A New Page in the Technology Market
In the fast-moving world of information technology, few companies manage to stay consistently relevant across decades. Formula Systems Ltd. , an Israel-based holding company, has done just that. Through its majority stakes in IT services leaders like Matrix IT Ltd., Sapiens International, and Magic Software, Formula has become a global player in enterprise software, digital transformation, and cloud services.
Trading around $114 as of August 19, 2025, Formula’s stock reflects both its strong footprint in IT services and investor caution about global tech spending cycles. The question is: is Formula a dependable long-term compounder through its subsidiaries or simply a diversified basket of mid-tier tech firms?
Income and Profit: Broad-Based Growth
Formula’s most recent results showcase its ability to grow across multiple segments. In Q2 FY25, consolidated revenues stood at $780 million, up 8.5% year-on-year, driven by demand for cloud migration, digital consulting, and insurance software solutions.
Net income attributable to shareholders reached $48 million, compared with $42 million in the same quarter last year. Margins improved slightly to 13%, reflecting stronger contributions from high-margin subsidiaries.
Breaking it down further:
- Matrix IT (largest subsidiary) grew revenues by 9%, leading Israel’s IT outsourcing and digital transformation market.
- Sapiens International expanded 7% YoY, fueled by its insurance software adoption in North America and Europe.
- Magic Software rose 6%, benefiting from integration solutions and enterprise application demand.
Together, these businesses provide Formula with a balanced portfolio of recurring revenue and growth exposure.
Expansion: Ambitious, But Capital Heavy
Formula’s expansion strategy is executed largely through its subsidiaries, each pursuing growth in its niche:
- Matrix IT continues to expand digital and cloud consulting services across Israel and Europe.
- Sapiens is broadening its insurance tech platforms globally, particularly in emerging markets.
- Magic Software is investing in cloud integration tools, positioning itself as a partner for enterprises shifting to hybrid IT.
At the holding-company level, Formula’s approach remains acquisition-driven identifying promising IT companies and integrating them into its ecosystem. This inorganic strategy supports growth but requires significant capital. FY25 capex and acquisition spending topped $350 million, keeping pressure on free cash flow.
Ownership and Institutional Backing
Institutional investors maintain strong interest in Formula due to its diversified tech holdings:
- Asseco Poland S.A. remains a significant shareholder, reinforcing Formula’s European ties.
- Global funds, including BlackRock and Vanguard, hold positions, reflecting confidence in Formula’s long-term model.
Institutional ownership stands around 65%, providing stability while leaving the company somewhat exposed to shifts in fund sentiment.
IPO Origins and Valuation Context
Formula Systems has been listed on Nasdaq since the early 1990s, making it one of the longest-standing Israeli tech firms on U.S. exchanges. Once considered a niche IT holding company, it has evolved into a multinational with a diversified technology portfolio.
At today’s ~$114 per share, Formula’s market capitalization is about $1.7 billion. While modest compared to global tech giants, its valuation reflects consistent profitability and steady dividend payouts. For investors, Formula is less about hypergrowth and more about compounded stability.
Analyst Sentiment: Positive, But Conservative
Analysts generally view Formula favorably, though with measured expectations:
- Barclays: $120 target, citing consistent performance across subsidiaries.
- UBS: $115 target, neutral, noting steady but unspectacular growth.
- Jefferies: $130 target, bullish on expansion opportunities in Sapiens and Magic Software.
Consensus sits at a “Moderate Buy,” with analysts appreciating Formula’s stability but acknowledging it lacks the explosive upside of pure-play tech disruptors.
Risks on the Horizon
Despite its strengths, Formula faces challenges:
- Global IT Spending Cycles. A slowdown in enterprise tech budgets could dampen growth.
- Subsidiary Risks. Performance depends heavily on Matrix, Sapiens, and Magic underperformance in any could ripple through results.
- Capital Demands. Acquisition-driven growth requires continuous reinvestment.
- Competition. Each subsidiary competes in crowded markets, from insurance software to digital consulting.
Why the Case for Holding (or Buying) Still Stands
Formula Systems remains attractive for several reasons:
- Diversified Portfolio. Exposure to multiple IT verticals reduces concentration risk.
- Stable Growth. Subsidiaries generate recurring revenues and steady profits.
- Strong Market Position. Matrix leads in Israel, while Sapiens is a recognized global name in insurance tech.
- Shareholder Alignment. Long-term institutional backing provides stability.
The Bigger Picture: A Holding Company with Staying Power
Formula is not chasing headlines with moonshot projects. Instead, it has built a reputation as a quiet compounder acquiring, growing, and nurturing IT service providers across global markets. Its blend of stability and modest growth makes it distinct from volatile tech peers.
In an industry where many firms rise and fall quickly, Formula has shown it can sustain relevance across decades.
Looking Ahead
For investors, Formula offers a measured tech play not explosive, but consistent. The key watchpoints will be whether subsidiaries like Sapiens and Magic can accelerate international expansion, and whether Matrix can continue dominating Israel’s IT sector while scaling abroad.
Conservative investors may appreciate Formula’s steady dividends and reliable earnings base. Growth investors may want more clarity on whether acquisitions can unlock higher growth.
Key Takeaways
- Stock trades around $114, with a market cap of $1.7B.
- Q2 FY25: $780M revenue, $48M net income, 13% margin.
- Subsidiaries: Matrix IT, Sapiens, Magic Software driving balanced growth.
- Institutional ownership ~65%, with Asseco Poland and global funds as key holders.
- Analyst targets range $115–$130, consensus “Moderate Buy.”
- Risks: IT spending cycles, subsidiary dependence, capital intensity, competition.
Formula Systems is proof that consistency in tech pays off. For investors, it’s less about chasing rapid disruption and more about owning a diversified, stable IT services platform with room for steady growth.