NATL Q3 Deep Dive: Hardware Growth Outpaces Profits as Tariffs and Card Mix Weigh

Financial technology company NCR Atleos (NYSE:NATL) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 4% year on year to $1.12 billion. Its GAAP profit of $0.34 per share was 51.1% below analysts’ consensus estimates.

Is now the time to buy NATL? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

NCR Atleos faced a challenging third quarter as its revenue exceeded Wall Street’s expectations, yet the company missed profit forecasts by a significant margin. Management pointed to strong hardware sales and a surge in ATM-as-a-Service contracts as key drivers, but noted that elevated tariffs and a decline in U.S. payroll card transactions pressured profitability. CEO Tim Oliver described the quarter as “exceptional from a strategic and competitive perspective,” but acknowledged that macroeconomic headwinds and shifting transaction patterns continue to influence results.

Looking ahead, NCR Atleos is focused on expanding its ATM outsourcing and recurring service businesses, expecting these to drive profit improvement despite persistent tariff and cost pressures. Management believes growth will be supported by ongoing adoption of its recycler product and efficiency gains from AI-driven service initiatives. CFO Andy Wamser stated that while tariff uncertainty remains, the company is planning for a moderate rate, and expects margin expansion to come from recurring revenue growth and productivity improvements. Management emphasized that consistent free cash flow generation will remain a top priority into next year.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to robust hardware deliveries, ATM-as-a-Service momentum, and efforts to offset external challenges such as tariffs and shifting card usage patterns.

• Hardware strength: The company reported substantial growth in hardware sales, particularly from its recycler product, with production ramped up to meet strong demand from major banks. Management highlighted this as a key contributor to revenue but noted that hardware mix can vary in profitability depending on product type and region.
• ATM-as-a-Service acceleration: ATM-as-a-Service bookings hit a record, with total contract value reaching $195 million and annual recurring revenue on track to surpass $300 million by year-end. This service line saw 37% year-over-year growth and is viewed as a long-term profit driver due to high margins and growing international adoption.
• Network segment headwinds: Lower payroll card transactions, especially in U.S. cities with large migrant workforces, continued to reduce network segment revenue. However, management indicated that this trend stabilized in the latter part of the quarter, suggesting a possible return to growth soon.
• Tariff impact and mitigation: Elevated import tariffs—currently at 50%—had a notable impact on costs, prompting NCR Atleos to adjust sourcing and supply chain strategies. Management expects tariffs to remain a wildcard but is budgeting for a lower, mid-20% rate next year.
• AI-driven service optimization: The rollout of AI-based dispatch and service tools in North America improved repair metrics and is set to expand to Europe. These initiatives are designed to boost service efficiency, reduce costs, and enhance customer satisfaction, supporting recurring revenue streams.

Drivers of Future Performance

NCR Atleos expects recurring revenue growth, service expansion, and cost control to drive performance in the coming quarters, while tariffs and evolving transaction trends remain key variables.

• Recurring services momentum: Management is counting on continued growth in ATM-as-a-Service and software subscriptions to drive higher margins and more predictable cash flow. CEO Tim Oliver projected a 40% growth rate in this business both in the next quarter and into 2026, with contract wins in new geographies supporting expansion.
• Hardware demand and installed base: Robust demand for next-generation hardware, especially recyclers, is expected to support new long-term service and software contracts. Management noted that increasing the installed base directly feeds recurring revenue streams, as every hardware sale typically results in a multi-year service relationship.
• Tariff and cost management: The company is budgeting for tariffs to moderate but recognizes the risk of volatility. Management believes ongoing efficiency and supply chain optimization will help offset any upward pressure on costs, but higher-than-expected tariffs could squeeze margins further.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will closely watch (1) the pace of ATM-as-a-Service adoption and recurring revenue growth, (2) stabilization and potential recovery in U.S. payroll card and network transactions, and (3) any developments in tariff regulations that could impact cost structure and margins. Execution on service expansion, AI-driven productivity gains, and hardware backlog conversion will also serve as key indicators of NCR Atleos’s ability to sustain profitable growth.

NCR Atleos currently trades at $34.99, down from $37.89 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free for active Edge members).

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