Magic Software Surges in Q2 2025, Beating Revenue Expectations and Raising Full-Year Guidance.

[City, State/Country] – [Date] – Magic Software Enterprises Ltd. (NASDAQ: MGIC) today announced a robust financial performance for the second quarter of 2025, delivering results that surpassed analyst expectations and prompted an upward revision of its full-year revenue forecast. The company’s strong showing was driven by significant demand for its digital and AI solutions, particularly in the U.S. and defense sectors.

Magic Software reported a significant 11.3% year-over-year increase in revenue, demonstrating its ability to capitalize on the ongoing global shift towards digital and cloud-based operations.

Key Financial Highlights

The company’s Q2 results painted a picture of strong top-line growth and operational strength, though some profitability metrics fell short of analyst consensus.

• Adjusted Revenue: Came in at $151.60 million, comfortably beating the consensus estimate of $145.90 million.

• Adjusted EPS: Reached $0.26, slightly ahead of the $0.25 analyst consensus.

• Adjusted Operating Income: Missed expectations at $18.60 million compared to the $19.80 million consensus.

• Adjusted Net Income: Also missed the mark, reporting $12.70 million against a consensus estimate of $14.80 million.

• Adjusted Gross Margin: Stood at a solid 28.7% for the quarter.

• Adjusted Operating Margin: Was reported at 12.2%.

While revenue and earnings per share were clear wins, the misses in operating and net income suggest potential pressure on profitability or higher-than-expected operational costs during the quarter.

Drivers of Growth

Magic Software attributed its impressive revenue growth to several key factors:

• Robust Market Demand: The company continues to see strong, sustained demand for its digital, AI, and cloud transformation solutions as businesses across industries modernize their infrastructure.

• U.S. Market Expansion: Revenue in the United States grew approximately 9% year-over-year. This growth was significantly boosted by major agreements that were executed in late 2024 and early 2025, which are now bearing fruit.

• Strength in the Defense Sector: The company highlighted continued high demand for its services within the defense industry, a sector that has proven to be a reliable and growing source of revenue.

Confident Full-Year Outlook

Bolstered by its strong Q2 performance and a positive market outlook, Magic Software has upwardly revised its full-year 2025 revenue guidance.

The company now anticipates full-year revenue to be in the range of $600 million to $610 million. This new forecast represents an expected annual revenue growth of 8.6% to 10.4%, indicating strong confidence from management in the company’s growth trajectory and its ability to continue capturing market share.

Analyst Commentary and Stock Valuation

Wall Street sentiment on Magic Software remains generally positive. The current average analyst rating on the stock is a “Buy”, with one “strong buy/buy” recommendation and one “hold.” This aligns with the average “Buy” recommendation for its software peer group.

However, a closer look at valuation presents a more complex picture. The median 12-month analyst price target for the stock is $16.00. This is notably about 17.5% below its recent closing price of $18.80, suggesting that analysts believe the stock may be fully valued or slightly overextended at its current level.

Further supporting this view, the stock is now trading at 18 times its next 12-month earnings, a significant increase from its price-to-earnings (P/E) ratio of 13 just three months ago. This indicates that investor expectations—and the stock’s valuation—have risen sharply in a short period.

In summary, Magic Software’s Q2 results underscore a company with strong growth momentum and a clear strategy, but investors will be watching closely to see if future profitability can match its top-line expansion and justify its rising valuation.