NOTE's Record Quarter Ran Into a Bare-Board Wall

A quarter that was almost a record

NOTE AB sold SEK 1,057 million in the third quarter of 2026 — the highest top line in the Swedish contract manufacturer's history. Headline growth was 27%, but strip out the Kasdon and STI acquisitions and the number collapses to 2% organic. Underlying operating profit was SEK 98 million, a 9.3% margin, and EPS came in at SEK 1.98. The CEO opened the call by conceding the shape of the miss: “We were a little bit below our target when it comes to sales. We had the factory moves. They are corresponding to some lack of sales.” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23 The relocation of the Lund and Hyvinkää plants cost roughly two production weeks late in the quarter, which management sized at “roughly SEK 35 million, SEK 40 million, maybe SEK 45 million” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23 — four to five percentage points of sales, and, because it landed late, with no time to catch up. To their credit, they owned the disclosure gap: “we could probably have been more clear on that, to be honest.” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23

So the interesting question is not why the margin slipped a few tenths. It is why a company with a 20% higher order book for the first half of 2027 could only squeeze out 2% organic growth in the quarter just ended.

The bottleneck is the market's hottest theme — and the tape has started to crack

NOTE's constraint has a name, and it is the same name that has driven the entire AI hardware complex: bare boards and memory. The CEO was unusually concrete. PCB lead times have stretched to 20–25 weeks from 6–12; memory has sat near 50 weeks for a year, and the older memory variants NOTE needs — it is a heavy industrial shop running legacy customer designs — are getting harder, not easier, to source. This is the availability of components problem in its purest form.

today, less than 2% of the PCBs are manufactured in Europe, and that is barely enough for critical infrastructure and defense. So you can say that, yes, this is a problem for the industry.

Here is the contrast worth holding onto. The market has spent a year paying up for whoever sells into this squeeze. High bandwidth memory names returned +114% over 360 days with eleven advancers and zero decliners on the price tape; PCIe Gen 6 was +144%. Over the last 90 days those same clusters flipped: high bandwidth memory −6.9% with eleven decliners, PCIe Gen 6 −7.5%, AI data centers −5.6% on 48 losers against 6 winners, and printed circuit board names −4.9%. The tape is voting that the AI hardware trade is being unwound. NOTE sits on the opposite side of that trade: it is a buyer of the scarce input. Tightness costs it revenue today, but through FIFO pass-through it becomes pricing power tomorrow. Management explicitly refuses to bank that: “We are not factoring in an expected price increase in our top-line growth.” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23 They expect single-digit component inflation in 2027, not double. Confluence is broad — NCAB, the Swedish printed circuit board distributor, reported the same day with strong order intake and a data-center market callout. This is a sector condition, not a NOTE story.

The backlog mirage

The order backlog is up 12% like-for-like, the third consecutive quarter above 10%, and the H1 2027 book is up around 20%. Against 2% organic sales growth, that spread is enormous, and Pareto's Thomas Blikstad put the question bluntly: it is hard to use as an indicator when the gap is that wide. The CEO did not dodge it.

I think that is a very relevant question, Thomas, and this is something that we are struggling a bit with.

His defence is that the orders are real demand, not channel stuffing: end customers are waiting on product, defense customers included. On lead-time padding, he offers a reasonable test — “Nothing of what we see in the order book for those quarters are what we would say an inventory buildup at the customer side.” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23 But he also hedges the near quarter in the same breath: “In the fourth quarter, I would say that there are risks. There are also upsides. ... If you ask me if I am 100% comfortable, no, I am not.” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23 A backlog that is 10x the organic growth rate is either a spring or a relic of customers ordering early to protect themselves. Management says it will know in six to eight quarters.

What the spotlight is no longer on

The western business is genuinely excellent: Western Europe +41% to SEK 825 million, +6% ex-acquisitions, 10.5% margin. Security & Defence grew 220% headline and 19% organically — the best in years — and the CEO leaned hard on critical infrastructure as a structural driver. Industrial turned positive at +11%.

Everything else is a slow bleed dressed in seasonal language. The Rest of World segment fell 6% to SEK 232 million at a 5.9% margin, with China down 25%. Medtech declined 5%. Greentech — the old EV growth engine — is still described as sluggish, and the CEO all but removed the turnaround from the near-term story: “if I would say that China is back on track with strong growth and good underlying profitability, I would not expect that.” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23 Meanwhile inventory, the working-capital sink that has eaten cash flow all year, is expected to stop growing but not to fall: “I don't dare to say that they will decrease.” — Frida Frykstrand, Chief Financial Officer (CFO) · 2026-10-23

The arithmetic to watch

Management guided Q4 to be “the best quarter in the NOTE history, both in terms of profitability and in terms of sales” — Johannes Lind-Widestam, Chief Executive Officer (CEO) · 2026-10-23 — while confirming the full year lands inside the 9.5–10.5% margin target. The last Q4 printed 11.4%. Best-ever profitability, three points below last year's seasonal peak, is a claim that only reconciles if the definition of "best" is revenue and not margin. That is the tension to carry into January: a company with a real, scarce position in European defense electronics supply chains, a record order book, and a working-capital problem — reporting against a component cycle whose equity proxies have already started to roll over.