Schneider Electric recently released its Q3 results: while revenue continued to grow, the company confirmed that both annual revenue and profit margin growth may fall in the lower half of expectations. The market reacted pessimistically, with Schneider's stock price dropping after the announcement.

Schneider Electric's golden era in China seems to be fading. In Q3, India and Australia in the Asia-Pacific region achieved double-digit growth, while China only saw low single-digit growth, with the construction sector remaining sluggish.

The quarter's growth was primarily driven by demand in data centers, infrastructure, and services, though some projects in Europe faced delays. JPMorgan analysts noted in a report that investors are reasonably questioning why the company has been slow in executing its plans.

To salvage profits, Schneider executives have announced price hikes in markets outside China in H2. However, the company has already raised prices in China at least twice this year. Meanwhile, the rise of domestic competitors is eating into Schneider's market share.

**Growth Pressure and Project Delays Under Scrutiny** In its earnings report, Schneider reiterated its 2025 financial targets, aiming for adjusted EBITA organic growth of 10%-15% amid "geopolitical uncertainties," consistent with its February guidance. However, full-year organic revenue growth and margin expansion are expected to land in the lower half of projections, with revenue growth forecast at 7%-10% and adjusted EBITA margin around 18.7%-19.0%.

Schneider's performance in China has been underwhelming. While Q1 2024 saw high single-digit growth, Q1 2025 only achieved low single-digit growth, with no significant improvement by Q3.

In Q3, the Asia-Pacific region accounted for 26% of Schneider’s revenue, growing 6.4%. Energy management rose 5.1%, led by strong demand in data centers, though China's growth remained low single-digit amid a weak construction market. Industrial automation grew 11.2%, with China posting single-digit growth while India and Australia saw double-digit expansion.

Margin contraction is more concerning. In H1, Schneider’s EBITDA reached €3.5 billion, but gross margin fell sharply by 90 basis points YoY.

CFO Hilary Barbara Maxson noted that the data center sector is experiencing robust growth, expected to contribute over 24% of group revenue next year. She added that while some European projects are delayed, execution is improving, particularly in France.

JPMorgan analysts remarked, "While we see no specific red flags, investors are right to question why execution hasn’t been faster."

Analysts suggest Schneider’s pressured earnings reflect broader challenges in traditional manufacturing. When revenue growth persists but margins decline, it often signals deeper structural issues—whether in cost control, business model viability, or shifting competitive dynamics.

**Price Hikes: China First** Maxson attributed the 10-basis-point EBITA margin drop to declining gross margins, citing negative net pricing adjustments to offset inflation and tariff costs.

To counter this, Schneider is raising prices. Maxson stated, "Outside China, including the U.S., we’ve increased list prices, expecting a noticeable H2 impact."

Yet, Schneider has already hiked prices multiple times in China this year. On February 24, Schneider China adjusted terminal distribution product prices by ~3%, citing rising material and supply chain costs. Later, its energy management, industrial control, and smart home divisions raised prices by at least 3% effective March 22.

Amid domestic competition, these hikes may further strain Schneider’s market position.

The company has faced pricing controversies before. In November 2024, Schneider and three others were fined €470 million by France’s competition authority for price-fixing. Schneider alone paid €207 million (~¥1.593 billion). Earlier, in 2007, the EU fined Schneider and 10 others €750 million (~¥5.771 billion) for similar antitrust violations.

**Domestic Brands: From Underdogs to Rivals** As one of the earliest foreign entrants in China, Schneider once enjoyed strong growth and profits. "Schneider’s sales incentives were unique—high performers earned exceptionally well," an industry insider recalled.

From 2000-2010, Schneider averaged over 20% annual growth in China, but momentum slowed post-2012. Domestic firms, once overshadowed, began fighting back.

In August 2006, Chint Group—previously sued by Schneider for patent infringement—counter-sued Schneider, seeking ¥335 million in damages. The 2009 settlement, where Schneider paid Chint ¥157.5 million, marked China’s largest IP case then, signaling local firms’ rising competitiveness.

Schneider’s dominance has since eroded. In low-voltage electrical equipment, domestic products now match its performance at lower costs. The *2025 China Low-Voltage Electrical Equipment White Paper* shows local leaders like Chint and Delixi rivaling Schneider, ABB, and Siemens in market share, surpassing them in construction and residential segments.

With cost-effective alternatives, domestic brands are formidable substitutes. An industry source revealed, "Schneider’s sales approach was once aloof, but they’re now learning from local partners under performance pressure."