A refocused industrial group exposed to the right cycles
Since the arrival of Björn Rosengren in 2020 (followed by Morten Wierod in 2024), the group has shifted to a demanding decentralization strategy: empowered divisions, reduced central costs, and clear mandates, with profitability first and growth second. The tangible result is that the operating EBITA margin target of over 15% was achieved as early as 2022, with a growing number of divisions exceeding a 20% margin. This drive for simplicity is now reflected in the Q2 figures: orders at $9.8bn (+16%), revenue at $8.9bn (+8%), operating EBITA margin at 19.2% and a record order backlog of approximately $25bn (+13%). The momentum is not cosmetic, however; it is driven by the short-cycle activities of Electrification and Motion, and by very strong traction in Process Automation, including a landmark order of approximately $600m.
The business model: selling essential building blocks and capturing recurring value
The economic core is clear: electrical transmission and distribution products and systems account for nearly 68% of revenue, automation systems for just over 30%, with the remainder coming from related activities. Geographic diversification cushions shocks: 33.9% of sales are in Europe, 27% in the US, 13.1% in China, and 17.1% in Asia, the Middle East, and Africa.
ABB's offering is based on three mutually reinforcing drivers:
- First, product depth. In Electrification, ABB occupies leading positions in low and medium voltage, inverters, UPS, power quality, and charging infrastructure, accounting for nearly half of the group's sales and about half of its operating EBITA. The addressable market exceeds $160bn, driven by the rise of smart buildings, decentralized energy, and data centers. Motion doubles this base with motors, drives, and services that efficiently convert electricity into motion—a segment at the heart of the energy transition, with the installed base of motors expected to double by 2040. Process Automation, ranked second worldwide, connects everything: process control, measurement, cybersecurity, and services for demanding customers in the chemical, energy, mining, and marine industries. Finally, Robotics and discrete automation bring flexibility and productivity to assembly lines in Europe and beyond.
- Next, the software-data stack. ABB is not just a manufacturer of robust equipment; it is also a software publisher and integrator. Its ABB Ability platform aggregates industrial data, analytical modules, and vertical applications. Building blocks such as Genix (co-developed with Microsoft) and PlantInsight inject machine learning to optimize maintenance, stabilize processes, and reduce energy consumption. The new Plant Optimizer for the paper industry illustrates this move upmarket: real-time traceability, operational twin, economic arbitrage of flows, with measurable gains in costs and availability.
- Finally, there is the capillarity of services and projects. ABB's model is a continuum of hardware, software, and integration. The company knows how to deliver end-to-end solutions, install, configure, train, and then manage multi-year service contracts. This dimension, while less visible, is nevertheless strategic: it amortizes cycles, increases recurrence, and above all, locks in customer relationships by placing ABB at the heart of investment decisions.
Industrial AI: a value chain where ABB ticks all the boxes
ABB is involved at every stage of this chain.
In terms of hardware, the group is a long-standing leader in robotics and sensor-actuators. Its autonomous and versatile robots feature local vision and intelligence, adapt their trajectory, and are becoming increasingly dexterous. Partnerships (notably with LandingAI) enhance computer vision for picking, quality inspection, and depalletizing. This embedded AI brings decision-making closer to the workstation, reduces latency, and increases throughput.
At the platform level, ABB Ability serves as the digital backbone. The integration of generative AI capabilities via Azure and the internal AI Accelerator streamlines the use of process data: drift detection, failure prediction, energy optimization, and conversational interface for operators. The more AI becomes democratized in the workshop, the more value shifts to these software layers and their subscriptions, which supports the margin mix.
When it comes to integration, industrial credibility makes all the difference. Deploying AI in a paper mill, mine, or refinery is not just a matter of pushing a model: you have to secure, certify, interface heterogeneous protocols, manage MLOps and its updates, and train teams. ABB has this field presence. It also knows how to ride the most promising adjacent wave: the explosion of data centers. Orders related to these infrastructures now account for around 15% of Electrification's intake, proof that AI and the cloud are directly driving demand for electrical distribution, ABB's sweet spot.
Divisions focused on disciplined growth
The current momentum is consistent, with a few nuances. Electrification is showing robust organic growth, driven by utilities and double-digit data center orders, with a book-to-bill ratio of over 1 and margins improving thanks to efficiency gains. Motion, buoyed by short cycles and resilience in water, energy, and services, is maintaining revenue growth and solid margins, despite a tighter cost environment. Process Automation is leading the way, as evidenced by order intake and improved project profitability. Robotics is still suffering from delayed decisions (particularly in China), but machine automation activity is picking up from a low base; management anticipates a gradual improvement in margins.
This performance lends credibility to 2025 targets: organic growth at an average single-digit rate, a book-to-bill ratio > 1 and annual EBITA margin growth. In the near term, the company forecasts at least mid-single digit organic growth for Q3, with a fairly stable margin, which, given the order book, remains cautious.
Capital allocation and shareholding: a machine for transforming cash into value
The balance sheet is healthy, and ABB is putting it to work for its shareholders in a measured way. The dividend is on a sustainable upward trajectory, supplemented by share buybacks when FCF generation permits this. Portfolio discipline has been remarkably well executed: sale of Power Grids to Hitachi, exit from turbo-compression activities (Accelleron distributed to shareholders), sale of energy conversion and mechanical transmission. At the same time, targeted acquisitions such as B&R have strengthened software and machine automation, where marginal value is the highest. Management aims to make 5 to 10 small to medium-sized bolt-on acquisitions, which will be preferred over buybacks if their expected return is higher.
Shareholders benefit from this dual leverage: a smoother cash flow profile thanks to services and software, and a gradual reduction in the number of shares when the markets offer the window. The past reduction in par value, distributions related to the Accelleron spin-off, and the pursuit of a rising dividend reflect a culture of disciplined and predictable returns that is attractive to long-term investors.
Governance and direction: vigilant continuity
The announced management transition (Morten Wierod succeeding Björn Rosengren in August 2024) is taking place in a spirit of continuity. Wierod, former head of Electrification, has in-depth knowledge of the group's growth drivers. Nevertheless, the market will be watching the next steps, particularly the plan to spin off robotics by 2026. If done well, this operation could reveal the value of this franchise while preserving technological synergies through commercial agreements. It is a potentially powerful catalyst for the stock.
Risks under control, asymmetry intact
Automation margins can still improve, but the prolonged weakness in China is weighing on robotics, and the trade-off between in-house software investments and partnerships (with Microsoft, for example) requires careful orchestration. However, the risk structure is favorable: demand in utilities and data centers is structural, North American exposure supports the cycle, and disciplined project selection limits earnings volatility. Above all, industrial AI will not replace equipment: it makes it indispensable and more "sticky". ABB, which sells the building blocks, connects them, and maintains them, is in the best position to monetize this convergence.
A technology infrastructure asset
ABB is increasingly behaving like a technology infrastructure asset: visible thanks to a $25bn order book, profitable with a margin of close to 20%, disciplined in its capital allocation and exposed to the densest pockets of global investment (network electrification, motor efficiency, process automation, and the rise of AI in factories and data centers). While multiples may seem high compared to historical levels (much like its peer Schneider Electric), the company is no longer the same. The past decade has seen margins double without revenue growth; the next decade could combine both. In a world that is rapidly electrifying, automating, and digitizing, it makes sense to bet on the company that provides the arteries, muscles, and now the nervous system of infrastructure. ABB is this hidden anatomy. This is precisely what we are looking for in MarketScreener's European portfolio: a defensive growth stock, backed by fundamentals that, quarter after quarter, confirm its trajectory.
