Operator: Good morning, ladies and gentlemen, and welcome to the Siemens 2026 Second Quarter Conference Call. As a reminder, this call is being recorded. Before we begin, I would like to draw your attention to the safe harbor statement on Page 2 of the Siemens presentation. This conference call may include forward-looking statements. These statements are based on the company's current expectations and certain assumptions and are therefore subject to certain risks and uncertainties. At this time, I would like to turn the conference call over to your host today, Mr. Tobias Atzler, Head of Investor Relations. Please go ahead, sir.

Tobias Atzler: Good morning, ladies and gentlemen, and welcome to our fiscal Q2 '26 conference call. All documents were released this morning and can be found also on our IR website. I'm here today with our CEO, Roland Busch; and our new CFO, Veronika Bienert, for her first earnings call. Both will review the Q2 results. After the presentation, we will have time for Q&A. With that, over to you, Roland.

Roland Busch: Thank you, Tobias, and good morning, everyone, and thank you for joining us to discuss our second quarter performance. I'm pleased that we continued our successful path of profitable growth, creating value for all our stakeholders despite an overall environment that was geopolitically demanding. In the Middle East, our top priority has been on supporting and safeguarding the well-being of our employees affected in the region. From a business perspective, we expect our direct revenue exposure in this region to be limited to 3% to 4% in fiscal year 2026. Direct supply exposure at around 1% of purchasing volume is very low and mitigation measures are in place. Obviously, we are closely monitoring developments as well as the magnitude of secondary effects regarding inflation, global supply chains and investment sentiment. So far, however, we have not seen material changes in broader customer buying behavior, and we are benefiting from our technological strengths and strong positioning in key growth markets. Now let me walk you through the key highlights. Book-to-bill reached a strong 1.22, lifting orders backlog to a record high level of EUR 124 billion. Nominal top line growth rates were again materially impacted by the strong euro as anticipated. Group orders reached EUR 24.1 billion, up 18% on the prior year, with double-digit growth in all 3 core businesses. Smart Infrastructure again reached a quarterly order record with strong demand across most end markets. SI's data center vertical clearly stood out with unprecedented triple-digit order growth in the quarter, even topping the excellent Q1. Demand continues to be vibrant, driven by the build-out of cloud and AI infrastructure. Digital Industries continued its growth path. The market environment has shown some early signs of improvement that are now being challenged by renewed geopolitical volatility. The ICE automation business was strong across regions. Our software business seized several larger opportunities across the portfolio and is successfully upselling with its customer base. Mobility won attractive large orders in Q2. Two weeks ago, another high-profile contract came finally to a close, which will be accounted for in Q3. We will deliver up to 200 double-deck trains based on the Desiro platform to SBB. This is the Swiss Bundesbahn for the Swiss commuter rail networks. The order value is around CHF 2 billion. Overall, revenue growth reached 6%, driven by Digital Industries and Smart Infrastructure. A very strong contribution came from Smart Infrastructure's electrification business, up 18%. The software business at Digital Industries achieved compelling 14%. It is good to see that revenue was up in all regions. The Americas led the way, up 10%, fueled by strong momentum in the United States. EMEA grew by 2% and Asia, Australia was up 8%, driven by India, which was up 21%. Industrial business profit reached EUR 3 billion, translating to a profit margin of 15.4%. We saw operational strength at Digital Industries and Smart Infrastructure, while Mobility was impacted by U.S. tariffs. Currency headwinds amounted to 80 basis points and are expected to ease in the second half. These results translated into earnings per share pre PPA of EUR 2.81, including, as previously indicated, a gain from the divestment of our airport logistics business in the U.S. Compared to the first quarter, free cash flow picked up to EUR 1.7 billion. We confirm our outlook for fiscal year 2026 on the group level with some adjustments in the individual businesses, Veronika will give you some more color later. In addition, we continue to shape our portfolio. As planned, we clarified the time line for the spin-off of Siemens Healthineers shares. The shareholder vote is now planned for our next ordinary Annual Shareholders Meeting in February 2027. Four key levers drive our growth ambitions as one tech company. First, digital growth. In the first half of the fiscal year 2026, we grew our digital business by 19%, well ahead of the ambition level of 15% that we set last November. Digital business was driven by a good mix of organic growth from expanding our Siemens Xcelerator's software and digital service offerings combined with a strong growth trajectory of our recent software acquisitions. Second, grow regions. A great example of where Siemens strengths across business come together as one is Vulcan Energy's project Lionheart in Germany's Upper Rhine Valley. This is Europe's first integrated lithium and renewable energy project, and it will create local lithium supply. As a result, it will strengthen growth and competitiveness in Germany. The backbone of Lionheart will be our advanced automation and digitalization technologies as well as smart buildings solutions. Bringing them together will help in ramping up production faster. As a key partner, Siemens Financial Services will become a minority investor in this project and has supported the structuring and arrangement of the debt financing. Third, grow verticals. Data center demand has been soaring and it reflects our trusted systems integration and delivery capabilities. The team grew our revenue in the first half year by more than 45% to EUR 1.8 billion. We are confident that we will be able to keep up this stunning pace throughout fiscal year 2026. To meet accelerated demand, we will ramp up further low and medium voltage production capacities in the U.S. at several locations in the Carolinas. And we are continuously expanding our data center partner ecosystem to scale next-generation AI infrastructure. The goal: we are creating more flexibility across compute, energy and infrastructure systems. Data center operators can connect to the grid faster, scale efficiently and operate reliably in a power-constrained world. Fourth growth lever: grow AI. Bringing AI to the real world was our key theme at our first RXD Summit held in Beijing, which was a major customer and partner event. We deepened our partnership with Alibaba to bring our advanced industrial software together with their cloud and AI capabilities. Now engineering teams at our customers in China can flexibly run complex simulations more efficiently. And we introduced 26 new products for edge automation and control to execute AI-driven applications in industry and in its infrastructure. These products were locally developed at China speed, as we say, for the Chinese market and beyond. Those of you who visited our booth in Hanover saw firsthand how we are bringing industrial AI to the shop floor together with our partners. Let me highlight just a few examples. First, we launched our Eigen engineering agent, with which we are moving industrial AI from providing assistance to autonomously planning and executing industrial automation engineering tasks. The impact is impressive with up to 50% greater engineering efficiency and up to 80% higher solution quality, proven in more than 100 global pilot deployments. Second, we showed that physical AI is becoming reality in our own factories. We are automating complex and unpredictable logistics tasks with AI-powered robots. After receiving the task, they figure out by themselves how to solve challenges and optimize the required actions. A huge opportunity to address the scarcity of skilled labor. With KION, we entered a strategic partnership to shape the supply chains of the future. Using comprehensive digital twins and our digital twin composer, we turn warehouses from a physical hub into the digital nerve center for the supply chain. A key part of this collaboration is exchanging selected areas of industrial data and domain expertise to accelerate AI-enabled solutions. All these applications will lead to increasing demand for electricity for AI factories. We launched a comprehensive new direct protection and switching portfolio, the basis for offerings more efficient and sustainable DC grid solutions. I'm very pleased with the momentum and performance of our DI software business. Organic ARR growth trended upwards to a very healthy level of 11% over the prior year. The integration of our Altair and Dotmatics acquisitions is progressing very well. We have achieved an important milestone by implementing the targeted cost savings measures of $150 million following the Altair integration. The bottom line impact will follow subsequently. At the same time, we are working on accelerating cross-selling revenue synergies where customer opportunities are gaining more and more traction. As AI capabilities are evolving rapidly, our top priority is ensuring that all our teams fully embrace AI to leverage the full productivity gains of AI-powered coding. We are uniquely positioned to build on our strengths and meet key customer needs when implementing AI-powered industrial software. First, deterministic. Our customers require the management of physical laws and deterministic outcomes. Embedding AI in our physics-based solutions enables better and faster deterministic intelligence that unlike probabilistic results can be trusted. Our tools have the capability for sign-off and verification. Second, contextualization. Industrial-grade AI requires precise contextualization of data. Our industrial software understands design intent and all of our product configurations. AI that is built on systems of record uniquely preserves all necessary rules and relationships. Third, multi-domain. The complexity of innovation is rapidly increasing in a world of personalized and software-defined products. Customers require AI to be built on systems that understand the multi-domain design intent across the enterprise. We are the only company that can do this across PLM, EDA, simulation, and shop floor execution. And fourth, live. Real-time intelligence that will drive action requires a live digital twin that is infused with real-world physical data. Siemens is the industrial leader in bringing the real and digital worlds together to drive better, faster real-time intelligence and government actions. With focused investments, we are speeding up the development of AI-enhanced products and new applications in 3 ways. First, faster engines. Our physics AI solution doesn't replace deterministic CRA resolvers -- solvers. It makes them dramatically more efficient. Engineers can rapidly screen thousands of options and identify the most promising candidates. Then they run full deterministic solvers on only the top few. The result, dramatic faster design iterations and earlier validation. Second, faster engineers. Another key innovation is our new agentic industrial-grade AI platform that autonomously plans, executes and validates. We have stress tested this capability where the stakes are at the absolute highest, which is in the semiconductor design. The Fuse EDA AI system securely orchestrates highly complex workflows across very specialized tools, and it delivers real engineering productivity for industry leaders such as TSMC and NVIDIA. Even more, this is a platform approach for scaling. We are taking this agentic intelligence and will extend it to more than 20 agents across our product software portfolio. Third, increased design intelligence. One of the key challenges in adapting and implementing comprehensive digital twins for factories is the complexity of integrating data across ecosystems. Siemens has resolved this issue by introducing the Digital Twin Composer, which can merge all these data streams from the digital and real worlds into one experience. You saw this compelling concept in Hanover, with PepsiCo and KION examples. We enabled those companies to build an ever-evolving engineering mirror of the physical product and factory constantly driving operational improvement. Customer interest is massive. So far, we have been working on more than 300 inquiries from large enterprises since the launch at CES. To sum it up, our foundation is strong. It's built on team center, the industry's #1 trusted and secure system of records. On this basis, we are bringing the benefits of faster engines, faster engineers and enhanced design intelligence to life. We are building an AI native experience that is secure, trusted and governed. We aim to lead this transformation. And now over to you, Veronika.

Veronika Bienert: Thank you, Roland, and good morning, everyone. Let me share more about our successful Q2 and our expectations for the remainder of the fiscal year. Orders for Digital Industries at EUR 4.8 billion were 12% above the prior year with a book-to-bill of 1.03. Overall market dynamics in the automation business have been gradually improving. At this stage, however, we have limited visibility into the future impact that the conflict in the Middle East will have on investment sentiment. DI software business again delivered strong growth over the prior year with orders close to EUR 1.8 billion. Book-to-bill was clearly above 1, driven by structural tailwinds from sustained AI momentum and by several large order wins in EDA and PLM. Our backlog at Digital Industries increased moderately to EUR 10.2 billion with a gradually increasing software share. Revenue for DI increased 8%. Therein, its software business was strongly up by 14% on broad-based double-digit growth across PLM, simulation and EDA. DI's automation revenue was up by 6% to EUR 3 billion, led by the short-cycle factory automation business. Process automation was up modestly. DI's profitability was higher than expected at 18.5% with a strong contribution from its software business. DI is increasingly reaping benefits from the fact that the SaaS transition is nearing completion and from executing cost synergies in connection with Altair. A favorable mix with the high share of short-cycle business supported healthy profit conversion from automation as well. Sustained productivity gains remain the engine for a clearly net positive economic equation in Q2. Integration-related costs for Altair and Dotmatics had a magnitude of 90 basis points in the second quarter, in line with expectations. We now expect this number to reach around 80 basis points for full fiscal 2026. Finally, as anticipated, negative currency effects weighed on DI's margin development with around 90 basis points. I am pleased that Digital Industries improved its free cash flow performance to EUR 760 million. Looking at the regional top line perspective, DI's Automation business grew across the board. China was robust, clearly up in orders and revenue after a strong first quarter, which was supported by some pull-forward effects due to the expected price increases. In Q2, the book-to-bill was above 1 in China, where motion control drove revenue growth. Our local China portfolio is well on track, growing by a rate in the mid-20s. Germany showed 13% order growth on easy comps, while revenue was up modestly. The U.S. showed positive trends driven by brownfield modernization and greenfield activity in selected industries. Among them were semiconductors, data center, power generation, grid modernization as well as aerospace and defense-related manufacturing. After a successful first half year, we raised our fiscal year 2026 guidance for DI's revenue growth 100 basis points at the midpoint to a narrowed range of 7% to 10%. We now expect DI's profit range to reach 17% to 19%, up 100 basis points at the midpoint versus our previous guidance. DI is driving growth and margin expansion by simplifying its setup, optimizing its sales approach, fostering innovation and ensuring stringent post-merger integration. For the third quarter, we see DI orders clearly up over the prior year level with a strong contribution from its automation business. DI software will grow moderately on lower order volume from EDA year-over-year. The sales funnel for EDA is skewed towards the fourth quarter again. We anticipate that DI revenue growth will see a high single-digit increase, supported by growth in automation and software. And we expect a profit margin of around 18%. Now let's turn to Smart Infrastructure, which continued its success story with an excellent performance across all businesses and metrics. Orders were up 35%, reaching a new record level of EUR 7.5 billion. This increase was driven by massive growth of 62% in SI's electrification business and 38% in its electrical product business. Both businesses benefited from surging contract wins from hyperscalers and colocation providers, but also from leading semiconductor firms. Data Center orders amounted to a record high EUR 1.9 billion with customers globally building out capacities for surging AI workloads. Book-to-bill reached an outstanding 1.27. SI's record order backlog of EUR 22 billion now already provides visibility well into fiscal year 2027. Revenue growth was broad-based and reached 10%. The largest contribution came from the electrification business up 18%. Stringent backlog execution led to further operational margin expansion, up 10 basis points year-over-year to 18.6%. SI's business continued to benefit from economies of scale due to higher revenue and from sustainable productivity improvements. This offset a material currency headwind of 110 basis points as well as higher commodity costs. For the second half of fiscal year 2026, we expect pricing measures in SI's product business to increasingly compensate for higher commodity prices. Free cash flow showed excellent cash conversion at 1.02 with a reduction in operating working capital despite strong top line growth. Looking at the regional top line development, there was healthy demand across the board and stringent backlog execution drove revenue. The U.S. demonstrated exceptional order momentum, up 72%, led by data center demand. It was also good to see bookings in buildings up by low teens. Germany recorded double-digit order growth in buildings and electrical products. The Europe and Middle East region also benefited from large data center orders in the Nordics and from some power utilities wins. SI's top line in China showed further improvement, driven by electrification and electrical products despite a continuously soft real estate market. The service business delivered 7% growth, clearly up across all regions. We anticipate that the service business will accelerate in the second half year. Our teams continue to expect very consistent end market dynamics with data centers and power utilities as key pillars for growth. After delivering 10% revenue growth in the first half of fiscal year 2026, and given high visibility from backlog, we raised our guidance for the full fiscal year. For SI, we now expect comparable revenue growth in the range of 8% to 10%, up by 150 basis points at the midpoint. For full fiscal 2026, we continue to expect SI's profit margin to be in the upper half of our guided range of 18% to 19%. For the third quarter, we anticipate that SI's revenue growth will be at the upper end of the full year range and profit margin in line with full year expectations. Mobility recorded a mixed set of results in the second quarter. Strong orders at EUR 5.3 billion were well above the prior year with a book-to-bill of 1.76. Order backlog stands at EUR 53.5 billion with further improvement of the gross margin profile. Around 30% represents attractive service business. As Roland mentioned, the sales pipeline for the second half of fiscal 2026 looks very promising. Revenue in Q2 came in 2% below the strong prior year level on tough comparables, held back by the impact of U.S. tariffs mainly in rolling stock. In addition, we saw conversion delays in large-scale rail infrastructure projects due to delayed call-offs under framework agreements, especially in Europe. The U.S. Supreme Court ruling on tariffs and the subsequent introduction of similar tariff structures triggered an immediate reassessment of project calculations in the U.S. The result of this assessment impacted both top and bottom line equally. The negative impact on Mobility's profit margin of 6.9% was 170 basis points. In addition, severance charges at 80 basis points were somewhat higher due to some factory network optimization measures. Free cash flow was soft as expected because the timing of milestone payments led to a temporary buildup of operating working capital. Looking at project payment profiles and the timing of order awards, we continue to expect a material catch-up in the second half of fiscal 2026. After the first half year, we take a prudent perspective on the current geopolitical challenges and having taken into consideration the current situation of U.S. tariffs, as a result, we lower our full year outlook for revenue growth at Mobility to the range of 5% to 7%. Despite this change, we confirm the full year margin outlook in the range of 8% to 10%. Also, it is now expected to be towards the lower end. For the third quarter, we see Mobility's revenue growth and margin within its full year guidance. Our below IB performance, as shown on Page 19 in the appendix was as expected. The results included a gain of EUR 172 million from the sale of our airport logistics business in the U.S. Free cash flow of EUR 1.7 billion in the second quarter was well above the prior year. As discussed, we saw a significant catch-up in the industrial businesses and lower tax payments below the line. We are very confident that we will achieve a double-digit cash return once again in fiscal year 2026. With a capital structure of 1.2 for industrial net debt over EBITDA and strong ratings, we continue to act from a position of financial strength. Our leadership team is fully committed to delivering stringent capital allocation and a strong shareholder return. Therefore, we retired 18 million shares in March, and we have almost finished our current EUR 6 billion buyback program after less than 2.5 years. Since we will conclude the buyback in a few weeks, we are already announcing today a new program of up to EUR 6 billion over a period of up to 5 years. These parameters allow sufficient flexibility. However, we have built a track record of accelerated execution when feasible. Now let me point out our updated outlook assumptions for full fiscal 2026. Incremental investments in AI-based innovation will lead to R&D intensity slightly above prior year levels. Selected investments in optimizing our sales channels will keep SG&A as a percentage of revenue on par with the prior year. We will continue to support midterm growth momentum by increasing CapEx in targeted growth fields to expand capacities. Severance costs are now expected in the range of EUR 300 million to EUR 350 million. We will continue working on ensuring competitiveness across our businesses and functions, primarily with regard to Digital Industries. As expected, FX was a strong burden in the first half of fiscal 2026. However, based on current rates, we expect the headwinds to ease over the second half year. Finally, let me conclude with a confirmed outlook for the Siemens Group and the updated guidance for the businesses at a glance. We continue to expect to reach the upper half of our group revenue growth guidance of 6% to 8%, and we anticipate that we will reach EPS pre PPA in the range of EUR 10.70 to EUR 11.10. In a time of highly volatile geopolitics, we are delivering resilient performance with healthy growth and strong free cash flow. With that, I hand it back to Tobias for Q&A.

Tobias Atzler: Thank you, Veronika. We are now ready for Q&A. [Operator Instructions] Operator, please open the Q&A now.

Operator: [Operator Instructions] The first question comes from the line of Philip Buller from JPMorgan.

Philip Buller: I'd like to dig a bit deeper into the triple-digit data center momentum, please. Is this just an easy comp? Is it a one-off? Or are you gaining share? And if so, why is that? Anything you can help to offer to build out that huge headline order momentum would be great.

Roland Busch: So we do our homework when we compare our growth as far as we can, obviously, see it from -- we call it electrification. So this is a some of medium-volt, low-voltage. And from that perspective, we -- I would say we slightly gained market share, but we are growing, let's say, with the key competitors likewise, maybe a little bit stronger in that quarter. So I mean, this is all about delivering capabilities. So you know that we continuously expand our manufacturing footprint in the United States in Carolinas. We invested more. We are ramping up high-quality manufacturing, very much automated. So we are able to do that. We have our supply chain under control, and we are having a strong focus on that. And so therefore, this is the way to keep momentum. The other part is that we are not only growing with the hyperscalers. We are diversifying also to others -- data center builders. And the last point is, and that's more looking forward, we are launching new products. You saw that 800-volt DC switching technology, which hits the market anytime soon, launched right now, so which gives hopefully another momentum going forward.

Philip Buller: And is there any kind of thing to bear in mind from our side in terms of gross margin dilution or a material margin profile difference for what we're seeing coming through on the order book, please?

Roland Busch: No, it's supporting a great margin in that business.

Operator: The next question comes from the line of James Moore from Rothschild & Co. Redburn.

James Moore: I wondered if I could ask a little bit about the automation momentum and broadly similar environment to last quarter. And the Chinese environment could potentially have been even a little bit faster. I wondered if you could talk a bit about market share in China. Was it that a year ago, you've done the launch, so it was a tougher comparative. You mentioned some pre-buys. Could you talk a little bit about global automation momentum into April as well?

Roland Busch: Okay. Well done. So let me start and maybe that's one of the key message we are also looking for is that April shows really another strong growth, which is even above our forecast. I mean, just to give you that sense. And this is automation globally. So let me start maybe in China. The -- in general, the industrial market is recovering. In particular, you know that China is going more for high-tech manufacturing, but they're also driving export for eco semiconductors and the like. We see stable distributor stock levels, which is good. And what's really exciting is our China new products they grow extremely well. They hit the market really to the point. And here we talk about broad portfolio, edge drives and controls. I'm super excited about our Smart PLC, which was part of the last 26 products we launched, but also switching technology. So it's not only automation, it's also electrification and FI business there. So we continue to see China new product growth. And this growth is really gaining -- we're gaining market share definitely in that case and a strong growth in OEM business, too. So the -- if you ask for the verticals, there are a couple of government-supported verticals, AI semiconductors, obviously, e-car, solar, batteries, logistics, marine, and at the other level, maybe a short one on pricing. You saw that there was a price increase in Q1. Currently, the pricing is on a stable level. So all in all, that's doing well. Regarding prebuy, we currently see indicators which suggest that prebuying may be partly driven by our order dynamics, fueled by maybe component scarcity or a price increase. So we cannot rule out some of these effects. However, if we look at our KPIs, we see no meaningful shifts in order patterns or requested lead times that would point out prebuy distortions in our performance. So that's very, very important to say, but we are staying obviously very vigilant on this point. On a global basis, if you ask for the automation, we see in the automotive space, there is, I mean, limited growth in early '26, partially U.S. recovery. Europe, Japan, flat. China softened sequentially. It's overcapacities in China. So therefore, cautions in CapEx spending. Machinery, there's a moderate moment ahead of us. The Europe is slightly positive and the automation demand is expected to grow modestly, low single digit to mid-single digit. Chemicals, we see chemical output shows moderate growth driven by China, Europe weakening further. Pharma, solid growth there, led by China, Japan. Pricing remains under pressure, I mean, also from this by tariffs. Food and beverage production growth remains modest. So there's a more cautious near-term outlook. Electronic semiconductors, super strong exceptional momentum due to the AI chip demand and aerospace and defense, likewise here, key growth drivers. Aerosense is a high dynamic market, and Siemens can play a key role in scaling up capacities and in a closed-loop production. So I hope that covers your question somehow.

Operator: The next question comes from the line of Ben Uglow from Oxcap Analytics.

Benedict Uglow: Unsurprisingly, it's also about China. I guess my puzzle here is what is new and what could be driving this? In terms of your conversations, Roland, I guess, with either the customers or government, et cetera, why do we think we may now finally be seeing some form of improvement in China? I -- is this to do with the 15th 5-year plan? Is this to do with just catch-up? Is it stimulus? Just your sense of what might be going on? And then could you just talk a little bit specifically about the machine building segment, one of your end markets, which I see on your slides are kind of flattish, but other people are calling out Germany getting better, Italy getting better. Could we just drill into that vertical a little bit more?

Roland Busch: Yes. So talking about China. On a high level, we said it over the last quarters, remember, is that we expect China to improve gradually. There will be no V-cycle, whatever, it will improve gradually. And this is a combination of, let's say, getting step-by-step more consumer confidence of having the Chinese government strategy working out, remember, high-quality manufacturing, but also being able to divert their export to -- away from United States to other regions, Asia, in particular, but also Europe. So this is a combination which somewhat drives it. And the last one I would say is, I mean, China is really good in embracing new technologies. So AI technologies, and let me take that now one by one. So the -- let me talk about the exports. And this is cars, for example, but also machines. They are quite competitive. They diverted their export to other markets, as I said, amazingly fast. So their export is increasing despite the tariffs and, let's say, the throttling of export to the United States. So this was a surprisingly fast way to really find new ways that helps. The other one is there's clearly a kind of a pivot to this high-quality manufacturing, which is also higher price, higher value added. So if you go away from, let's say, clothing to a machine, that makes a big difference. And that goes along with technology, the embracement of technology. I mean we see that for local competitors, but also the international ones acting there. And maybe here, that's something what I really believe we are sticking out if we look around and compare ourselves to number one, local Chinese competitors, and we really -- we win customers back. I mean our RXD Summit was extremely successful. We had roughly 3,000 people, 42 partners exhibiting in our summit. I mean we had, I think, more than 1 million streamings that really hit the market, including forging partnerships. I had Alibaba on stage. We are going now offering our software in China on the cloud, so it can be deployed super fast, and we see a lot of interest there. So this is coming together. And coming to your point about machine building, you know that, Ben, that the machine builders in China, they really made a step up, super competitive. Would I see them already in the super high-end market? So the -- let's say, the DMG MORIs or the high-end TRUMPF machines, maybe not. But the working horses, standard machines, they are quite good and they take advantage out of that. So overall -- and coming back maybe to the customer sentiment, so the private consumption, we believe that this comes back gradually, as we say. I mean, another sideline, obviously, the real estate thing is improving also gradually. Don't expect any kind of fast pivot here. But this package, what I was talking about seems to be a very, let's say, somewhat slow but gradually improving momentum there.

Benedict Uglow: Super interesting.

Veronika Bienert: And maybe, Ben, just to add to the China performance really in the way how we are really monitoring that in a very prudent way. So therefore, what is really important for us that we look at the distributor stock levels. And here, we see for the -- for Q2, really a stable distributor level. And what is as well quite interesting that if we look at the market development that what was really driving was the high-tech manufacturing, what Roland mentioned, but as well the export growth, for instance, really for e-cars in semis, which is a very important element. And that is something which we expect as well to develop going forward in this.

Roland Busch: And since we are talking about it another one is, I mean Q1 is normally strong Q2, normally, we see a little bit weak. This is not the case going into April, again, you see a good momentum there. So that's really encouraging.

Operator: The next question comes from the line of Benjamin Heelan from Bank of America.

Benjamin Heelan: I wanted to touch on M&A. There were some reports yesterday and you were linked to a potential rail acquisition. If you could maybe comment on that. But just broader, how are you thinking about M&A? Can you talk about the pipeline? Are there any divisions that you're particularly focused on right now?

Roland Busch: The first part of your question, I can make very short. We do not comment on that. On the second one, I can speak a little bit longer. I mean we -- number one is, obviously, we have a lot of focus, which is supporting our strategy, which is combining the really in the digital world. Any kind of digital asset, I mean, software assets is super interesting. It's getting harder. The more -- I mean, the more market leadership you're expanding with Altair, for example, then the harder it gets. But there's another space we call operational software, which is really I think going away from the design world of software into the operational world that's super interesting. I mean, obviously, we're looking also into any kind of AI or data-related assets, which is interesting. But we do not shy away from also going into hardware, particularly connected hardware, hardware, which supports our electrification growth. I mean, is it bolt-on acquisitions or looking also into adjacencies? I mean you know that the AI factory market is very fast changing. We see a change in technology. You have to control data AI factory differently from a data center. That has an impact on the controls itself, on the -- so the evolves the mechanics, the controls, but also the DC technology, which you see there, we're looking in that space as well. So anything what is -- and we love connected hardware. The hardware who delivers data is connected is super relevant for us because finally, it has not only memory on it, but also silicon, so you can really run AI technology on it. So therefore, broader space to look at. And regional expansion, obviously, India is a place we always would like to do more. Remember, our CNS acquisition, we love it. This was low-voltage stuff. If we find any other options there, we will do this as well.

Operator: The next question comes from the line of Andre Kukhnin from UBS.

Andre Kukhnin: Could we talk about the industrial software momentum and how you assess your performance there versus your respective peer groups? And also, could you talk about if your stance has changed at all on the potential AI impact on the space I think at Hanover Fair, we actually talked to a lot of people who are excited about prospects for simulation and how much can be done with agents. Are you ready to price for that hike in consumption?

Roland Busch: Yes. So let me start with the industrial software. Number one is -- and I said it in my presentation and I spend a little bit more time on that, that we have -- we are developing software, industrial software is based on physics. It is -- has a difference between AI technology, which is nondeterministic to that one which you require. For us, the combination is making the beauty. So having simulation, which you can enrich with AI. By the way, also rewriting and running on a different hardware on GPUs makes it already faster, but AI is really making a big difference. So -- and with our software and the combination, you can make non-deterministic AI suggestions to deterministic and roll it in the real world. Is it on the shop floor, but also on the design. You cannot make a mistake in the design of your semiconductors that costs you billions if you make a mistake there. So that's what we love. The other one is General PLM Team Center. This is the trusted secure system of records. It also contextualizes. So -- and this is super important because if you throw AI on nonstructured, nonconextualized data, it doesn't really do well. If you work it on a contextualized way, you really do magic. And this is the reason why Team Center is such a powerful platform, and we offer it not only also with the X version for small and medium-sized enterprises to scale it faster. Now we are developing an agent platform and an agent studio to supply a variety of agents that enhance team center capabilities for customers and for all products. So AI stack an own agent framework across and now listen EDA, PLM and simulation. That's unique -- that's unique in the market. And again, with our X expansions, we're offering that also from the cloud. So that's kind of a competitive edge. The other elements are going then across now moving from the design space to the operations space. Our digital twin composer, for example, you have digital twins of products and manufacturing and compose it into one, which creates this digital thread, which is unique. And then we make it able, make it open for a round-trip of data. So real-time data going into that and have a chance to really operate them out of the cloud. So this is another unique element, which requires actually having an enhance-on operations and getting real-time data into our software stack. So we believe that we have, number one, a super strong position there, including -- I mean, Altair was really closing a gap in our simulation. Now we go cross domains, so to speak, super relevant cross domains and domains is either the supply chain, as I said, EDA, PRM simulation, but also cross disciplines like hardware, software, electronics and the like. And the other one is the capabilities to increase it. Maybe 2 more things. One is we're writing our software also in a sense for the -- how our customers use it. Currently, it's engineering using our software. In the future, it will be a blend of engineers and agents, which is obviously you can imagine a different way. And this now to your other question, this spills over to the way how we monetize -- we also look into AI-driven monetization, tokens usage-based, which is changing the model. And that's something which is -- it's premature yet, but we see that this is a huge opportunity as well to leverage the portfolio I was talking about also into the way how we monetize it. I talked a lot, but I don't know whether I hit all your -- the points you wanted to know.

Andre Kukhnin: No, that's really helpful. And I guess in H1 performance, do you feel like you've taken share or performed more in line with the market?

Roland Busch: No, I would say we took share. I mean, remember, for the first half, our digital business grew by 19% in the quarter now Q2, our cluster by 14. So we feel very confident we were happy about the performance...

Veronika Bienert: And maybe just to briefly add to monetization. So we are convinced that user-based licenses will continue to exist. But if required for AI, we can really fully leverage new monetization models, and we are testing this on new AI solutions and our AI capabilities in the product. So therefore, we are convinced that the mix of both will really help to grow our top and bottom line.

Roland Busch: I'll give you one more since this is so exciting. Engineering agent. I don't know whether you have a chance to be at our Hanover trade fair, but what is it? It is an agent which really helps engineers programming industrial PLCs, typically using our TIA portal, but that can go much, much broader. What it does, I mean, it receives -- actually, you interact with a prompt. This is the first thing. And you go for a task. For example, I would like to give you a welding task, including the clamping, the welding and the unclambing and moving on. And then the agent goes out and checks out for all the necessary documents, I mean whatever you need in order to do that for your machine. So it looks around in all the documents, upload it, creates a software to run on your PLC, validate it over and over again until it really works. And then it comes back and say, okay, here's the ready-to-release software. And finally, a human can decide and push a box and upload it. And guess what? It works. I mean this is so amazing. And that's something what was really done by our Seattle team based on a prework for our team here in Germany. They did made it work. And this is first of its kind engineering agent. And by the way, we call it Eigen because, number one, it's yours and Eigen is a German, it's yours. Number two, it's linked to the state of in physics, which means that -- and this is a very interesting point because physics is nonderministic if it comes to quantum but an eigenstate is deterministic. So -- and that's the beauty of it. We make out of a nonderministic technology and deterministic output, which is hardened and can run on the shop floor. Sorry for being a little bit technological here, but we love it. And our customers, too, they have very strong interest.

Operator: The next question comes from Max Yates from Morgan Stanley.

Max Yates: I just wanted to ask about the Healthineers spin. Obviously, in the quarter, you made the announcement that the vote would take place at the AGM next year. I was just wondering, could you give us a little bit of context around kind of why that's now at an AGM as opposed to maybe an extraordinary general meeting earlier? And then maybe sort of once the vote happens at the AGM, what kind of time line after that would we expect the transaction actually to take place? What are the hurdles that need to happen once it kind of -- that we need to get through once it has shareholder approval?

Veronika Bienert: Yes, I'm happy to take your question. So we are working on an unprecedented transaction. And while such processes naturally take time, the alignment with the tax authorities is progressing well and in a very constructive and positive manner. And we cannot give you details on the ongoing proceedings. However, the alignment with the tax authorities is progressing well. And so we are very confident there. So -- and I assume you are as well aware that there are certain key contractual aspects, which need to be solved between Siemens Healthineers and Siemens AG. So all existing contractual relationships like service contracts, rent leasing contracts or financing agreements, they have been checked. And their continuation or termination evaluated from both sides. So we are confident that we will have satisfactory solutions to the questions at the time of the spin-off. And so we have a very straightforward approach. So we will go to the regular AGM and then execute on the relevant spin-off activities. That's how we move forward. So you are aware, we currently hold 67%, and we will deconsolidate with the effectiveness of the spin-off. And while reductions are planned in the midterm, as previously communicated, we are in no rush and we'll approach reductions as we always do with a very steady hand and taking into account that the market and operational development of Siemens Healthineers.

Operator: The next question comes from the line of Alexander Virgo from Evercore ISI.

Alexander Virgo: I wondered if you could just talk a little bit about DI margins. And in particular, I'm thinking about whether you can give some clarification about what you've included in terms of basis point headwinds, FX, price cost, in particular, I suppose, in the full year guide. And then I guess really what I'm getting at is thinking as we exit this year, we're looking at well north of 20% on an underlying basis. So I'm just sort of trying to get a framework for thinking about 2027.

Veronika Bienert: Yes. So as previously explained, so for Q2, we see 80 basis points impact in terms of FX. And then for the entire fiscal year, 50 basis points. So our expectation is that in the Q3, Q4 and the difference to previous year will kind of flatten out. And with regards to the different impacts in terms of supply chain inflation and alike. So we are heavily working to keep economic equation up and to compensate in different areas so that we have a very strong purchase price approach here. So therefore, we are quite confident to fulfill our targets for the course of the fiscal year.

Operator: The next question comes from the line of Daniela Costa from Goldman Sachs.

Daniela Costa: I just wanted to follow up on some -- there were some news articles a couple of weeks ago regarding sort of you considering reorganizing how the divisions, DI and SI are structured. I just wanted to check sort of like whether you've considered anything of that sort or if we should dismiss those. And in case you would consider what is the logic behind?

Roland Busch: Yes. Thanks, Daniela, for asking that one. So for the time, dismiss it, we keep on going with what we do. But we do -- it's maybe behind the scenes to give you a little bit of background. So there's -- and remember, we had our -- with our One Technology program, we also had -- which is targeted for 3 elements. Number one is stronger customer focus; number two, faster innovation, so increasing our innovation velocity. And number three is ultimately going for -- gearing for higher profitable growth. So -- and we thought of what do we need to do in order to make a step up. And to give you a little bit of background and some things -- there is a reason why I say disregarded because hopefully, you don't see what we do because while delivering, we're increasing our performance. Take you an example. We basically reworked our sales organization in the automation business. It was -- currently, it was driven by actually 4 business units and segments, and this whole structure was duplicated in the regions. We don't think that this is a good idea. So we bring that now under one control. It's one CRM, so one sales organization, which is really having a much, much more better grip on what products to sell, how to sell it. It's a common way to address it. It goes live. I mean we already work in that direction. It goes live then 1st of October, but we are ready to do that. And we believe that with the same portfolio, we can do better impact because we have better transparency. We get our productivity of our salespeople up. This includes also how we steer new products when we go to the market. But then we're also strengthening our marketing -- product marketing. So once we are launching products, you saw that in China, that we have a product marketing and a campaigning behind to really create impact much, much faster. So in short, this is professionalizing the CRM, our sales organization in automation as an example. That's what we do. And the other one is -- we're working on our -- the way how we are delivering products and I'm still on automation so that we don't have redundant platforms, which creates, kind of, a headroom for investing in new innovations like I mean, China new products, super successful. We keep on going. We talk about virtual PLC software-defined automation, which already starts hitting the market. So we need that headroom to deliver and grow faster in doing that. And then the next thing is that we -- once you start doing that, you think also about what is it what our functions can do. And so we create a fabric of functions, which are able to scale also technology. We talk IT and AI technologies across the company much faster while having a clear focus on supporting the businesses. So world-class support for businesses in scaling. I give you one detail, one idea behind. We have currently -- because we didn't really put too much attention on it, I mean, I think something like 600, 700 engineering tools in our company, which is maybe not the right idea to really scale productivity also. I mean, using GitHub and all the new technologies and AI. So we are consolidating that now and driving them within doing that, not only operational productivity of our coders, but also developers, but also having a tool chain, which is supporting them to be much, much more productive. On top comes scaling that for the company, it makes us also more productive if we move people around and the like. So this is what we do. We do not touch things which are not broken. So you don't see a very limited change in our medium voltage, low-voltage business. You see an improvement in our building business. So therefore, we are very selective, but we are very clear what we want to do and how we want to do it to come again back stronger customer focus, faster innovations and higher profitable growth.

Tobias Atzler: We have time for 2 short questions.

Operator: The next question comes from Martin Wilkie from Citi.

Martin Wilkie: It's Martin from Citi. Just to come back to the margin in DI and particularly on software. I think you said that software was an important part of that margin improvement inside DI. Can you remind us where we are in the SaaS transition in terms of the drag from that sort of beginning to reverse or improve? And just to understand, was it largely driven by the timing around that? Or is there also an underlying pickup in profitability inside software?

Veronika Bienert: So we are on our way with the SaaS transition as planned and -- but still some activities are underway, but we are progressing very well. And you're very well aware that we are not disclosing the software margins. But what we see as well from the Altair integration activities in terms of synergies, revenue synergies, we see as well the translation into profitability. So therefore, we are very confident in the overall SaaS transition.

Roland Busch: And maybe to add, coming back to when we started off also taking you with us on the SaaS transition, this is something what is really -- I mean, high credit to our team. They execute as planned. I mean this goes back now, I don't know, 4 years or whatever, 5 years. They deliver as planned. So you will see the expected pickup in margins. They deliver on the integration of Altair and Dotmatics measures for the $150 million savings are in place, which are kicking in, in our bottom line going forward. So from that perspective, we are very happy that they pick up as planned and also on the top line, so we see the pipeline building up for our cross-selling and upselling.

Tobias Atzler: We take one last question, please.

Operator: Today's last question is from Gael de-Bray from Deutsche Bank.

Gael de-Bray: My question is for Veronika. I'd be really interested in hearing about your early observations in the role. Where are your priorities and focus as CFO? Is there anything you'd like to do differently from your predecessor? And if I may, in terms of the capital allocation strategy, why only EUR 6 billion of buybacks given the strength of the balance sheet and the expected deconsolidation of the debt from Healthineers in less than a year's time?

Veronika Bienert: Yes. So happy to take your question. And with regards -- you mentioned it on your own.

Roland Busch: You make me stay tuned now.

Veronika Bienert: Capital allocation is, of course, one of the focus areas, which is on top of my mind. But in addition, as well, stringent execution in terms of delivering our free cash flow. That is something which is very important to show the healthiness of our businesses. And another area is something, in particular, in this challenging geopolitical environment. And if you think about increasing inflation and volatility in different areas, it's, of course, our economic equation because that is something which shows as well whether our different businesses are healthy and resilient in order to navigate in challenging environments. And yes, to come back to capital allocation -- this goes into different directions. So of course, our announced share buyback program, it's one of the building blocks. So it's more or less a one instrument which we are looking at. But capital allocation goes into the direction when we look in a very prudent manner at M&A activities. So of course, we are doing that in the same manner as before. So no change, yes, a very prudent approach. However, if you look at the multiples in different areas, we are in industries we are acting in. So therefore, we really need to show or to see evaluating such targets, how does it look like with synergies about revenue, cost synergies and is it the strategic fit in terms of top, bottom line and many other areas, you are very well aware of our 5 to 6 focus areas from a strategic point. So that is something which we further pursue. But when we talk about capital allocation, it's not only about share buybacks and M&A activities. It is as well if you look kind of inside the company, R&D activities, R&D efficiency, such topics we really need to look at in a very close manner and the way how we allocate resources. So just to translate it into a resilience of our company, so we really need to diversify. We need to diversify the way -- where are our production locations, where are we running our R&D activities, and that is something which we started to do, but we will do that in an even more focused manner that we really ensure in a very stringent way, but in a very forward-looking way for the value creation of our company. So I hope this gives you a certain insight on my focus areas going forward.

Tobias Atzler: Thanks a lot to everyone for participating today. As always, the team and I will be available for further questions. We're looking forward to our sell-side meeting, I should say, call later today and meeting many of you on our roadshows over the upcoming weeks. Have a wonderful day, and goodbye.

Operator: Ladies and gentlemen, that will conclude today's conference call, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.