WiseTech Global (ASX:WTC) The e2open Earnings Reality Check And What Comes For FY26

Cheapest Multiple in 5 Years, But the Market Wants Proof

WiseTech is a company we have been covering at Stocks Down Under for a while, and we were surprised to see the stock open up today.

On the surface, the result was strong. Revenue growth was impressive. But the market also had to digest a materially higher cost base, which meant earnings did not keep pace. That mix of strong top line momentum and weaker near term profitability is exactly why the reaction has been a bit counter intuitive.

The other key context is valuation. WiseTech is now trading on its cheapest multiple in roughly five years. This matters because the stock has carried high growth expectations for a long time, and when expectations are elevated, the market has less tolerance for any sign of margin pressure.

A big driver here is the e2open acquisition. Strategically, it makes sense, but the operational reality is that synergies and operating leverage do not show up overnight. Integrating a platform like this into customer workflows takes time, and management is effectively asking investors to be patient while they work through the integration and rebuild efficiency.

That is why our core focus from here is the operating efficiency program. The pathway to better earnings is not really about proving demand again. It is about demonstrating that the cost base can normalise and that operating leverage can re emerge as integration matures.

Here is the quick financial snapshot.

Revenue was up 76% to US$672.0m, with e2open contributing US$249.4m from five months of ownership.

Operating profit was essentially flat at around US$149.6m, despite the big revenue lift, because the cost base expanded with e2open and integration related costs.

Underlying NPAT was up 2% to US$114.5m, which suggests the core earnings engine held up, even after factoring in acquisition impacts and funding costs.

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Revenue Up 76%, Margins Down, What’s Next

Top line revenue was strong, but it is worth calling out upfront that it was mostly inorganic. Group revenue reached US$672m, with the e2open acquisition contributing US$249m.

Management is guiding to 7% organic growth at the group level, with momentum supported by new customer wins, large global freight forwarder rollouts, and higher pricing. So demand is still there, but the headline growth rate is clearly being driven by the acquisition.

Recurring revenue also remained very high, but it did slip to 95% from 98%. That is not a deterioration in the core model. It is mainly mix, because e2open brings a larger proportion of services revenue.

Costs Add Pressure

Where we want to spend time is profitability. With any acquisition, the real investment debate is not whether revenue can be added, it is whether the combined business can deliver operating leverage over time. That is the standard WiseTech is going to be judged against from here, and it is what investors will want evidence of across the next 12 to 24 months.

Gross profit increased 61% to US$520m, but gross margins fell to 77%. The key driver was mix. e2open generates a higher proportion of professional services revenue, and it also carries higher headcount embedded in cost of revenue, which drags the consolidated margin down.

Operating profit was essentially flat at US$149m, even with the revenue step up. The reason is simple. Costs grew faster than revenue. Product and R&D was up 68%, while G&A increased 164%, reflecting both the larger combined cost base and integration related overheads.

The Cost Out Program Is the New Catalyst

We have touched on this in previous pieces, but it is important to repeat. e2open was a high revenue business, but it was not an efficient one. At the same time, it does bring service capability that helps fill gaps in WiseTech’s product delivery. That is the trade off management is now trying to optimise, keeping what strengthens the platform while cutting what is redundant or structurally uncompetitive.

The obvious question investors are asking is: how does WiseTech rebuild earnings and EPS growth to justify a premium multiple again?

The answer, at least on management’s framing, is the efficiency program. Phase one targets FY26 net cost out of US$9m. Phase two aims for an FY27 EBITDA net savings run rate of US$18m per year.

Critically, the company is targeting a major headcount reduction in the second half of this year, with management talking about cutting roughly 50% of headcount, or around 2,000 roles. If executed cleanly, this is the lever that should most visibly support improving G&A intensity and help gross margins stabilise as the integration matures.

$2bn Debt Changes the Story

Looking at WiseTech’s balance sheet, cash and receivables improved meaningfully, which is a good sign for the underlying health of the business and the quality of cash conversion.

That said, the acquisition has clearly changed the financial profile. There is now a large debt facility sitting on the balance sheet, which shifts the debt to equity mix materially. The positive offset is liquidity. The undrawn revolver provides meaningful flexibility, so the company is not boxed in from a funding perspective.

But investors should be clear on what comes with that. The cost of debt is now a material driver of earnings volatility. With around US$2bn of debt, interest expense is no longer a footnote. Tracking interest payments, coverage ratios, and the pace of deleveraging becomes a core part of the equity story post acquisition.

From Growth Stock to Integration Stock

The bigger takeaway is that what we are seeing is a common “synergy curve” in action. Revenue has stepped up, but expenses have also risen quickly because WiseTech is integrating a business that historically had limited operating leverage compared to WiseTech’s original operating model. In other words, the acquisition adds scale immediately, but efficiency takes time.

To frame valuation, we built a simple P/E multiple model based on current EPS and a current P/E of around 52x at the time of writing. We then stress tested a range of EPS growth outcomes:

FY26E EPS growth of 0% to 8%
FY27E EPS growth of 34% to 40%
FY28E EPS growth of 36% to 45%

On a base case, the implied share price comes out around $46-$68. Taking a margin of error into account, our read is that WiseTech looks more fairly valued at current levels, but it is still carrying a premium multiple relative to where the earnings profile sits today.

The market is essentially saying, “We will pay up, but we need proof.” And the proof investors will be looking for is pretty simple, operating leverage re emerging as integration costs fade, cost out measures land, and the debt burden starts to become less dominant in the earnings mix.