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1&1 AG Reports Weak Q1 Earnings Amid Increased Costs

1&1 AG faces challenges in Q1 with a 42.6% drop in EPS and a 38% decline in EBIT. Despite slightly lower revenues, the company maintains fiscal outlook for 2025.

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AI Rating:   5
Weak Earnings Performance
1&1 AG has reported weak earnings for the first quarter, showcasing a significant decline in both EBIT and Earnings Per Share (EPS). The EBIT fell by 38% to €73.2 million from €117.9 million in the prior year, indicating that the company is under pressure from higher depreciation and operational costs associated with expanding its mobile network infrastructure. This is a concerning sign as declining earnings could reflect broader issues in operational efficiency and cost management.

EPS decreased sharply by 42.6% to €0.27 compared to the previous year’s €0.47. The adjusted EPS, excluding purchase price allocation (PPA) write-downs, also showed a decline, indicating that the core profitability of the company is under stress. Such a decline can negatively influence investor sentiment and potentially lead to a sell-off in the stock if this trend continues.

Another critical area to note is that while total revenue decreased slightly by 0.6% to €1.019 billion, service revenues remained flat, which may not be a completely bad aspect. However, the drop in low-margin hardware revenue by 2.9% is a concern, as it signals a possible shift in customer spending away from hardware, which can impact future revenue streams.

Fiscal Outlook
Despite the challenges faced in Q1, 1&1 AG maintained its fiscal outlook for 2025, expecting service revenues to stabilize at around €3.303 billion, consistent with the prior year. However, the anticipated decline in EBITDA of about 3.4% raises further questions about operational efficiency and whether the company can achieve its planned cost management.

Overall, the company’s current performance metrics regarding EPS and EBIT could negatively impact stock prices in the short to medium term as investors reassess growth potential and overall profitability. Open investor sentiment is likely to hinge on execution of its fiscal outlook and improvements in both revenue generation and cost management strategies.
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