NOS — €4.81
Revaluation | 2Q26 Results
The 2Q26 results reinforce my positive view on NOS. This is not a high-growth telecom, but the company is increasingly converting stable revenues into higher margins, lower CAPEX and stronger free cash flow.
1. 2Q26: the key numbers
- Revenue: €458.3m, flat YoY
- EBITDA: €206.0m, +1.5%
- EBITDA margin: 44.9%, +0.7pp
- CAPEX ex-leasing: €84.2m, -8.2%
- EBITDAaL – CAPEX: €88.9m, +14.9%
- Net income: €77.5m, +34.1%
- Recurring FCF: €62.5m, +8.8%
- Total FCF: €83.3m, +120%
The +120% FCF growth should not be extrapolated, as €20.8m came from non-recurring items, including the tower sale. The recurring FCF growth of +8.8% is the more relevant figure for valuation.
2. The important change: CAPEX is falling
NOS is entering a more attractive phase of its investment cycle.
CAPEX ex-leasing fell 8.2% in 2Q26, while EBITDAaL-CAPEX increased 14.9%.
This matters enormously for a mature telecom: the business does not need strong revenue growth to generate stronger FCF.
As network investment requirements decline, a greater proportion of EBITDA can flow through to shareholders.
3. Operational momentum
The operating trends remain healthy:
- Total RGUs increased by 20.2k QoQ.
- Mobile RGUs increased by 28.6k.
- Post-paid added 72.2k customers.
- Fixed access increased by 2.3k.
- FTTH reached 5.706 million households.
- NOS FTTH now reaches every Portuguese municipality.
IT remains particularly strong, with revenue growth of 19.1%, helping offset pressure in B2C and Wholesale.
4. Margins and efficiency
This is arguably the strongest part of the quarter.
Revenue was essentially flat, yet EBITDA increased 1.5%. At the same time, adjusted operating expenses fell 2.9%.
NOS is also deploying AI and automation across its operations, with more than 140 AI use cases identified.
This creates an attractive combination of stable revenue + operating leverage + lower capital intensity.
5. Balance sheet
The balance sheet remains comfortable:
- Net debt / EBITDAaL: 1.6x
- Average cost of debt: 2.9%
- Liquidity: €222m
The 1.6x leverage ratio remains comfortably below the company’s ~2x reference level, even after the dividend payment.
6. Dividend
At €4.81, the €0.35 ordinary dividend represents approximately a 7.3% yield.
The additional €0.10 extraordinary dividend should not be treated as recurring.
This gives NOS an unusually attractive combination of cash generation, balance-sheet strength and shareholder distributions.
Valuation
I remain conservative on the assumptions.
I do not annualise the €83.3m quarterly FCF because of the non-recurring contribution.
Using a normalized 2026 FCF of approximately €250–260m, ~2.5% medium-term FCF growth, a 1.5% terminal growth rate and an ~8.5% WACC, I estimate:
Intrinsic Value Range:
€6.70–€7.70
Central Fair Value:
€7.20
At €4.81:
- Central upside: ~49.7%
- Margin of Safety: ~33%
- Upside to the lower end of fair value: ~39%
IPIS v2.2 Score
Factor
Score
Business Quality
82/100
Valuation
88/100
Margin of Safety
86/100
Balance Sheet
88/100
FCF Visibility
84/100
Growth
63/100
Capital Allocation
82/100
Reinvestment Runway
76/100
Investment Score
84/100
🟢 Verdict: STRONG BUY
At €4.81, NOS offers a compelling combination of:
Defensive business + strong competitive position + healthy balance sheet + declining CAPEX + expanding margins + growing recurring FCF + attractive dividend yield + significant valuation upside.
NOS is not a 15%+ growth compounder.
The investment thesis is different: the market appears to be valuing NOS primarily as a mature, low-growth telecom, while the company is increasingly demonstrating that lower CAPEX and operational efficiency can drive FCF growth even without meaningful revenue growth.
What would invalidate the thesis?
I would reassess the Strong Buy if:
Recurring FCF starts declining despite lower CAPEX;
B2C competition causes sustained margin compression;
Debt rises materially to fund shareholder distributions.
For now, none of these conditions is evident.
At €4.81, NOS qualifies as a STRONG BUY
It is not an exceptional growth company — but at this valuation, it offers a particularly attractive combination of yield, cash flow, downside protection and potential re-rating.
