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, versus 29.4% and $40.1 million a year ago. Non-GAAP operating income increased 1.9% to $18.6 million, and non-GAAP net income attributable to shareholders rose 8.7% to $12.7 million, or $0.26 per fully diluted share, from $11.7 million, or $0.24. North America revenue was $62.2 million, up 6.5%, and Israel revenue was $68.7 million, up 18.8%; on a constant-currency basis, revenue grew 13.5%. For the first half of 2025, cash flow from operating activities was $21.2 million versus $41.4 million in the prior-year period. Cash and cash equivalents plus short-term bank deposits were about $90 million as of June 30, 2025, and total financial debt was about $70 million. Management raised 2025 revenue guidance to $600 million-$610 million, implying about 8.6% to 10.4% annual growth at current FX rates. The company also declared a semiannual cash dividend of $0.296 per share, or about $14.5 million, payable October 22, 2025.

Guy Bernstein framed the quarter as part of a broader acceleration in cloud and GenAI demand, describing the company’s AI work as a land-and-expand opportunity. He said Magic has more than 270 AI projects across more than 20 industries, has expanded its AI specialist team from over 30 to over 50, and is supported by more than 100 AI-focused events and over 10 strategic alliances. His tone was upbeat and expansionary, emphasizing that customers are increasingly viewing Magic as a preferred partner for digital transformation.

Asaf Berenstin highlighted the record revenue, the 18.8% growth in Israel, and the 6.5% increase in North America as evidence of solid execution. He said gross margin was pressured by revenue mix and the timing of term-license renewals, with software renewals concentrated in Q4 this year, and expects margins to improve in the second half and normalize around 29% on an annual basis. He also noted lower financial expenses of $700,000 versus $1.2 million last year, average debt falling from $72 million to $63 million, and cash flow from operations of $21.2 million for the first half, which he said reflected working-capital investment rather than a deterioration in the business.

Analysts asked about U.S. customer behavior, margin drivers, cloud adoption, pipeline build, and the July acquisition question. Management said U.S. demand is showing signs of recovery, especially with major clients, after a period of softer segment-level demand, and that cloud and AI are key drivers of the pipeline. On margins, management reiterated that the main pressures were the timing of software renewals and a heavier mix of lower-margin professional services, and said second-half margins should improve as software revenues normalize. When asked about a July acquisition, management corrected the premise and said no company was acquired in July; instead, they discussed Axiom as a very small consultancy partner tied to FactoryEye AI in the U.S.