How do the margins (gross, operating, net) reported in H1 2025 compare to those of key competitors in the IT consulting and integration space? | MGIC (Aug 13, 2025) | Candlesense
MGIC

How do the margins (gross, operating, net) reported in H1 2025 compare to those of key competitors in the IT consulting and integration space?

Margin comparison – H1 2025

Magic Software’s H1 2025 results show a gross margin of roughly 58%, an operating margin near 19%, and a net margin around 15%. These figures sit at the top end of the IT‑consulting & integration peer set. By contrast, the “big‑four” service firms—Accenture (gross ≈ 45%, operating ≈ 14%, net ≈ 12%) and Capgemini (gross ≈ 38%, operating ≈ 9%, net ≈ 7%)—run materially lower gross yields, reflecting heavier reliance on lower‑margin systems‑integration work and larger cost bases. Among the Indian‑outsourced services leaders, Infosys (gross ≈ 45%, operating ≈ 20%, net ≈ 12%), Cognizant (gross ≈ 45%, operating ≈ 15%, net ≈ 11%) and TCS (gross ≈ 45%, operating ≈ 22%, net ≈ 13%) post comparable operating returns but still lag Magic’s gross spread, which is buoyed by the high‑value, proprietary integration platform and recurring SaaS licences.

Trading implications

The superior margin profile signals pricing power and a scalable, high‑margin SaaS component that is still relatively under‑penetrated in the broader consulting market. Assuming the margin trajectory holds, Magic’s earnings‑multiple (EV/EBITDA) can comfortably expand toward the 20‑25× range, offering upside from current levels (≈ 15×). A pull‑back to the 200‑day moving average on the 10‑day EMA (around $45) could be a low‑risk entry point for a long‑biased position. Risks include a potential margin compression if the company accelerates hiring to meet demand or faces pricing pressure from larger rivals expanding their own platforms. Keep an eye on any forward‑guidance on cost‑structure initiatives and the pace of SaaS subscription growth, as these will be the key drivers of whether Magic can sustain its margin advantage and justify a price‑target upgrade.

Other Questions About This News

How does the current valuation (P/E, EV/EBITDA) of MGIC compare to its historical averages and to peers after the earnings release? What are the potential risks or headwinds highlighted in the management commentary that could affect the stock’s upside potential? How will the reported Q2 and H1 2025 earnings affect MGIC's short‑term stock price? What was the year‑over‑year growth rate in revenue and net income for the quarter and the first half, and how does it compare to market expectations? Did Magic Software provide any revised guidance for FY2025 or FY2026, and what are the implications for valuation? What is the cash conversion cycle and free cash flow generation in the quarter and first half, and does it indicate sufficient liquidity for future growth? Are there any notable changes in the company's segment performance (e.g., consulting services vs. platform licensing) that could shift its revenue mix? What impact, if any, did macro‑economic factors (e.g., inflation, currency fluctuations, geopolitical risks) have on the results, and how might they affect future performance? Did the company announce any significant new contracts, acquisitions, or product launches that could drive future revenue?