Lane Level Mapping And AI Production Will Reshape Long Term Automotive And Enterprise Demand

Catalysts

About TomTom

TomTom provides digital maps and location technology for automotive and enterprise customers worldwide.

What are the underlying business or industry changes driving this perspective?

• Growing demand from carmakers for higher accuracy, real time data and lane level information to support advanced driver assistance and self driving systems positions TomTom's Lane Model Maps as a core input. This can support Location Technology revenue and the mix of higher margin software based contracts over time.
• The move by OEMs toward unified map solutions that serve both in car navigation and the self driving "robot" reduces complexity for customers and can favor suppliers with an integrated stack like TomTom. This can support contract wins, larger content per vehicle and long term earnings visibility.
• New AI driven approaches to map production that lower cost, improve freshness and broaden coverage beyond motorways address the historic economics issue of HD maps. This can support gross margins and help sustain an asset light model as coverage extends across Europe and North America.
• Evidence of customer interest, including previous large wins such as the Volkswagen contract and a "healthy" RFQ and order pipeline for 2026 and 2027, points to potential ramp up of new automotive programs. This can support future Location Technology revenue and operating margin contribution as legacy programs phase out.
• Expanding use cases in Enterprise, including insurtech, defense, traffic planning and public sector intelligence, alongside partnerships with AECOM, Kapsch TrafficCom and LOCUS, increase the addressable demand for TomTom's data. This can support Enterprise revenue and scale benefits for net margins.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more optimistic perspective on TomTom compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming TomTom's revenue will grow by 4.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 0.8% today to 6.0% in 3 years time.
• The bullish analysts expect earnings to reach €37.4 million (and earnings per share of €0.45) by about July 2029, up from €4.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 28.4x on those 2029 earnings, down from 134.9x today. This future PE is lower than the current PE for the GB Software industry at 134.9x.
• The bullish analysts expect the number of shares outstanding to decline by 0.17% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.08%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Group revenue in Q1 2026 was €129 million compared with €140 million a year earlier, with Automotive operational revenue 16% lower and Consumer revenue 21% lower. If discontinued automotive programs, Consumer shrinkage and car production or currency swings persist beyond the current transition, Location Technology revenue and overall earnings could remain under pressure rather than recovering.
• The company is leaning heavily on Lane Model Maps and higher automation levels as future growth drivers. Management acknowledges that economics and regulation for self driving remain unresolved and that old HD maps suffered from unprofitable business cases once coverage moved beyond motorways. If AI driven mapping does not fully fix costs and coverage at scale, future Location Technology revenue, gross margin and operating margins could be constrained.
• Lane Model Maps are not yet at the fully automated production target and still require manual work to address process fallout, while significant coverage for Europe and North America is described as a goal rather than a completed outcome. Any delay or higher than expected need for manual intervention could lift development costs and capitalized R&D, weighing on free cash flow and net margins.
• Enterprise revenue in Q1 2026 was €38 million, down 8% year on year before currency effects, and management characterizes 2025 as disappointing with only early green shoots now in areas like insurtech, defense and public sector projects. If these use cases do not convert into larger contracts, Enterprise revenue growth and the scale benefits that support margin expansion may fall short.
• The business is in the middle of a leadership change to a new CEO and is exposed to broader shifts in tariffs, energy costs and how AI changes customer behavior and product consumption. While the core map product is described as safe, any misstep in adapting pricing, product focus or cost structure to these long term forces could limit future revenue growth and hold back operating margin and earnings progress.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for TomTom is €7.0, which represents up to two standard deviations above the consensus price target of €6.25. This valuation is based on what can be assumed as the expectations of TomTom's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €7.0, and the most bearish reporting a price target of just €5.5.
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be €626.2 million, earnings will come to €37.4 million, and it would be trading on a PE ratio of 28.4x, assuming you use a discount rate of 7.1%.
• Given the current share price of €4.61, the analyst price target of €7.0 is 34.1% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.