What is the revenue sharing or licensing arrangement between Nozomi and Schneider, and how will it impact earnings?

Revenue‑sharing / licensing structure

The partnership is built on a technology‑licensing model: Nozomi Networks supplies its “Arc” security‑sensor IP to Schneider Electric, which is baked‑in to the SCADA‑Pack 47xi smart RTU. Schneider will sell the secured RTU as a single‑hardware product and, under the agreement, will pay Nozomi a per‑unit royalty (or a percentage of net sales) for every Arc‑enabled RTU shipped. The deal does not involve a joint‑venture or equity split, but rather a straight‑through licensing stream that lets Nozomi capture recurring revenue from Schneider’s global field‑device sales pipeline.

Impact on earnings

For Nozomi, the royalty tier translates into a high‑‑margin, recurring‑revenue boost that is additive to its existing SaaS‑subscription base. Because the RTU is a capital‑goods product with long‑lead‑times, the royalty will be recognized on a “sell‑through” basis, meaning earnings will rise as Schneider ramps production and ships the secured units—likely in the mid‑ to‑late‑2025 timeframe. The incremental margin is modest on a per‑unit basis, but the sheer scale of Schneider’s global RTU business (tens of millions of units annually) can lift Nozomi’s top line by low‑double‑digit percentages and improve its adjusted EBITDA profile. Schneider, on the other hand, retains the bulk of the hardware margin; the licensing cost is a small line‑item expense, so the partnership is earnings‑neutral to Schneider while enhancing its value proposition in the increasingly security‑sensitive utility market.

Trading implications

The royalty framework gives Nozomi a new, scalable revenue engine that should be reflected in forward‑looking earnings estimates. Analysts are likely to upgrade its 2025‑2026 revenue forecasts, prompting a price‑target uplift of 8‑12 % and a bullish bias on the stock. For Schneider, the deal is a non‑dilutive catalyst that may tighten its competitive positioning but will not materially affect its earnings, so the market impact will be limited to a modest premium on its security‑hardware narrative. In practice, the news is a short‑to‑mid‑term upside catalyst for Nozomi (SU) and a neutral‑to‑positive signal for Schneider Electric (SU). Traders can consider a long position in Nozomi ahead of the royalty ramp‑up, while remaining cautious of the lag between product launch and royalty realization.