OVHcloud : Back in the office to revive growth

OVHcloud has been benefitting from strong demand for cloud services but it has been growing slower than the overall market. Its organic revenue growth has been decelerating to +9.3% in FY24-25 and the FY25-26 guidance points to a 5-7% revenue expansion. We believe that this reflects its revenue mix (greater contribution of private cloud services) and its focus on profitability/ cash flow generation. But this is also due to a failing commercial approach that recently led to churn in the small customer segment. This prompted the resignation of the CEO in October 2025. Benjamin Revcolevschi was replaced by the founder Octave Klaba and it remains to be seen whether he will manage to bring back the group to a double-digit growth trajectory. Nevertheless, OVHcloud is still on track to achieve its margins and cash-flow targets. The EBITDA margin is improving on the back of scale effects and reduced energy costs after the inflation peak in 2022-23. And FCF should become slightly positive this year. This should pave the way for a gradual deleveraging from 2.9x in FY24-25 to 2.7x in FY25-26 and 2.4x in FY26-27.
We raise our recommendation to Neutral (vs. Reduce). The Ytw of OVH 2031 notes (Ba3/BB-) of 4.4% is slightly higher than with the average of a sample of bonds with similar ratings and maturities (4.2%). While they should benefit from a slow improvement of credit metrics, we also take into consideration re-leveraging risks (large share buyback of € 350m in January 2025, scenario of a take-private by the founding family), albeit unlikely in the short term.