch. You said that you're going to give more information or details about the deconsolidation of Healthineers. Now will you then touch on the tax-related issues?

And the second question I have, Mr. Thomas, you talked about data centers. So it is quite unusual that in the first quarter or after Q1 is raising its guidance. Now is the conclusion correct that the business with data centers is a relatively short-term one, so relatively volatile, isn't it?

Thank you very much, Mr. Flamig. First question, yes. Second question. Well, I can't answer that quickly as the first one. But nevertheless, I can say that we see a very stable development in this respect. And last year, we also draw your attention to the fact that we are building up our capacity and adjusting to the enormous growth potential. But nevertheless, we use a moderate approach. So at present, we should say that we are very happy with the ongoing development. Now in the first quarter, which we are reporting on now, we can say that the order or the incoming order numbers was very, very, very high.

So we had major orders coming in, like I mentioned in my presentation. So this means that we do not have separate instances of this, but that there is a wide range of things coming in. So it is even exceeding our expectations. I must say that the growth rates and also the revenue here, we believe that it will be maybe on the same -- more or less on the same level as last year.

But nevertheless, we see a positive trend. And we surely are also aware that loss of the energy and computational efforts will be, say, influenced and impacted by the demand, the AI demand maybe. And of course, we are watching, keeping tabs on the markets and see what's happening.

But you -- when looking at the order intake, then you can see any downturn or something like this?

No, we cannot.

Next question from Christoph Meyer from DPA.

At DI, I'm seeing an upward trend. So you offered a cautious, say, guidance or forecast, if I understood you correctly. Now where are the problems? Or did you only see the good progress to be made?

Well, DI, well, has never been in the forest to put it like this. I believe that this is a very sophisticated demanding market environment it is operating in. I think it did a very good job in this respect, held its ground, so to speak. All the classical economic levers were used in order to face this challenging business and this environment. Certain quality and other measures were initiated. Innovative products have been launched onto the market also in China. Of course, things are moving slowly, but nevertheless, we try to win or gain materiality so that we are going to have growth rates exceeding 40% in this competitive market environment, surely in China, and I'm sure you are aware of that.

Well, at present, I should say we are moderately optimistic and optimist because lots of the, say, investment sentiment, as they say, also is subject to many ups and downs. And of course, geopolitical influences also have an impact, the macroeconomic, the high volatilities and also exchange rates and the raw material prices, commodity prices. So we can say we are well advised and we remain so to make the best use of the chances which we see. And then, of course, we seize the opportunities once they emerge. But otherwise, we keep a more restrained approach in this respect.

Next question, Marcus from FAZ, Frankfurter Allgemeine Zeitung.

About Digital Industries. Mr. Busch, you said that the economic environment had a dampening effect. Could you give us more information about the industries you mentioned? And to some extent, I should say that the support was a bit disappointing?

Well, not really disappointing, I should say. Automotive, for instance, and this includes the suppliers, mechanical engineering here, the same situation. And we expect that growth will continue moderately. So pharmaceuticals here, we see a strong demand, electronic and aerospace and defense here, we can say that the picture is a mixed one actually. But automotive, with all the suppliers, we should say that this is one of the major growth drivers when the markets are picking up speed, so to speak. Well, it is like we expected. So we use this, say, moderate or cautious approach.

And maybe to add to that, automation, it did a good -- it showed good development. We have value for money products, as we call them, and I can say that they were really successful, and we see growth in this respect, too, and it encourages us to launch the next ones in this year, 2026.

Next question from Angela Maier from NZZ.

Just a few brief questions. The airport logistics business in the United States, the book profits. And in the first quarter, what were the license fees of Siemens Energy because they are getting higher and higher. And we might assume that in the midterm, they might fall by the wayside. And then I'm interested in the contributions of Altair and Dotmatics in the first quarter because in the last fiscal year, after closing, you added up and it came out as a loss of EUR 120 million carried forward. So I would like to know the contribution in the first quarter of these 2 companies.

And there's another question about the HR change as we heard yesterday, we will now see the position was it? I mean what were the important achievements? He was responsible for the accelerator. And did you -- was really progress made? And does that mean that his responsibilities will be extended?

Well, thank you very much, Mrs. Maier. Let me start with the Altair and Dotmatics contributions. We do not only talk about the earnings structure. We also talk about the external and internal structures, and I touched on that briefly in my presentation this morning. Surely, we look at the earnings and the burden as a result of the integration is something we take into account. But nevertheless, we will try to decrease this burden, and we -- it will be 170 basis points during this quarter. And I also said that in this context, there will not be any major restructuring requirements, so to speak, over the next few quarters.

Now airport logistics. Well, in the second quarter, the -- looking at the earnings, we will see EUR 150 million to EUR 200 million, but this is not a final amount, and we just talk about the Q4 figures right now. Licenses, Siemens Energy, surely, we are not going to give you kind of a quantitative answer right now. It surely depends on the publicly known license agreement with Siemens Energy, how it developed.

And like you can see in the prospectus, there were certain thresholds included in this contract. So to continue it, to extend it -- so once we reach that threshold, of course, we are going to provide the requested information. But of course, we are very happy that Siemens Energy is very successful in the marketplace and that this will be translated into good earnings, meaning this will be of benefit to our shareholders.

About Peter Koerte, he made considerable contributions over the last few years, and he's got a huge spectrum of responsibilities, technology, predevelopment, technological development. He has to look after these, look after the respective products. Now technology services, digital services, that is -- and there are calls from [ EUR 23 billion ] in fiscal '25, and we expect this to continue and even rise to 47 Siemens AI calls, we will see that there is growth in ASEAN and Middle East, Siemens Accelerator, the respective platforms. We will not be able to sell hardware and software, and we onboard partners. We see strong growth figures in this respect. And Peter, of course, is looking forward to his job he will have.

Next question from [ Gust Kraft ] from [ Asset ].

Can you say that Mr. Koerte is something like a crown prince? Could you comment on this, please? And the second is before and after SAP, the most valuable company in Germany, what do you expect in this respect?

Well, first question, the discussion, I must say it is almost unbearable. We are a management team, and this is what we're going to do in the future, too. We are working for this company. And of course, the Supervisory Board will have a closer look at the situation. Now -- well, yes, of course, we are very happy. We are very happy about the development of our share prices. And of course, it is, say, not gratifying that SAP lost value. We need a strong SAP for Germany. But also for the digital further development. But of course, we also look at our share price and then work on improving it. So we have to deliver growth and earnings must be good and then the shares -- the prices will go up.

Next question from Clara Thier from WirtschaftsWoche.

Three questions. This fiscal year, will you divest of your shares of Siemens Energy? You hold 10% right now. Two, this fiscal year, can we expect a shareholder meeting about the split of Siemens Healthineers? And this is the next question. You spoke out against this supply chain law. So what are your plans in this respect?

Thank you very much for your questions. Siemens Energy and divest of Siemens Healthineers shares. Surely, we do not want to kick something off board. No, I want to say that with this split or the spin-off of Siemens Healthineers is we still want to continue accompanying this company when establishing its position in the stock exchange. We think that Siemens Healthineers will show good economic potential over the next few years. We want to accompany this development. And of course, this does not depend on share prices or on us wanting to spin off something.

No. We look at the shares. We are using them, utilizing them astutely. And like last year, we have the investment of Dotmatics and Altair, there is financing, which we have to take into account also here, spinning off certain shares. This is something which we are going to do with Healthineers in a similar way, but the situation will continue as it was last year. Well, of course, there are many aspects, the tax-related aspects and the respective services, which we are going to offer. These are passed on to Siemens Healthineers. And of course, the question about the license fees, there are financial aspects which have to be taken into account.

So I want to say that there are several questions which we can ask -- which we can answer and we look at them one after the other. And surely, share price, Siemens and Healthineers, surely, we could tap on or monitor the development of the share prices. We look at a time frame of 6 months about, and we will see what happens. So I don't think for the time being, there will not be that much of a difference.

Then the supply chain law, we believe that it is very difficult to implement, put it into practice. We are a large company, Siemens. And truly, we are going to manage to handle it, implement it. And the way we position ourselves and whenever we do that, we always think and have in our minds, our customers, our suppliers, it is difficult to implement and sometimes it's even impossible to comply with all the regulations and rules, presenting reports and things. And this also applies to other regulations.

Sometimes they are contradictory, sometimes they're exaggerated all these regulations, they are derived based on an end customer demand. And then, of course, they are reflected in the laws. But if you look at business situations, then they walk along different parts. So there are always contradictions. There are always exaggerations. We just have to make sure that these rules and regulations do not restrain us or offer some constraints our business. This is the background of our position.

All right. Unfortunately, we have to conclude this conference call, and please bear with us that we give you the answer. Thank you very much for your interest in this phone call. And at 8:30, we are going to have the conference call for the analysts also with Roland Busch and Thomas. And of course, you can follow it over the Internet if you dial in to the respective call on the [ 30th ], we are going to see or hear each other again for the second quarter earnings.

Thank you very much. The phone call has come to an end. A recording of this phone call is available on the siemens.com telephone conference. We wish you a wonderful day, and goodbye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Good morning. Welcome, everyone. We are here to talk about growth, sustainable, profitable growth. And this is important, accelerated growth. Just look at what we have done in the last 5 years since we have become a focused technology company. This was our growth trajectory for the period starting fiscal year 2021 until fiscal year 2025. Average revenue growth, 8% per year in this period, up from 2% in the previous decade. Average profit margin of our industrial business, 15%, up from 10%; and average free cash flow margin 13%, up from 7%. The total shareholder return of 151%. We outperformed the DAX and other indices. Higher growth, higher margins, higher free cash flows. This successful performance continues.

So let's take a look at our most recent past fiscal year 2025, and it was another record year for Siemens. Our orders reached EUR 88 billion, 6% above prior year's level. Revenue grew by 5%, a total of EUR 78.9 billion. And book-to-bill ratio of 1.1, a high-quality backlog of EUR 117 billion. We move with confidence in our fiscal year 2026. Our industrial business showed a strong performance, a record profit of EUR 11.8 billion. Our free cash flow at a new historic high, EUR 10.8 billion. This means we turned 14% of sales straight into cash, with EUR 10.4 billion record in net income for the third consecutive year. And finally, we achieved earnings per share pre-PPA of EUR 10.71. And we adjusted this, as you know, for effects from Dotmatics, Altair and Innomotics. And we achieved this in spite of substantial uncertainties all around the world, geopolitics, new tariffs and protectionism, slow consumer spending. We created substantial value for all our stakeholders.

Now let's take a look at the performance of our industrial businesses. Let's start with Digital Industries. We met the guidance as we did with all our businesses. Revenue declined by 4% as we had predicted because of difficult market environment for our automation business and against a very, very strong base of comparison for our software business. Profit margin, 15.9%. This, by the way, excludes effects related to Altair and Dotmatics which were not part of our guidance.

Smart Infrastructure, 9% revenue growth. They delivered at the upper end of the guided range, and profit margin was even more impressive with 18.3%. That's an all-time record and above guidance. Congratulations to the team. Mobility, strong revenue growth, again 10%, and that's the upper end of the guided range. Excellent execution. There is a huge backlog of orders, and the team is just producing and delivering. At the same time, they successfully balance risk and opportunities. The result, industry-leading profitability and free cash flow.

Siemens today is stronger than ever. Our strategy works. We grow by combining the real and the digital worlds. And our ambition keeps growing too. With our ONE Tech Company program, we are making changes to the fabric of our company and unlock even higher growth in the future. Now when we talk about our fabric, there are two important aspects. One is the portfolio and the other one is our operating model. Our operating model versus how we support and strengthen our businesses with world-class technologies and services with higher efficiency and a huge set of high-quality industrial data, so that our businesses can innovate faster and serve our customers even better.

Now let's take these two aspects one by one. Our portfolio. In the last 5 years, we have put particular focus on streamlining it, preparing ourselves for the transformation, both through divestments and high-growth acquisitions. In 2020, we spun off Siemens Energy. In the following years, we divested our so-called portfolio companies, companies for which Siemens was no longer the better owner. 6 years ago, the total evaluation was estimated to EUR 1.5 billion. In the end, our proceeds from these divestments totaled EUR 7 billion.

Focus on where we can create the most value also through disciplined acquisitions. And of course, always along our strategy to combine the real and the digital worlds. We acquired intelligent hardware companies. For example, industrial drive technologies for ebm-papst; Trayer switchgear, Danfoss Fire Safety; C&S Electric in India for electrical and electronic equipment. On top, we strengthened our digital business with three SaaS acquisitions, all cloud native. Sqills, a provider for inventory management, reservation and ticketing software for our rail customers. Supplyframe, a platform that connects design and sourcing of electronic parts. Brightly, a provider for asset and maintenance solutions for buildings.

And in 2025, we closed the acquisitions of Altair and Dotmatics. With Altair, Siemens has now the world's most complete portfolio for AI-powered design, engineering and simulation. Our customers can now build the most comprehensive physics-based Digital Twins. And with Dotmatics, we are adding more than EUR 5 billion to our addressed markets. Our customers can now build a digital thread all the way from R&D to production. This helps them bringing medicines and biochemicals to the market more quickly and at lower cost.

Now we make another important step towards a highly synergistic Siemens portfolio. We plan to deconsolidate Siemens Healthineers. This will unlock long-term value for all our shareholders because it will allow both companies to tap fully into their respective growth potentials. Siemens Healthineers is a success story. Since its IPO, the company has grown from EUR 13 billion in revenue in 2018 to EUR 23 billion in 2025. And the Varian acquisition contributed approximately EUR 4 billion to this. Industry-leading margins, a best-in-class product offering, reliable cash flow, high free cash flow conversion. A strong attractive business, but one with increasingly less and less synergies.

Siemens Healthineers serves markets which are increasingly different. They are different from the core markets of Siemens. For example, regulation in health care is comprehensive and increasing. Digitalization in the way that we do it at Siemens today doesn't really scale into the health care sector. Through the planned deconsolidation, Siemens Healthineers will benefit from a significantly higher free float. A leading pure-play med tech champion, more attractive for the capital market.

So what happens now? We intend to transfer 30% of shares to Siemens AG shareholders via direct spin-off. And as a minority shareholder, we will continue to participate in the attractive business of Siemens Healthineers. In the medium term, we intend to reduce our shareholding to a financial asset. The transaction still needs regulatory clarification and a green light from both shareholder meetings. And more details will follow in early Q2, calendar year 2026. And let me assure you, Siemens is committed to managing its investments in Siemens Healthineers in a responsible and shareholder-focused manner.

Our new Siemens has taken shape, a company with less complexity and with simplified governance, with a fast-growing digital business, with an unmatched portfolio of industrial software and digital services, and with a strong portfolio in hardware, connected hardware that will be increasingly software-defined and enhanced with AI. In short, Siemens with a highly synergistic portfolio ready to scale. Portfolio matters, but there's more to our fabric than the mix of our businesses. When we say we are changing our fabric, then we also mean we are improving our operating model. Remember, stronger customer focus, faster innovations, higher profitable growth.

Siemens is a strong company with a rich history, but this means legacy too. Too many systems, for example, ERP systems. Still many silos, for example, data silos. Every single bit of this legacy made sense at a certain point in time, but times have changed. The world has become more competitive. Companies need to be more resilient. Scale matters more and more, speed matters more and more. We are giving our business an efficient optimal environment so they can focus, so they can innovate faster, they can serve our customers better. And that's how our new operating model is all about. We are building and rolling out services for all of our businesses, highly standardized, delivered in highly efficient ways, always up to date with the latest technology and at world-class quality for everyone and at Siemens to scale.

We do that because the world is squeezing out small. Digital tools allow us to use economies of scale in every possible way. Scale matters for data. Scale matters for AI. Scale matters when you want to be a powerful partner in our global ecosystem. And that's why we are creating ONE data fabric, ONE technology fabric, and ONE sales fabric for all Siemens. Let's look at these fabrics one by one to see how they can help our businesses grow faster.

Let's start with ONE data fabric for all of Siemens. We are tearing down walls and bring data where it belongs together. ONE ERP system, ONE CRM system, ONE data layer for internal data, for customer data, for external data, all connected, available real time. Today, our customers can already use 250 data products. And with our data, we are feeding our AI models. And because scale matters, our customers and partners want to connect into our data fabric. We started with machine tool industry. Seven companies joined an alliance to pool data. And here is what our partners have to say.

[Presentation]

So ONE data fabric. Next is ONE technology fabric. This means technologies and services, which our businesses need for their success. We build them once for everyone at world-class level, one set of technology building blocks. Take, for example, our Software-as-a-Service business. We can create the supporting infrastructure once for login, distributing, patching, cybersecurity and do that for all our SaaS offerings. The specific application on top are the differentiator and create the value for our customers. Or take software engineering. Today, we have 30,000 software engineers. They use roughly, you won't believe it, 900 separate versions of software development tools. We plan to consolidate these into just a few dozen of standardized tools. This will boost productivity.

And ONE Industrial Foundation Model, and I will talk about that later. Finally, number three, ONE sales fabric. Let me be clear here. For different markets, Siemens will still have different go-to-markets. We address them through six sales organizations for automation, buildings, electrical products, electrification and automation for mobility and for software. The important part, though, is all of these sales teams are using the same sales fabric. What does that mean? Shared tools at lower cost, rigorously standardized, data-driven for full transparency real time, orchestrated by stringent account management, channel and partner management. This means Siemens will sell with ONE digital marketplace, ONE sales tool set, ONE vertical approach.

And just to give you a simple example, all six teams have started using ONE and the same digital identifier for customers. This increases transparency and visibility. We see now in real time and holistically what each customer wants and buys, but also we see what they do not buy yet from us. That's where we are unlocking more and more sales opportunities. Also, more standardization means less back office work. In automation, for example, we are doubling the share of salespeople who carry a quota. In short, with greater transparency, we can allocate resources better, and this will help us grow faster. So now where will growth come from? First of all, we are in a good place because we are offering what the world needs. And we are positioned along secular growth drivers; automation, digitalization, electrification, sustainability and artificial intelligence, AI for the real world.

Let's have a look at our markets. Our address markets grow at approximately 6% per year on average. And in 5 years' time, this adds up to a total addressable market of EUR 650 billion. The digital markets therein close much faster by 11% to EUR 175 billion for 2030. Now, in addition to this, we are tapping into expansions of our total addressable market. They are adding up to EUR 50 billion in fiscal year '25, but we expect them to grow between 14% and 18% per year in average until 2030. And these are very attractive growth areas for us. They include new AI applications and products, AI factory capabilities, life science software, just to name some examples. And we are able to address these markets organically. And we will, of course, also evaluate opportunities for either partnerships or acquisitions. In short, our addressed markets are growing, and we are addressing market expansions, which are even growing faster.

Siemens is accelerating its growth. At our Capital Market Day 2019, we said 4% to 5%, we delivered. At our Capital Market Day in 2021, we said 5% to 7%, we delivered. Again, and here is our new midterm ambition, 6% to 9% comparable revenue growth. This is our expectation only for our existing portfolio, excluding Siemens Healthineers. Any growth from total addressable market expansions is not reflected in this ambition. And of course, we aspire not just growth, but profitable growth, growth that translates into strong earnings per share. And our midterm ambition here is EPS per share pre-PPA high single-digit increase.

Now let's zoom in for a moment and look actual growth levers for growth, what are -- where are we doing strongly to tap into our growth markets and our growth opportunities. And there are four big levers: grow digital, grow regions, grow vertical and grow AI. We take them again one by one. First, grow digital. In 2021, we had committed to an average annual growth rate of 10% for our digital businesses, which consists of software, IoT and digital services and consulting services, and we delivered. Our digital business grew by 12% and reached EUR 9.4 billion in 2025, including acquisitions. Now we expect our growth to increase further 15% on average per year over the next 5 years. This means we expect this part of our business to double in revenue by 2030.

How? How do we grow in this area? Of course, software is a big part of this, and especially recurring revenue from Software as a Service. Take our successful SaaS business in Digital Industries. We grew the annual recurring revenue with an average growth rate of 13% year-over-year to now EUR 5.3 billion. All in all, for our SaaS business model in PLM, we won 24,000 customers, 7 out of 10 are new customers. Almost 9 out of 10 are small and medium enterprises. And for many of these smaller companies, this easier, faster access makes them choose Siemens software actually for their first time.

And there is Siemens Xcelerator, our open digital business platform. It helps us reach small and medium-sized enterprises through our marketplace and, of course, with SaaS offerings. This helps us to sell more effectively into verticals and to tailor offerings through digital threads. Here are five examples for how it is gaining market traction. First, manufacturing, Industrial Operations X. In one of their plants, Audi replaced physical controllers with virtual controllers from Siemens. The result, more flexibility, higher speed, lower cost. Audi will roll this out now to all their factories. Currently, we are evaluating with the virtual PLC with half a dozen of further customers.

Building X. We help to lower cost -- operations cost, which are the lion's share of buildings cost. With data-driven optimization, customers can save up to 30% of energy and generate up to 10% more in operating income. Signaling X, which is interlocking in the cloud. Instead of physical signs at the side of the track, we offer virtual signaling in the cloud. And we have done this for Norway, for Finland, for Austria, for Barcelona. And yesterday, we announced that this will be also working for mass transit in Singapore. It scales.

Gridscale X, many electricity grids are at their limits. And thanks to our software products, grid operators can increase their capacities up by to 30% without upgrading hardware or existing hardware. And the last example is Teamcenter X. We launched the Digital Reality Viewer, what is that? Running in on Siemens Xcelerator and powered by NVIDIA, Omniverse and GPUs, it lets customers explore complex products, futuristic and in 3D to speed up collaboration. And the next level will bring one unified immersive and highly realistic digital twin to factories. And Foxconn, one of the largest contract manufacturers in the world will be the first user.

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Which brings us to lever 2, grow regions. Siemens is both a global and a local company at the same time. We are present almost everywhere on the planet. And we grow where markets are growing and where markets grow particularly fast. We double down increasingly our investments. The focus countries for us, United States, China and India. This broad footprint also increases our resilience. So when tariffs or trade restrictions come up, we can buffer their impact for us. Most of our competitors cannot. This supports our growth relative to the market. And here's the CAGR for our addressable markets over the next 5 years in these three regions. United States, about 6%; China, nearly 4%; India, more than 7%. These figures, by the way, exclude the Healthineers market.

And here is now how Siemens fits into their respective growth stories. The United States wants to strengthen its critical infrastructure, reshore manufacturing and keep boosting its AI capabilities. We invested nearly EUR 1 billion in the United States in the last 2 years. This includes an expansion of our local footprint in manufacturing for electrical products. We are transforming public transport with the first high-speed link between Los Angeles and the Las Vegas area with locally manufactured trains. We are a partner for hyperscalers and their massive build-out of data centers. More on this in the deep dives later. We are offering software for production optimization for the needs of small and medium-sized enterprises. It can enhance their shop floor performance by 30%.

Let's move to China. China is moving up the value chain with high-tech manufacturing building out its digital infrastructure, and the country wants to strengthen its position as a global leader in AI. We keep providing high-end automation in China, but we also started building value products for the local market. Specified locally, manufactured globally, developed locally and sold locally and that with China speed. In the last year, we have seen 18 new automation products, and we have more than 20 new products in the pipeline for the next year. We see great potential for Siemens Xcelerator in the Chinese market, more than 0.5 million registered users in China and over 400 offerings by now.

India. India wants to boost domestic and export-oriented manufacturing, and the country is rapidly building up their AI infrastructure and rail infrastructure across the whole country. Siemens is upgrading the country's transportation sector. Recently, we started full production of our locally manufactured electric locomotives. 1,200 are on order, including a 35 years full-service maintenance contract. This is a EUR 3 billion contract in total. We bought C&S Electric, a local manufacturer for low-voltage equipment. They have been growing with a CAGR of 20%. And for medium voltage, we started manufacturing the environmentally friendly gas insulated switch gear in India as well. And this is, by the way, very much recognized. We were awarded best multinational company of the year in 2025.

And yes, there are opportunities in Europe, too. We continue to invest in Germany for its world-class industrial ecosystem, strong small and medium-sized companies and outstanding talent and research. We invested EUR 250 million to upgrade Europe's most modern train factory in Munich. And we have started building our EUR 500 million technology campus in Erlangen, which will bring the industrial metaverse to life.

Lever number three, grow verticals. Verticals are becoming more important for Siemens because our new fabric allows us to serve them even better. In verticals -- and this is important, what we can do since this is a smaller view on a market, we identify recurring customer problems, and we resolve them in repeatable offerings. In other words, this is another great potential to scale. Here is the expected market CAGR for five verticals -- growth verticals over the next 5 years. Rail transportation, 5%; aerospace and defense, 9%; life science, 9%; semiconductors, 10; and data centers and AI, 11%. Our target is to consistently grow faster than these respective markets.

A bit more on the five verticals I just mentioned. Let's start with data centers. Our revenue has increased to EUR 2.9 billion with a growth in 2025 of 40%. Our customers are building the next generation of data centers now through AI factories, larger, denser, higher energy intensity. Through this vertical, we bring everything we already have to offer. And we are developing new offerings, too, from advanced building management, automation with PLCs, DC switching for efficient power, and of course, a full digital twin simulation all the way from the chip to the buildings.

Life science, 9 out of 12 top pharma companies rely on both Smart Infrastructure and Digital Industry offerings, and we integrate what they typically need. And with Dotmatics, we expand into software for their R&D processes. Rail transportation, we are technology leaders in many areas, including rolling stock, signaling, you heard about it, and the cloud and AI-based predictive maintenance. Our ability to support with financing solutions is an additional advantage for us. In the rail transportation market, we expect to benefit also from the government stimulus programs. And we will take a deep dive on these three verticals in the afternoon. And by the way, we have an exhibition there, which you might want to enjoy, and we have some experts who love to show their products to you.

So let me share a bit more on the following two: aerospace, defense and semiconductors. In aerospace, we support our partners, use fewer resources. And we help them to develop more sustainable aircraft. 95% of the world's aircraft engines are developed and manufactured with Siemens software. 90% of satellites in the orbit have been developed with Siemens software. Defense budgets are growing globally with a CAGR of approximately 7% between '25 and 2030, and we have been a trusted technology partner for this industry for a very, very long time.

Semiconductors. Globally, semiconductors companies plan to invest about $1 trillion through 2030 in new fabrication plants. 29 out of 30 semiconductor companies rely on Siemens technology. Two examples. Our automation and design software enables the production of 2-nanometer chips. We offer high-precision building technologies for clean rooms.

Now lever number four, grow AI. More specifically, we talk about Industrial AI. And this is not really new to Siemens. We have been developing AI-based tools and products for more than 50 years. Today, we have 1,500 AI experts all around the world. And we use AI in three big ways to boost innovation and productivity, to enhance our products, but we're also building our own new AI offerings. And let's take them one by one. AI to boost our innovation speed and our productivity. We are using applications from Google for AI-powered improvement of our code, for example, for software-defined automation. And this is really genuine code programming. The same tools help us dramatically speed up our bids for complex projects, train projects, for example. We can shorten tender application from weeks to hours.

Secondly, providing -- powering our existing products with AI. Today, we have 38 AI offerings and the number keeps growing. Two examples. AI that finds the best production path for machine tools. This will be possible, thanks to our data alliance with a machine tool industry we talked about. We use Anthropic model Claude to refactor our own software. In simple terms, AI cleans up and simplifies code. This makes both our software and the hardware, it connects faster and more performant. Concrete benefits for our TIA Portal software, customers profit from updates faster and with higher quality.

And third, we are building new AI products. Siemens is developing an industrial foundation model. With our domain know-how and with the vast industrial data we have, including those from our partners. And this model will speak the language of engineers. It will ingest any kind of data, industrial data. We are working also on AI agents for industrial agents that plan, think, use tools and cooperate with humans to achieve clear goals. We are doing this with our partner, AWS. Our award-winning Industrial Copilot is already used by a number of customers. It offers up to 30% higher productivity in factories and we developed it together with Microsoft. For the AI opportunity, we've strengthened our team with Vasi Philomin. He joined us a few months back from AWS. You will get to know him later in the breakouts. He is scaling an AI development center in Seattle, connected to our AI and domain experts all over the world. This is super important, bring domain know-how and AI and data together.

In the next 3 years, we will invest more than EUR 1 billion in our AI capability and offerings. And we will work even more closer with our partners. Don't mix up EUR 1 billion with hundreds of billions in data centers. This is not investment in infrastructure, this is making this infrastructure work for the Industrial AI. This is where this EUR 1 billion goes. Now one example, NVIDIA. And Jensen Huang, their CEO sent us this video message. Enjoy and it takes approximately 3 minutes.

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Three-minute run through the technology stack, but also the market opportunities which we have. We are forging together with companies like NVIDIA and a very, very strong global ecosystem. We are in the pole position. Siemens is the leader in Industrial AI for the real world. And we have everything we need to build from here, the data, the domain know-how, the right people, the right partners. And of course, we do have the resources to invest. Now you know how Siemens will accelerate growth -- profitable growth with a highly synergistic portfolio and a new fabric, an operating system for speed and scale. As ONE Tech Company, Siemens can address new markets with new products, software and AI-enabled offerings, and tap into an unmatched ecosystem of world-class partners. We have the gravitas to do that.

At the same time, we benefit from our traditional strengths, trust, trust from our customers grown over decades, a global footprint, a great team, our management and team Siemens around the world. And here are the key takeaways regarding our ambition. Revenue growth, up 6% to 9%, picking up momentum over the next years. EPS pre-PPA, high single-digit increase. New fabric, new markets, new products. Siemens has entered its next stage of growth.

And now, I'm happy to hand over to Ralf for more details about our financials. Thank you.

Thank you, Roland, and good morning, everyone. Thank you for joining us here in Munich and on the webcast for our Siemens ONE Tech Strategy and Results event. Roland has been elaborating on our vision for the future and how Siemens has been successfully transforming. I'm excited to add my CFO perspective now on these topics. But first let's look at our impressive results for the fourth quarter of fiscal '25.

Our top line showed strong contributions from both Digital Industries and Smart Infrastructure. In particular, DI software business posted a record quarter that was supported by quite a number of large deals. SI saw broad-based volume growth from already high levels, including larger contract wins from data center and energy customers. Mobility's order and revenue growth faced tough comps, as you know, in the prior year quarter. Overall, this resulted in a book-to-bill ratio of 1.02 and a high-quality order backlog of EUR 117 billion, as Roland mentioned before, providing visibility and supporting future value-generating growth.

All regions have been contributing towards the 6% comparable revenue growth for the group. Most notably, Asia, Australia increased 8%, with China up 6% and India up 11%. The Americas and EMEA both grew 6%. Stringent execution converted into a sound industrial business profit of EUR 3.2 billion. As a result, the profit margin came in at 15.3%. This included material severance and M&A-related effects at Digital Industries as previously announced and guided. Smart Infrastructure once again extended its proven track record of continuing margin improvement. Earnings per share before purchase price allocation accounting, or so-called EPS pre-PPA, reached EUR 2.51, excluding Altair and Dotmatics effects, totaling a negative of EUR 0.21.

Since cash generation is the ultimate yardstick for any business' performance, I'm extremely proud of our EUR 5.3 billion of free cash flow, the highest level we ever recorded for a quarter. I applaud team Siemens for this truly outstanding performance. Our dividend proposal of EUR 5.35 reflects our company's strength and our focus on providing an attractive shareholder return. Following our progressive dividend policy, this proposal represents an increase of EUR 0.15 based on our share price at just below EUR 230 at close of the fiscal year on September 30. The proposal equals an attractive dividend yield of 2.3%. As another important pillar for shareholder return, we will continue executing our successful and accelerated share buyback program which has had an average price of EUR 198 with EUR 3.6 billion being bought back so far.

Looking ahead, we will flexibly react to market development by leveraging our technological leadership, now expanded through the acquisitions of Altair and Dotmatics, of course. And we will drive value creating growth in fiscal '26. I will come to our assumptions in a moment. First, however, let me walk you through the fourth quarter's results for our businesses. At EUR 5.5 billion, orders for Digital Industries were up substantially, both sequentially and over the prior year quarter. This led to a book-to-bill ratio of 1.1. In a continuously challenging market environment, the automation business grew 30% on easy comps, however, in the prior year and showed a clear uptick in orders sequentially. DI software business exceeded our expectations and recorded an all-time high quarterly orders of above EUR 2.5 billion. Several large contracts in the product life cycle management and electronic design automation businesses helped in setting this record.

Digital Industries orders backlog rose to EUR 9.5 billion, with a further increasing software share. Revenue for DI increased 9% on a broad basis and reached the high-end of our expectations. Therein automation achieved 10% growth led by discrete up 10%, driven by the factory automation business. The software business grew by 8%, driven by PLM up 11% and EBITDA was up 3% on tough comps. On an operational level, DI's margin benefited from already implemented capacity adjustments in automation as well as from strong conversion in software. Driven by broad-based productivity gains, DI's economic equation remained net positive, which is very important. The reported margin of 15.5% included material negative effects as indicated previously. They had a magnitude of 440 basis points and were mainly related to the automation business.

Excluding Altair and Dotmatics, DI's margin of 17.5% came in slightly above our own expectations. A clear highlight was the excellent free cash flow across all businesses which expanded from an already high prior year level. Annual recurring revenue from DI software business continued to show good momentum with a healthy growth rate of 10% on high comps. Our SaaS business is well on track as evidenced by EUR 2.3 billion of cloud ARR. Excluding Altair and Dotmatics, the cloud ARR share was close to 50%. This outcome is clearly above our initial target of 40% by the end of fiscal '25. All customer-related performance indicators continue to show a favorable trajectory too.

Now looking at the regional top line perspective, DI's automation business has showed growth across the board. Their growth rates reflect easy comps for orders as well as support from typical seasonal tailwinds as indicated previously. Germany and the U.S. drove sequential order improvement on a global level, while China was seasonally softer compared to Q3 of fiscal '25. Overall, DI's automation market momentum remains subdued and behind initial recovery expectations. So no V-shape. Many indicators continue pointing to restrained activities in the near future. We expect this challenging market environment to persist into fiscal '26. In contrast, DI's industrial software market clearly shows favorable dynamics on high levels with AI remaining a key driver. However, difficult macro and regulatory aspects are causing uncertainty in this highly attractive market, too.

Against this backdrop, DI is continuing its transformation very successfully. The team is committed to turning groundwork into performance. The automation business will continue to drive its adjustment measures, which have been making good progress. Having digested a huge portion of severance cost in fiscal '25, we do expect a significant lower amount of severance charges in fiscal '26. We also expect further positive effects from severance to materially unfold from fiscal '26 onwards. The software business will rigorously focus on completing the SaaS transition and on integrating Altair and Dotmatics to leverage market dynamics and synergetic effects. Integration efforts are expected to result in a negative impact of around 120 basis points for fiscal '26 on DI level.

For Digital Industries in total, we do expect comparable revenue growth in the range of 5% to 10% in fiscal '26. Growth across automation and software as well as tailwinds from cost reduction and productivity measures will support profitability at DI. We are again aiming for a net positive economic equation for the year, obviously. We expect the profit margin for fiscal '26 to be in the range of 15% to 19%. For the first quarter, we see comparable revenue growth in the upper half of our annual guidance range. We anticipate that DI's profit margin will be slightly up over the prior year's level, reflecting ongoing severance cost and M&A-related effect.

Now Smart Infrastructure. Once again, impressed with flawless execution and extended its track record of operational margin improvement to 20 quarters in a row. Leveraging supportive market opportunities, orders increased 5% from an already high prior year level with all businesses being up. Book-to-bill was just slightly below 1% and resulted in a strong backlog of EUR 18.6 billion. Large orders materially recovered sequentially from a lower level in the third quarter but remained below the extremely strong prior year's fourth quarter. Most of these orders, again, were related to data center customers. Revenue growth was broad-based and reached a 9%, slightly above expectations growth. The strong contributions once again came from the electrification business. It was up 17% on stringent backlog execution, especially in Europe and in the U.S. In fiscal '25, revenue in SI's data center business reached EUR 2.9 billion, up 40% over the prior year level. The book-to-bill was clearly above 1. As a result, SI's data center exposure has been steadily growing and now amounts to around 15%, give or take, of revenue.

We do intend to keep leveraging opportunities in this fast-growing market and anticipate revenue growth in the 10% to 20% range for fiscal '26. Smart Infrastructure, stringent backlog execution also led to margin expansion of 120 basis points, ladies and gentlemen. The profit margin of 13 -- of 18.7% even topped our own expectations. Smart Infrastructure continued to benefit from economies of scale due to higher revenue and high capacity utilization. Its economic equation remained clearly net positive, supported by productivity gains and adequate pricing measures. Cash conversion was again excellent and led to a superb free cash flow above EUR 1.4 billion, only slightly below last year's all-time high level. In particular, effective working capital management fuel the seasonally strong free cash flow again.

Let's turn to regional top line development at SI. The U.S. stood out with strong performance in both orders and revenues. In this region, all businesses saw top line growth led by remarkable growth in electrification on data center wins. In contrast, China recorded declines in orders and revenue. This decrease was due to a drop in the buildings business, given the ongoing market weakness, especially in the sluggish real estate market. On a global basis, we do expect consistent market trends with most verticals pointing to further growth opportunities. In particular, data centers and power utilities remain key growth drivers.

Building on this strong technology and global footprint, we see as I geared for further profitable growth in the future. For the full fiscal year '26, we expect Smart Infrastructure to achieve comparable revenue growth in the range of 6% to 9%. Leveraging ongoing growth opportunities and a relentless focus on productivity, we anticipate that Smart Infrastructure will achieve a profit margin within the range of 18% to 19%. For the first quarter, we expect SI's comparable revenue growth rate to be within full year guidance range. Considering seasonal effects on exchange rate headwinds, we anticipate that the first quarter profit margin will be below SI's annual guidance range. Nevertheless, SI has the potential for another quarter of year-over-year margin expansion.

Now let's move to Mobility. Mobility closed a strong fiscal '25 on a positive note and with excellent free cash flow. At EUR 2.5 billion, orders remained below the strong prior year level, due to a lower volume from large orders. However, going forward into fiscal '26, the order pipeline looks very promising again. Mobility's order backlog stands at EUR 52 billion, and it has a very healthy gross margin improved over the prior year level. As indicated previously, revenue of EUR 3.2 billion developed flattish on tough comps. The rolling stock and customer services business came in below their strong level of the prior year quarter and outweighed growth in rail infrastructure. The profit margin of 8.5% reflects a less favorable business mix compared to the prior year's fourth quarter.

In terms of cash generation, Mobility followed through on its commitment and delivered an excellent EUR 1.4 billion of free cash flow in the fourth quarter. The strong year-end finish pushed fiscal '25 free cash flow to more than EUR 1 billion. And our cash conversion rate of 0.93, this result is well in line with our 1-minus growth target.

As you know, Mobility has an attractive asset-light business model and has delivered consistently healthy cash flows and conversion for many years. Over the last 12 years, Mobility is growing top line, generated a cumulative EUR 10.2 billion of profit, which resulted in EUR 9.9 billion of free cash flow. With that, Siemens Mobility is a clear industry benchmark in terms of profitability and free cash flow conversion. For fiscal '26, we do assume that both comparable revenue growth and profit margin will be within the corridor of 8% to 10%. For the first quarter, we anticipate revenue growth and margin within the same corridor.

Now as I mentioned, I couldn't be more proud of about EUR 5.3 billion of free cash flow, all in for the Siemens Group. This was not only an all-time high fourth quarter, but also pushed our fiscal '25 free cash flow to a record of EUR 10.8 billion. This success is attributable to strength across the entire industrial business landscape, each of which delivered more than EUR 1 billion by themselves; a clear testament of the strength and dedication of the entire team Siemens. This record performance resulted in an outstanding cash return of 13.7%, and it marked the sixth consecutive year of double-digit free cash flow return on sales. Continuing to build on this industry-leading track record remains our clear ambition.

Now let me use this opportunity to highlight the most relevant assumptions for our fiscal '26 outlook. We do assume that the global economic environment will stabilize, and that global GDP growth will remain near prior year level. As a percentage of revenue, we will remain -- we will maintain R&D and SG&A at similar levels as in fiscal '25. These investments will help drive even stronger customer focus, faster innovations and higher profitable growth. To further support momentum, we will also increase CapEx to optimize our global footprint and expand capacity in targeted growth fields.

Severance costs are expected to be in the range of EUR 350 million to EUR 400 million, significantly below fiscal '25. Up to half of the group's total '26 severance expenses are expected to occur at Digital Industries. We will continue working on ongoing capacity adjustments, of course, particularly in the automation business and on ensuring competitiveness across our entire business go. Unfortunately, we have to expect exchange rate to be a strong burden for fiscal '26. Based on current U.S. dollar forward rates in the market, we see a negative translation impact of around 4% on our top line, and 50 basis points on our industrial margin. We do expect this impact to convert into a headwind of around EUR 0.70 to EUR 0.80 for EPS pre-PPA.

Now let me share our assumptions for the line items below Industrial businesses. We expect governance costs to be net 0 of brand fees, in line with the target we set to ourselves last Capital Market Day back in '21. Innovation costs will be broadly comparable to the prior year level and will reflect investments related to our ONE Tech Company program, as outlined from Roland. Financing, elimination and others depend on portfolio topics, of course, and we expect them to be roughly on the prior year level again. And finally, we assume a tax rate of 23% to 27%.

I have already described our fiscal '26 assumptions for our industrial businesses. On the Siemens Group level, we expect 6% to 8% comparable growth. We again anticipate a book-to-bill ratio above 1. We expect EPS pre-PPA in a range of EUR 10.40 to EUR 11 in fiscal year '26. This range reflects material negative impact from exchange rate, as mentioned before and compares to fiscal year '25 amount of EUR 10.31, which includes effects from Altair and Dotmatics. As always, this outlook excludes burdens from legal and regulatory matters. So in a nutshell, we are entering fiscal '26 from a clear position of strength and with a very ambitious outlook.

Now let's move to the second part of my presentation for today. And first, a review of and status update on the transformation that we have been driving successfully in recent years, and then a look ahead for our financial ambitions and priorities for the future. Let's start by looking back quickly at the substantial value Siemens has been creating in the 5 years since Roland took office as President and CEO of Siemens AG. Siemens is in excellent shape and has been transforming successfully. Our teams have maneuvered Siemens very well through a period of market -- of really marked by volatility markets and geopolitical challenges. All this resulted in a 151% total shareholder return since the beginning of fiscal '21, clearly over and above industry-leading levels.

Today, Siemens is delivering faster growth and higher profitability at the same time. Our cash generation is stronger and more consistent than ever, and we have further strengthened our rock solid balance sheet. We have allocated capital stringently to our shareholders while investing for profitable growth at the same time. Beyond that, we have been continuously optimizing our portfolio and have reduced complexity. At our Capital Market Day back in '21, we challenged ourselves. We set ambitious targets with an upgraded financial framework, and we delivered.

For comparable growth and revenue, we had set out to achieve a compound annual growth rate, so called, CAGR of 5% to 7%, and we delivered 8%. For EPS, before purchase price allocation accounting, reached a CAGR of 15%. At 16.2%, our average capital efficiency over the cycle stayed within our target band of 15% to 20%. And as promised, our capital structure did not exceed 1.5x. Another tremendous success was cash generation where we accomplished free cash flow all in of EUR 46.7 billion throughout that cycle and have achieved also a very strong cash conversion rate of 1.20 since 2021. Finally, we announced that we would pursue a progressive dividend policy, and our dividend has grown at a CAGR of 9% since back then.

Beyond executing on our group targets, we also drove our transformation. We delivered on strategic initiatives as promised. As I mentioned earlier, our SaaS transition is nearing completion, and we clearly exceeded our initial targets. Annual recurring revenue, or ARR, in DI software has grown 13% on average. The cloud share of ARR is now close to 50%. This result has been achieved well ahead of the initial schedule. In addition, we simplified our structure by divesting portfolio companies that were no longer core activities. More on that in a few minutes.

Year-by-year, we have been making progress towards an even leaner and more effective governance. We are achieving these improvements by consistently supporting our strong growth in operations with an adequate level of highly efficient resources in support and governance functions. In addition, we want the fees we receive for the use of the Siemens brand to fully offset our governance cost. Now we can confirm that we expect to reach net 0 governance costs in fiscal '26 as promised.

Team Siemens can point to an impressive achievement in recent years. And these successes also clearly show that we have further strengthened our excellent financial foundation. Our outstanding free cash flow generation, which is unique in our industry, is a crucial part of this rock solid foundation. I'm particularly proud that for 6 years in a row, we have achieved a double-digit free cash flow return on sales. Free cash flow is the ultimate yardstick for any business's performance and it has been and will be a key enabler for our prudent capital allocation. On top, I'm very pleased to see that rating agencies recognize our strong cash generation and resilient business model. Our industry-leading credit ratings by Moody's and Standard & Poor's reflect their trust in this regard. And of course, we want our shareholders to participate in our financial strength.

Between '21 and '25, we paid EUR 17 billion in dividends to our shareholders. And we delivered on our promise to pursue a progressive dividend policy. As I mentioned earlier, for fiscal '25, we are proposing a dividend of EUR 5.35. This will put our progressive dividend on a remarkable trajectory. It has been growing at a CAGR of 9% since fiscal 2020, as mentioned before. We have also meaningfully accelerated our current 5-year, EUR 6 billion share buyback program. It has been running well ahead of schedule and at an attractive average price of EUR 198 so far. While providing these attractive shareholder returns, we have been simultaneously investing in future profitable growth. To expand on our position of technological leadership, we have maintained a peer-leading R&D ratio of 8% with expenditures of EUR 29 billion over the last 5 years. In addition, we have further strengthened our well-balanced global footprint by making targeted CapEx investments totaling EUR 12 billion.

And finally, we have selectively expanded our portfolio by investing in inorganic growth. Over the last 5 years, we enhanced our portfolio with several bolt-on acquisitions and three larger acquisitions for a grand total of EUR 32 billion. For years now, we have been simplifying our portfolio and sharpening its focus. By spinning off Siemens Energy, we created a unique and leading player in the energy market. Despite its bumpy start, Siemens Energy has become a poster child for crystallizing value. Its market cap is now 5x higher than at the time of its listing in September 2020. Meanwhile, we have taken several steps towards phasing out our investment as announced from the very beginning. This way, we have realized around EUR 3 billion in cash proceeds. We also materially strengthened our pension assets by contributing more than EUR 3 billion to our pension fund. Our stake in Siemens Energy currently stands at 10.1%.

We remain committed to fully exiting Siemens Energy in a meaningful time frame and by mindful -- being mindful of market conditions. In addition, we have successfully divested our former portfolio companies, implementing a private equity style value creation approach proved to be very effective. We executed full potential plans and pursued strategic options. Over time and using tailor-made approaches, we found the best owners for each and every of those companies. In total, the portfolio company divestments generated more than EUR 7 billion in enterprise value.

Siemens Healthineers has been a separately listed company since its initial public offering in March 28. The strategic rationale for that IPO was opening the business for new investors while preparing for a bold consolidation move. Healthineers made such a move a few years later by acquiring Varian Medical Systems, as you know. The integration of Varian has been going very well. We have now reached the perfect moment to take a major transformational step again. As Roland outlined, deconsolidating Siemens Healthineers will align our portfolio even more closely with exciting growth drivers of automation, digitalization, electrification, sustainability and AI.

And now it's also time to shift gears as ONE Tech Company to go for the next level of performance. Roland already did explain the growth trajectory. We want to leverage opportunities from operating in attractive markets that have promising adjacencies. And we will expand our share of digital businesses even further and faster. As a result, we are upgrading our revenue growth target to the range of 6% to 9%, and we continue to expect our EPS pre-PPA to grow faster than revenue. Increasing profitability in our industrial businesses over the next few years will drive this development.

On top, we will maintain our high level of ambition for our other midterm targets according to our financial framework for the group. I will go into the details for those metrics in a minute. Incremental growth and profitability in our industrial businesses are driving continued high single-digit growth in EPS pre-PPA. As part of our ONE Tech company program, we are initiating steps to take our company to the next level of performance.

In terms of our markets and portfolio, we are continuing to grow our digital business and grow in the most attractive regions and the most promising verticals as Roland pointed out. These measures will structurally improve our growth and margin profiles. While our go-to-market can be distinct for different markets and business models, our teams will use ONE sales fabric. Standardizing and sharing information and tools will ultimately lead to better resource allocation.

Our businesses will also benefit from ONE technology fabric. We will build technologies and services once and leverage them across the entire organization. This approach will, for example, boost productivity and software development company-wide. On top, we are establishing ONE data fabric for all of Siemens. This step is crucial for driving advances in areas such as powerful AI usage. In the end, it will help to optimize our processes even further. All in all, we are building an efficient optimal environment to enable our businesses to focus sharply and innovate faster. These levers will help in lifting our businesses more and more so that they can realize their full potential.

At Digital Industries, our industry-leading and unique portfolios enable us to leverage opportunities in our markets and drive customer impact. In DI software business, we are about to finalize our SaaS transition. As a result, we are expecting tailwind for growth and profitability going forward. The teams have created a stable, high-performing operating model. Overall, profitability in this business will benefit from stringent integration of the recent Altair and Dotmatics acquisitions and continued productivity efforts. In DI's automation business, we are strengthening our sales teams by reducing back office work and doubling the share of quota-carrying customer-facing salespeople.

We will also further boost digitalization and vertical offerings. On top, we are rigorously executing ongoing productivity programs to drive margin expansion. You know and they know that I'm exceptionally proud of how the team at Siemens infrastructure has delivered on their commitments since the last Capital Market Day back in '21. Not many believed in their ambitious targets back then, yet Smart Infrastructure proved what can be achieved with a good plan, intense dedication and strong execution capabilities in an attractive market environment.

SI's track record is speaking for itself. The team has now achieved the 20th quarter of year-over-year operational expansion in a row. And SI's margin was north of 18% for fiscal '25. Looking ahead, we expect Smart Infrastructure to continue to expand their margin. A year ago, at SI's capital market event in Zug in Switzerland, we outlined the strong market positions of SI businesses and their levers for further profitable growth. Those key levers are targeted capacity expansion to execute on the strong order backlog, intensifying expansion into high-growth regions and verticals, and driving growth of digital business, and relentlessly improving productivity in operations on even higher levels than before.

Now as I mentioned earlier, Siemens Mobility is the industry benchmark when it comes to terms of profitability and cash conversion. Mobility achieved this performance level by prudently managing risks and opportunity time and again. We are proud of how the whole Mobility team has been maintaining their enduring commitment to our customers to deliver our orders on time at the right quality and within budget. The teams will continue to work on increasingly shifting Mobility's business mix towards accretive profit pools in services, software and platform businesses. Diligent capacity ramp-up and enhanced productivity will be key focal points for Mobility on top of maintaining the highest quality standards.

Now let me turn to the group perspective. I want to once again strongly emphasize our continuing commitment to profitable growth by rigorously implementing our ONE Tech Company program. We have achieved a very attractive trajectory for earnings growth in recent years. By pulling all levers I just discussed, we aim to continue this momentum and grow EPS pre-PPA by a high single-digit percentage. In fiscal year '25, EPS pre-PPA came in at EUR 10.71, excluding the effects from the Altair and Dotmatics acquisitions, which closed significantly earlier than originally expected. Including Altair and Dotmatics, EPS pre-PPA was EUR 10.31. For fiscal '26, we expect EPS pre-PPA to be in the range of EUR 10.40 to EUR 11, as I outlined earlier.

And we are extremely proud of continuously achieving double-digit free cash flow margins. This multiyear track record is the fact-based result of a cash mindset that is deeply embedded across the entire organization of Siemens and of maintaining a corresponding incentive system, of course. We are very confident that we are well positioned to continue this strong streak. And of course, excellent cash generation is a key pillar of our rock-solid balance sheet. However, there is more to it. For example, an all-time low in pension provisions as well as the cash inflows from the recent sale of stakes in listed companies and extremely important, prudent capital allocation. And it goes without saying that we aspire to maintain our rock-solid balance sheet and our industry-leading credit ratings.

We know that return on capital employed is a key metric for our investors. It provides a clear picture of how efficiently we are using capital to generate profitable growth and create long-term value for our company's owners. As promised at our Capital Market Day back in '21, we entered our target range for return on capital employed back in '23. Since then, we have maintained within the upper half of that range. We are committed to maintaining a ROCE between 15% and 20%, even though we will face temporary headwinds for this metric from recent software acquisitions.

I mentioned earlier how we have been balancing very attractive shareholder returns with focused investment, and we will continue to strike this balance effectively. We are very confident in the trajectory of the new fabric for Siemens as ONE Tech Company, and we want our shareholders to benefit from reliable and sustainable returns. We reiterate our commitment to an attractive shareholder return and a progressive dividend policy. We will stick to this policy even after deconsolidating Siemens Healthineers to maintain our trajectory and if necessary, we will temporarily allow a higher payout ratio. In addition, share buybacks will remain a core pillar of shareholder return for Siemens Investors. And of course, on top, the intended spin-off of 30% of Siemens Healthineers shares will benefit our shareholders directly and materially. Roland outlined the significant growth opportunities that we see in our markets. You will hear more about them in our deep dive sessions this afternoon.

To leverage these opportunities, we will continue to invest. We will maintain high R&D intensity to continue driving our technological leadership and further growth. Our geographic footprint is well balanced, and we will continue to optimize it through targeted capital expenditure. In addition, we will harvest selectively -- invest selectively in value-creating acquisitions. All investment decisions will be based on our well-known and clearly defined strategic imperatives and on prudent decision-making. And certainly, we will continue to monitor each M&A transaction closely based on specific criteria. Our aim is to ensure attractive returns and ultimately, strong value generation.

Ladies and gentlemen, our markets are changing at a high pace, and Siemens is transforming rapidly to stay in the lead. Yet our principles for value creation remain the same and remain fully intact. You can rely on stringent capital allocation and strong cash generation to drive operational performance at Siemens. You can rely on Siemens continuing to deliver very attractive and sustainable shareholder returns. And along the way, we will ensure that rigorous execution, transparency and compliance remain paramount.

Roland and I, the Managing Board and the entire team, Siemens are all fully committed to further accelerating value creation as ONE Tech Company, Siemens. Thank you.

Thank you, Ralf. Thank you, Roland, for opening the day. Welcome, everyone, also from my side. I'm Chris Ribeiro, the Chief Communications Officer of Siemens, and I'm here with Tobias, the Head of our Investor Relations. And together, we will guide you through the day.

Thank you, Chris. Also good morning from my side. I'm really happy to see so many of you taking place here in person, but also a warm welcome to the ones joining us live via the webcast.

We have a packed agenda. You received the agenda before, and you can see on the screen. We have deep dives with our experts. We have hands-on experiences showcased on that corner, network and exchange with MBMs and experts and what is next, Tobias?

Next is a break. I think we all deserved it. We will be back in 10 minutes for the Q&A with Roland and Ralf.

See you in 10.

[Break]

Welcome back for the Q&A with Roland and Ralf. Let me start with a few housekeeping items. [Operator Instructions] Chris and I will moderate and take questions from both journalists and analysts. We would start with the first questions from the analysts.

First question, James Moore, first row.

It's James Moore from Rothschild & Co. Thanks for all the information and Healthineers and the great growth outlook. I guess my question is about profitability, in particular, DI. If we're going to do high single-digit growth at the group level, I know you talked about the ambition of earnings above that. But if we're high single-digit growth for earnings, there's not a lot in there for margin expansion over time. And normally, record growth would drive some operational gearing. And specifically in DI, I imagine you should have some tail of the fish benefits, some productivity, some of the benefits from severance and a positive economic equation. Just wondered if you could help us with what's on the negative side of the ledger apart from currency, which you've been clear on. And in particular, just the EUR 2 billion of AI investment -- sorry, the EUR 1 billion of AI investment, whatever the number is, does that have an impact on the P&L?

So thank you, James, for giving me an opportunity to clarify a bit. I know that some of you may consider the guidance for DI margin conservative. I would rather qualify it as prudent. We clearly said and also experienced that part of the market is not yet bouncing back V-shape like to investment sentiment. And therefore, we do expect on top of exchange rate and also on top of the extraordinary integration that we mentioned and severance, which will be pretty much 50% of that what we guided for the entire company for fiscal '26.

On top of that, we'll see quite a couple of challenges developing through the first couple of months in the market. We do see momentum there. They are doing their homework, but also please bear in mind that severance being booked does not implicitly mean that all the impact is immediately popping up. So that will take time to materialize. And we want the company to stand on firm ground and also learn from history. So therefore, I would call it prudent and not conservative.

So let me talk about the AI investment. So this is basically -- it's an investment which goes across the company, but there's an increment of EUR 100 million plus, which you will find in the innovation below IB in that part. This is particular for the team, which Vasi Philomin, you will get to know him later, is about to build up. But this is only part of that. Other parts are, as you know, as I talked about, we have 1,500 AI experts across the company. We have many AI projects also in the businesses, but that is not increment. This is part of our R&D budget.

I take a question now from the press side. I saw Michael Flämig. Question from the press side. Any hands?

Okay. Great. I have two questions, please. I didn't raise my hand, but nevertheless, I will take this one. What complications do you have on the regulatory side for the deconsolidation of Healthineers? And the second one, the share price today is 5% down. How do we interpret this reaction?

Yes. Thank you for your questions, Michael. Of course, too early to finally conclude on the share price development of today. But what I feel also from the responses and that what we get is feedback, we made you drinking from a firehose house, many different aspects, levers floating around, and we are happy to have now an opportunity to clarify areas that may not have been coming across completely clearly. So that's why we have a Q&A.

I firmly believe that what we have to share today will have a very positive impact on the long-term value development of both Siemens AG and Siemens Healthineers AG's shares and also prospering opportunities from capital allocation in both companies. They are both leading in their markets, and I cannot imagine anything that could hold them back from being successful even more than they have been so far. So too early to jump to conclusions, but it's not a surprise that there's a lot of volatility at the moment out there, as I said, since there's room and of course, also a reason for further clarification and details.

Your first question may be one of them that needs further details. I hope we didn't get across like there's regulatory problems or challenges. It's just respect for regulatory processes. And I think everyone is well advised when you do something for the first time that you respectfully look at those who have a say in the process. And therefore, I would rather consider that being a topic of time lines than content, but too early to assess that. It's in their field and respectfully wait for them. If and when regulatory processes are getting us a clarification fast, we will be fast. If it takes a while, we will have to wait. And we will then be very well prepared for the next steps to be taken.

Next question from Ben Uglow.

I think Michael wanted to add something. Sorry.

I'm sorry. I choose the word problem because maybe on the tax side, you may have problems.

Yes. As I said, I mean, if we are standing on very firm grounds with our view on matters. But still, there is a regulatory aspect in it that needs to be considered, and we respectfully addressed that. We are talking to the regulators that are relevant for these steps. We feel encouraged by all the means and initiatives we took before that, that we are on the right path, but that doesn't take away that decision power from the regulatory framework. So therefore, we are confident that there is no problems, but there is time lines and opinion-making required on the regulatory side. If we were not convinced of our view, we would never dare to show up with a proposal.

Now it's Ben's time.

Next question from Alexander Reuters.

Ben Uglow was on first. Ben?

I guess it's related to the previous question, but -- and we're all frankly in the dark about exactly what the tax situation is and the regulatory implication. And I know I understand these are probably sensitive conversations, et cetera. But Ralf, can you give us just a little bit more sense on what the tax obligations or considerations are. And the reason why I ask is, from a Siemens AG standpoint, our understanding was that had basically gone away. And what we're really talking about is from a receiving shareholder standpoint, what their withholding tax or commitment is going to be. So is that right?

And then the second question is far more fun. A year ago, I think it was when we had the Handelsblatt article and various comments about this conversation. And at that point, I think that there was a -- how core is Siemens Healthineers to Siemens. We were going to do an internal review, look at the synergies and all these kind of things. And there was obviously a debate within the company. It now looks as though a decision has been made. What allowed you to come to a firm final decision? What changed in the water, what put you over the edge, so to speak, that allows you to do this?

Okay. Let me start with the tax one first. I mean there's, of course, tax implications in many different areas. For Siemens AG as a company and its tax obligations, I think we are fine. There's an immaterial amount compared to the potential deconsolidation gain involved. We didn't want to bother you with that. It would be too early to quantify anyhow. So not on the Siemens AG side. Therefore, it's difficult for us to talk about withholding tax because we are not the addresee of withholding tax. It's the depo holding banks for shareholders, and that very much depends on the nationality or jurisdiction residency of the individual being involved of the magnitude of the investment being involved of whether it's held privately or in a business environment.

So therefore, we cannot jump to conclusions for the shareholder because there's not the shareholder. And therefore, withholding tax is, of course, the area we are talking. And since we are not owning the process, it's hard to comment. But we are very confident that we thought about all the relevant aspects, but it's still not our turf to decide on. So therefore, we respectfully have to wait.

Maybe this is also giving me a bit of an opportunity. I mean, the time lines are not written by ourselves, obviously. You have to respectfully wait for conclusions being made in that field. But there's also, of course, the question out from that what I heard, where do we start from and where do we want to end up with. For those who are familiar with the financial and accounting language, a financial investment is considered to be below 20% typically. There's other aspects that need to be considered. If that's the midterm goal, you probably need to know where we start from. At the moment, we hold 67% in Siemens Healthineers. You also heard us talking about funding our software acquisitions, our latest software acquisitions with the sell-down of listed shares. Both Siemens Energy and Siemens Healthineers. So we didn't specify.

But if you took for modeling an area of something around 60%, sell down to 60% from the 67% being a residual from that, what we wanted to do in funding, maybe a bit below, this is probably a meaningful area to think about. So starting point is 67%, but there is intent and processes that have been ongoing to do what we said clearly last year when we announced that funding for the software acquisitions would be in part be done by using the proceeds of selling listed shares.

So -- and thank you for that question. And I give you really more details. What I'm saying now is not in the sequence of priorities, but it's basically describing the whole process how we get to the decision. Let me first start. We always said we are not dogmatic about it. And we also said that since the acquisition of Varian, we have a bottom line impact of EUR 350 million, and we want to see how that materialize it. By the way, it did.

So then obviously, we discussed all options, all possible options because we need to be diligent in such a big decision, so we don't oversee anything because this is a one-way street once you go there. So we're working, for example, also on the point of the question is how strong can we develop together the whole health care sector. And it's not only in the headquarter to think about, it's really on the field. I mean I started together with the team locally in the United States, also together with a consulting company to see can we together create a stronger impact. We visited hospital customers and to see that. And by the way, the teams are working also on the ground together to see can we really leverage each other's strengths, I was saying in the basement where you find the scanners and in the ground floor and others where we have the beds and all the other productivity and can we do something, including sustainability.

And yes, we can, and this is also good. It's roughly EUR 1 billion business of ours, just one. But again, it was -- it's not that synergetic that you say that you can really drive much, much higher growth. But it's still good. Then we really took a deep dive in what does digitalization mean in our sectors, in industrial sector, infrastructure, transport versus the health care sector. When I talk health care sector, this is another element, increasingly clinic-driven health care sector. If you look at Siemens Healthineers strategy where they go, it's going more into therapies along with diagnostics, which is really the clinical part. You see all the regulations. I mean, hospital systems, for example, they don't scale across regions. Digitalization is different from that perspective.

Then we looked into what is our capital requirement in the future, what is that one of Healthineers, a very important aspect, which you have to take into consideration. What are the fundamentals in the markets regarding growth, growth trajectory, where we can do a regional as well. And again, reevaluating how synergetic is the business with each others. At the same time, and this is a very important point, our Siemens business really developed further in terms of growth, in terms of profitability. So we are -- the way -- how much of, obviously, cash we are generating on our own.

So if you take that all together, you come to a point that once we go that step, we have a much, much stronger freedom regarding capital allocation on both ends. We could not justify a synergetic case, which is as big as in order to really keep going and really leverage. And that finally we thought it's -- we are better off in making that step.

And if I may add one thing just quickly. I mean, if you look back, that's why we took the time to remind ourselves where we are coming from since Roland took over. I think it's fair to say that the company has been already changing its fabric massively. And it's not finger pointing to the past or complaining about missed opportunities. It's about just keeping the momentum of that what we have been embarking on. We are a company that is scaling on digitalization, electrification, automation, sustainability with a focus on AI that is scaling globally. The health care industries are globally fragmented. They are ruled and regulated in different jurisdictions. So if and when they scale, it's a different ball game.

Second thing is the entire sector, and don't get me wrong, Healthineers is a fantastic business, and they are clear market leaders in most of their areas anyhow. So technology-wise and also growth-wise and from a profit-generating perspective. But the entire sector will most likely not grow double digit anytime soon. We can and prove that we can do that already by now in some areas. Therefore, capital allocation needs to be focused into those relevant growth areas and while harming others with our opportunities.

That's a big, big difference compared to the status we had when we listed Siemens Healthineers in March 2018. That was a different shape of Siemens AG. Therefore, it's only consistent that you time and again review your portfolio, your perspectives, your capital allocations and then conclude at the right point in time to do the right thing and then consistently and as quickly as possible.

The next question is from Alexander from Reuters.

I want to follow up on this a little bit regarding your targets for the next few years when you take out the Siemens Healthineers projected or past growth rates, the 6% to 9% don't seem too ambitious. And I think that's what the market also thinks today. So this is not really -- excluding Siemens Healthineers, this is not very much more than in the last few years. Can you comment on that? How ambitious would you say is your target? And on the other hand, Siemens Healthineers has had quite a big chunk of your sales and profits in the last few years. How do you think Siemens -- or do you think Siemens can compensate this within the next few years? Or will there be a Siemens in the end that may prove to be too small and become a takeover target?

Let me start at the end. I don't think so. We are still a sizable company, and this does not cost you this night. So -- but let me start with your -- I tend to disagree that 6% to 9% growth rate going forward is a weak target. I would consider it to be very strong. Number one, I think where we're coming from, and I talked about it in the last sequence, we had 5% to 7% go now for 6% to 9%, number one. Number two, did it double check for the GDP growth in whatever the world, how that goes? Even our markets are on the high side. I talked about our markets growing 6%. They don't -- they grow only by 6% because we have a substantial part of high fast-growing digital business in there. Remember the EUR 175 million by 2030. This grows by 11%. How many companies can claim to play in such a fast-growing market, substantially in revenue. I talk about EUR 9.4 billion revenue.

So all in all, if you agree that if you come to that conclusion, then talk about the industrial investment, it's hold back still. And China, by the way, is gradually picking up. This is not a recovery in the market is gradually picking up. So we are picking up momentum with that market, too. So I tend to disagree that a growth -- a midterm growth of 6.9%, picking up momentum is, we believe, a very strong target. And we have to see what others can do in that space, but I believe this is really good.

And on top, of course, converting top line into results is not a bad thing either. And we're clearly committed to outgrowing EPS the top line growth, which is quite something to accomplish time and again.

And one more thing since you mentioned it, we are -- for some businesses, we could grow faster. We are throttling, for example, in more dilutive solution business. That's why we say we could go faster, but we keep that on a certain level. That's another element where we really believe that happens, for example, in pieces of our building business and pieces of the DI business as well.

The other part of your question, Alexander, was around closing a potential gap being left behind Siemens Healthineers once being deconsolidated. I don't want to get into accounting things here, but it's a big difference between fully consolidating amongst others, profit and cash flow and owning the proceeds because we do own already by now the dividend we consolidate the free cash flow. It's a big, big difference, whether you own something or whether you have something in your area of responsibility from an accounting perspective and an oversight perspective. Don't misinterpret that big difference that is there already.

So now if and when, as we did, we sell down, we came to 67% that gap already has been widening compared to the 85% we originally owned. Did you see any negative development in the KPIs of Siemens consolidated or not? I didn't see that. So therefore, we are confident that we can continue on that trajectory and do meaningful things in a well-balanced way between investing and shareholder returns.

The second thing is we made a clear commitment, and I had that in my presentation and speech, that we will continue committing ourselves to progressive dividend. That means we are, if need be, also ready to increase for an interim period, the payout ratio that is -- this statement is based on a very deliberate approach and well thought through planning. We are highly confident that we can close that gap if it occurs over a meaningfully period of time.

As I said before, we are not owning the time lines of deconsolidation. Therefore, we don't want to speculate about that. But if and when it comes to that point that the spin is executed and deconsolidation is taking place, we also will have the benefit of a deconsolidation gain most likely. We cannot speculate about that today because it's driven by many different factors amongst one is very important, that's the share price at that point in time. But you can rest assure as much as the consolidation gain is higher than tax burden by far, it also may exceed a gap in a given year if and when the deconsolidation is taking place from an operating perspective. I cannot give you more confidence of the Managing Board that we are fully aware of that question.

Next question from Phil Buller.

The first question is a follow-up on the Healthineers comments that you've made. Is it possible that you could potentially deconsolidate pre the spin via dribble-outs and blocks? They've been taking place in recent months anyway? Or could they potentially still be accelerated prior to the spin out? That's question one. And then secondly, in terms of M&A, it sounds as though potentially large things are going to happen. What is missing when you talk about the fabric, what's missing from the fabric today that you think is important going forward? And when would we anticipate deals?

Let me take the first part of your question, Phil. I don't want to speculate about the time lines and things, but it's highly unlikely that a deconsolidation would take place before the spin of the 30%. You never say never, but it's highly unlikely. And as I said before, we are busily looking into the regulatory framework and opportunities arising from that. So the entire process, of course, will not be done within a couple of weeks. But we are also mindfully looking at the share price of Healthineers, of course. And therefore, we are not in a hurry of doing anything premature and harming the value of that really outstanding company.

So that's not really a big piece missing currently. But I can tell you in which areas you're looking. Number one is, and that's quite obvious, we're looking to any kind of software assets in the market. Take our -- for example, our market expansion, which we did with Dotmatics. It opened us a new space in the R&D of pharmaceutical, so simulating molecules, getting the Digital Twins there. There's a space which is super dynamic, super interesting. So any kind of asset which enriches our portfolio there is super interesting.

We also talk about connected hardware devices, which are generating data on the shop floor, any kind of device, we have a chance to increase. We are looking into that one. I mean you know that the new AI factories require new technologies to solid-state transformers, DC switching. We have, in all cases, what I'm talking about organic investment as well, but there might be inorganic moves, smaller ones, maybe larger ones, we have the firepower to do that, but it has to make obviously economic sense and align with our strategic priorities.

So therefore -- and in the AI space, in particular, we are watching closely also the start of smaller companies. I mean, in some cases, they are just -- I mean, their market expectations or the value is so high that it's prohibitive. But still in an early space, you find a lot of interesting companies, which is interesting. And it's interesting from 2 perspectives, what's the offering and what is the talent which comes along with that.

But typically, we would stick to our trajectory, which we had in the past. So we are adding incremental medium, smaller-sized assets to our software portfolio. We're looking into hardware, but we also to do larger moves, as you know, like Altair and Dotmatics if it really fits to our portfolio.

Any questions on the media side? Please?

Filippo Santelli from la Repubblica, Italian newspaper. I have two questions. The first one is on your slightly optimistic outlook for the geopolitical scenario. We've seen U.S. and China go through phases of escalation and deescalation. It looks like we are in the escalation phase right now. But most experts think that in the medium, long term, the 2 countries are headed towards a technological decoupling. What makes you confident that Siemens will stay in a position where it can provide key technological capabilities, both to U.S. and China in strategic sectors, thinking about semiconductors or aerospace or energy or whatever?

And the second one is on Europe and its industrial and technological competitiveness. It's obviously very high in the agenda. But do you think in concrete terms, Europe and European countries are taking the right actions to boost industrial competitors both on the regulatory side and on the investment side?

You trigger something here. So I said you trigger something. So talk about the markets. Number one, the markets themselves and said it before, number one is we are sitting on -- we are serving growth markets, secular growth markets. So there's not a really one-to-one match between the GDP growth and the market growth because, as I said before, we are focusing on the higher growth areas, automation, digitalization, sustainability and AI. If it comes to technologies, it is -- I would say it's getting harder that you have a technology in certain space, in certain space, which is scale globally. This is the reason why we are more and more going for local for local development and not only applications based on a global platform, but genuine local development.

Take an example of China. The products which we talked about, the new ones, they are -- they have all the way local Chinese components down to the silicon. This is not the high-end 5, 3-nanometer silicon. You find a lot of that, by the way, is produced in China. So the older nodes, the market share coming from China is extremely high. So we do that also because we know there are regulations coming in, which are forcing you to use also only China silicon on your controls, and we do that. We are prepared to do that. We go here all in. And at the same time, we do that on the other side, if you talk about innovation, software-defined automation for a global market in the United States, this is more based on resources, but also on components coming from there.

What is one -- there's one area, obviously, which is more critical, which is software because software you want to develop once and sell it as much as you can globally. And the only restrictions which we see so far, and you could read it also in newspapers is EDA software. And therein, it's not the whole EDA package is the package which is geared for the smaller nodes, so 5, 3 nanometers, which there's a restriction. It was resolved quickly after -- and this is the arm wrestling. This is technology on the one side and rare earth material on the other side, and it was resolved after 3 weeks. Would that go away? I don't know. But this is the point where you also start thinking of can we, let's say, for some of the software platforms as well. If need to, we would. Currently, the majority of that, what we are doing there, we believe we can still serve in different areas.

And you're right, the focus is definitely the semiconductors and to some extent, dual use the whole aerospace and defense sector. Yes. Well, we need -- the answer to be competitive in the future, also to have our industry staying competitive in the future. The answer is speed and agility and innovation. Germany, in particular, we do not have resources. Our resources are the people. Our resources are innovation, innovation, which is so good that others want to buy it. So we are export country. Innovation based on ecosystems, super strong companies and still automotive, I count on them, but also the supply chain. But they need to do actually also what we do is digitalizing their -- all their processes, work more with Digital Twins. And more work with data. And along with data comes, of course, the whole cybersecurity, go all in with AI.

I mean I strongly believe and subscribe to what [ Jensen ] said, this is a channel purpose technology. There's a world before electricity and after. It was a channel purpose technology. Think about it. And there's a world before and after AI. And the world will use it. And therefore, if we start and if you look at the regulations which we have currently in Europe, AI Act, Data Act, Cybersecurity Act. This is contradicting, it's too much, it's throttling innovation. Why would you derive a regulation, which is supposed to protect end consumers? Why would you deploy the same mechanism to B2B business? We are writing contracts. We are taking care about our products. There is a need for regulation. Don't get me wrong, but this should be guardrails, which ensure that within these guardrails, you can go all in with your innovation speed.

So therefore -- and this is not only about regulations, but also about decision-making. We are in a time where we need more and faster free trade agreements, and we cannot wait for 10 years when China is doing that in 1 or 2. We need less bureaucracy. We need faster digitalization also of these processes. Just pick one example. If you want to attract talents, you better get your visa process right that you get these guys and they don't have to wait for 6 months. Otherwise, they are somewhere else. So I can go and on. I believe we have really a substantial way to really sought out complexity and innovation, throttling governance and regulations in Europe and Germany in order not to lose competitiveness on a global scale. And I tell you, neither China nor United States is waiting for us.

Next question comes from Daniela.

I have two questions, both of them related to Digital Industries, but I'll ask them one at a time. First, on software, Ralf, you've mentioned that the headwinds from the SaaS transition were mostly behind us. Can you comment on sort of now the potential tailwinds on growth and margin based on what we've seen as headwinds? And can we start counting on those in 2026? And I'll ask the other after.

You want to ask two questions at the same time?

You want me to ask now? I was going to...

I mean, first of all, you're right. We are, I would say, 80% done with the SaaS transitioning, not completely, as we mentioned before. And of course, we are seeing positive impact from that. We still also have a business that has not been heavily affected from SaaS transition. Thanks God, EDA is working very well, too. It still is and will remain a chunky business. So the seasonality and the resilience that we aspire with the SaaS transition is not fully affecting the entire portfolio. We discussed that quite frequently. We also have been acquiring 2 highly attractive companies that are on the path to be integrated. I indicated in my presentation that there will be 120 basis points, give or take, margin impact from integration efforts. There's people-related things. There's a bit of adjustment here and there. So no one can expect this being done in 3 or 4 months, obviously. So that's going to have an impact.

But there's also a clear opportunity to get into scaling mode on that one, and we feel highly encouraged by the results we achieved so far. We discussed the cloud-based ARR ratio being very close to 50%. Original plan was 40% by the end of '25. So we are ahead. Roland has been elaborating on the customer-specific access we have with small and medium companies. So the entire rationale of the SaaS transition is bearing fruit now and will be harvested.

I know that you or at least some participants would love to hear us talking about software margin already by now. We are not yet at that point, but you can rest assured that we aspire and continue aspiring and are on a good trajectory to be one of the margin leaders in the years to come as well. There's a couple of specifics for those which are not that deep into the detail. Many of the software companies are listed, have shares to pay for -- to pay with their key personnel. This will not be one by one translated into the Siemens approach. That's why I have been inviting many of you contributing to getting us to a point to having meaningful metrics once we start talking about them. And that metrics should not add another non-GAAP figure to the hundreds of non-GAAP figures floating around already in that field. So I will still be happy to listen to every meaningful proposal in that field. So we are committed to make this a success, as you know, and to also share relevant metrics at that point in time when we feel we are mature for it, and you can work with that then meaningfully.

But one last comment, if you allow, you can rest assured that Roland and myself are at least as ambitious as you guys are when it comes to profitability development at our software business.

And the other part is regarding the automation part. You've commented some years ago on sort of the challenging competitive environment in China. You then adjusted your offer towards that. Can you give us a little bit of a view right now sort of have you started to see market share going back up? And should we foresee margins in China in automation could also go up?

So to the later one, yes, because the Chinese market is still under the potential which we have there and which we see there. So this is a general remark regarding our automation business. Secondly, we see also a pickup not only in the -- we talk about the value for money market. This is where we launched our new products, but also in the other segments, higher segments, market is picking up, in particular, in the factory automation space. Machine building still hold back a little bit, but there, we are picking up momentum. We see traction in the market of our new products, which we launched. This is the reason why, as I said before, this is our engine, which we started. We are about to launch 20 new ones, for example, IOs are rebirth, and they would even go global. This is a really super strong platform. And once we do that, it's new products and new products with a cost out, which allows us also to drive our margins at the same time.

So we are very careful about maintaining our margin. They're still in the very high end, there's higher money to earn on that one. But don't underestimate if you do it right from the specification to the sourcing to the manufacturing, then you can also drive your margins in that business going forward. It is a volume game, though. Therefore, we have to get traction and we have to sell more of those in the market.

The last point is that you -- it's a different sales motion, too. We are learning that. This value for money addresses different customers, some customers which didn't talk to yet. So we have reached them also with our digital platform, we talked about super relevant, but you still also need to have some feet on the street. This is the reason why we're happy that we have more -- we double our quota-carrying people globally for the automation, but in particular, in China. So therefore, it's a combination of having the right products and also gearing our market -- go-to-market for eventually new customer market segments. But we are very confident that we are picking up momentum there.

A question from the media comes from Angela Maier.

Two very short questions. First on your software business. Could you maybe quantify the software margin, the margin of your software business? I think there has been some speculation about it. And is it fair to assume that your software margin is dilutive to the Digital Industries margin? And second question, just to clarify your growth target of 6% to 9%, does this include any acquisitions?

Thank you for the question. I think I answered your first question already by commenting on that what has been asked before. If we had the intent to share software margin at this point in time, we would have done it. I said also the reasoning for that. We are in the process of completing a very successful SaaS transitioning. We always said when we started to enter into the transition to SaaS that we will consider sharing metrics after completing the SaaS transition. So being not there, we stick to what we said.

And the second part of that question was implicitly answered with that as well because if we talked about the margin levels and the impact on the DI margin at all, we would do exactly that. What we do not do at the moment, share something premature. And I think there's nothing to add.

Regarding our midterm growth target, 6% to 9%, this is without Siemens Healthineers and is it without M&A.

I see hands in the second row. Jon?

It's Jonathan Mounsey from BNP Paribas. So first question, obviously, you've committed today to take Healthineers down to financial asset status, which you also then elaborate was 20% or less. When you exited Energy, I think you already at the beginning, made the commitment to a full exit. Why not today make that commitment for Siemens Healthineers? The second question, just thinking out, and I would suggest that the day after you deconsolidate Healthineers, you're going to start getting questions about the rest of the portfolio. Mobility is doing very well. We know that. But then Healthineers is a good business. Energy is a good business. You exited those. Can you give the sort of synergistic reasons why Mobility maybe fits within the portfolio?

Let me take the first part of your question, John. I think it's important and we -- first of all, I do not think that we should and can compare the Energy listing and exiting to the Healthineers listing and exiting with completely different rationale. I don't want to repeat all that what you know anyhow. So therefore, taking a relevant step at the right point in time, I believe, is a good thing to do. At the moment, we are busily preparing for those crucial steps that it will take to get the spin done. Being a financial investor in the meaning of the word means being a financial investor then and a financial investor as also many of your clients are, would take prudent decisions then on whether to hold or not an asset at a certain point in time. We are not at that point yet. So therefore, we don't want to jump to premature conclusions. But maybe you consider that playing with words as the relevant piece, financial assets are financial assets.

So on Mobility is a completely different situation. So let me start with the technology. Currently, I think it's fair to say that Siemens Mobility is playing in the technological leadership regardless, whether you talk trains, the efficiency of our trains, talk about our recent win at SBB. It was not won by the price. It was won definitely by the technology, what do we do. Efficiency, maintenance cost, service cost, technology, what do we do, predictive maintenance, all that sits on solid Siemens technologies. The signal in the cloud was development not possible without the technology, which we talk about in our technology fabric, cybersecurity, the cloud, machine learning core, which drives the predictive maintenance of our trains. We are saving 1 train of operator or 2 trains in some cases in the fleet because we have an uptime.

All that is based on the products which we do together with technology, which we're scaling across the company and Mobility, in particular, loses it, including also controls, for example. It goes further. We are genuinely working on a genuine new product development. So if you get a tender that AI gives you an idea how the train looks like, which you should offer based on all the manufactured trains we did in the past. AI can learn it and train it. So this is the next level, and this is technology which we bring to the party and make out of Siemens Mobility technology that what it is today, which is a clear margin leading and wait for our new novo trains once they hit the market, how they look like.

So then I go along that supply chain management. I mean it's commodities. It's steel, green steel, aluminum, green aluminum. This is a super leverage what we do there to make -- and the customers are asking for that. We need to also offer that without to have a super impact on our cost. The same holds true for hardware and the like. The global footprint, which we support. Financing, super relevant. I mean, in many, many cases, we have a very good combination. Then it goes to business synergies. I mean I will talk a little bit later in my intro for the breakouts about one example, Paris Metro Line, where we are jointly working on a system. Siemens Smart Infrastructure comes in electrification. They come in with building technology for the surveillance part, any stations, tunnels controls.

So therefore, this is a lot where we can do together. You don't see that because it works in very many cases in projects where we are systemic. Egypt, it's a bigger one. So therefore -- and last but not least, they are paying very well, not only into our business and cash flow, but also into our sustainability agenda. We are really making a big difference there. They are eligible to 100% aligned with 80%. So it's -- this is where we are talking about a synergetic portfolio for industry, infrastructure and transport, which is the core of our Siemens portfolio.

So looking at the time, we have time for one last question. Martin, do you want to close it off?

Yes. I want to come back to the outlook for profitability. You talked about prudence in 2026 within DI, but also the confidence in the midterm. But when we look at your EPS guidance, it doesn't imply a huge amount of margin upside at the group level. And you have talked about some incremental investments in innovation and things like that. But when we think about that bridge from revenue growth to EPS growth, why should we expect a higher amount of growth coming from increased profitability? And the second question, which is kind of linked to that is, obviously, your leverage will drop when you deconsolidate Healthineers, your balance sheet deployment capability goes up significantly either through buybacks or M&A. When we think about that EPS guidance, is that based on the portfolio as it is today or including some of the optionality for deploying your balance sheet in the future?

Yes. Thank you, Martin. I think it's still fair to call it prudent and not conservative because, I mean, there's such a lot of volatility in the markets and also the geopolitical aspects that Roland has been discussing before that. It's really hard to predict in a fast-moving short-cycle business, what's going to happen when and at which point in time. So we have been deliberately choosing a wide range for both top line and bottom line on the DI side to make sure that we know what we do and can live up to our own commitments. It doesn't exclude being better than the midpoint if circumstances allow. Then of course, when it comes to top line growth dropping through, it's about investments and capital allocation. When we talk capital allocation, we talk about dividends and share buyback on the one hand side, but also on investing.

And I would like to repeat what Roland said in his presentation and what I tried to summarize in mind. I mean, we have been spending such a huge amount of money in shaping a technology leader in R&D. We will continue to do that. We are the AI prone leader in the industrial space, while missing out that opportunity, and we will still well balance investments and drop through to bottom line. That's what we did, I believe, meaningfully well throughout the last decade, and we will continue doing that. I'm absolutely convinced of that. So therefore, it's both investing into future at a point when paradigm is shifting, that's crucial to be a leader of the gang instead of a follower that will never make it again to the lead. So therefore, this is a part of it, reinvesting rationale, and that includes CapEx as well.

On the other hand, that's why I mentioned and underpinned it a couple of times, the ultimate yardstick, I believe, is free cash flow. And we are fully committed to delivering on those high levels that we delivered before, which again is an enabler to keep the high level of total shareholder return. And that is also in part a bit answering the second part of your question, we have a very ambitious share buyback program, which is ahead of time in a meaningful format. If and when we complete that potentially ahead of time, there would be another one. And you can also expect us to again prudently share the ultimate outcome, free cash flow in a meaningful way with a progressive dividend with a share buyback program and also with meaningful share price development on the way forward. That's what we are committed to, and that's what we feel encouraged with.

Again, I know that fiscal '26 with that heavy impact on exchange rate is kind of hard to swallow. But you may also recognize that in 12 years, I have the pleasure to do this annual press conferencing. We never used exchange rate as a parameter for guiding, but the relevance and magnitude in this fiscal year '26 is a mandate and an imperative to do so to not mislead anyone.

So midterm perspectives, we will be fine. Short term, as a matter of fact, will be impacted by exchange rate. If you add back the EUR 0.70 to EUR 0.80 in EPS that will be only lost by translation of U.S. dollar, if you take it black or white. If you add that back, you will see that we clearly double digitally increasing EPS. I think operationally, that makes a hell lot of sense to steer with a slow but steady hand and not overreacting.

Thank you, Roland. Thank you, Ralf, and thank you, everyone, for joining. We will now close our webcast. The deep dive sessions after the lunch break will not be streamed, but they will be available on our website as a replay after the event. We now will have a lunch break until 12 noon, and then we will kick off our deep dive sessions.

And let me make a sales pitch for the team, which are going to be on stage. What you will see, we will not -- you will see our leaders in factory automation. You will see Vasi Philomin, who joined us. He is one of the top top LLM experts in the world building up a team. So you will see our experts on verticals. By the way, also some exhibitions there. You don't want to miss out on that. So be back sharp at. Thank you.