Magic Software Enterprises Ltd.

Revenue in Q2 2025 was $151.6 million, up approximately 11.3% from Q2 2024 and 2.8% sequentially. Non-GAAP gross margin was 28.7% of revenue, or $43.6 million, compared with 29.4% or $40.1 million a year ago. Non-GAAP operating income was $18.6 million, up 1.9% from $18.2 million. Non-GAAP net income attributable to shareholders was $12.7 million, or $0.26 per diluted share, versus $11.7 million, or $0.24 per diluted share. North America revenue was $62.2 million, up 6.5% year over year, and Israeli revenue was $68.7 million, up 18.8% year over year. For full-year 2025, management raised revenue guidance to $600 million-$610 million, implying roughly 8.6% to 10.4% growth year over year at current FX rates.

Guy Bernstein framed the quarter around GenAI and cloud-led demand, saying the company is seeing land-and-expand opportunities and more than 270 AI projects across 20+ industries. He emphasized that new and legacy customers are increasingly moving toward cloud offerings, and described the company’s AI, low-code/no-code platform and managed services as well positioned for continued expansion. His tone was upbeat and growth-oriented, especially around the potential of cloud and AI to deepen customer relationships.

Asaf Berenstin highlighted record quarterly revenue, improved U.S. performance, and stronger Israel growth, including 18.8% year-over-year growth in Israel and 6.5% growth in North America. He explained that gross margin pressure came mainly from revenue mix and the timing of term-license renewals, which are more concentrated in Q4 this year, and said margins should improve in the second half and normalize around 29% annually. He also noted financial expenses fell to $700,000 from $1.2 million, average debt declined to $63 million in Q2 from $72 million a year ago, cash and short-term deposits were about $90 million at June 30, 2025, and the board declared a $0.296 per share dividend totaling about $14.5 million.

Analysts focused on signs of a U.S. IT spending recovery, margin drivers, cloud adoption, and pipeline composition. Management said U.S. demand is improving among major clients after about a year of softer demand, and that revenue/margin mix should improve in the second half as software renewals shift into Q4. On cloud, management said adoption is broadening across new and legacy customers, including Japan, while the pipeline is being driven by cloud and AI projects that are converting at a higher-than-industry rate.