Formula Systems Pivots After Sapiens Sale, Forges New IT Services Giant

OR YEHUDA, Israel – March 26, 2026 – Formula Systems (1985) Ltd. has announced a landmark year of strategic transformation, reporting record-breaking net income of $606.5 million for 2025. The staggering figure was primarily driven by the lucrative divestment of its controlling stake in insurance software firm Sapiens, a move that reshapes the company’s portfolio and unlocks significant value for shareholders, including a planned dividend of up to $200 million.

In a concurrent strategic maneuver, the global IT holding company orchestrated a monumental merger between its subsidiaries, Matrix IT Ltd. and Magic Software Enterprises Ltd., creating a new IT services behemoth with global ambitions.

The Sapiens Windfall and Strategic Refocus

The cornerstone of Formula's banner year was the completion of the Sapiens International Corporation acquisition by private equity giant Advent. The all-cash transaction, finalized on December 17, 2025, saw Sapiens shareholders receive $43.50 per share, a deal valuing the company at approximately $2.5 billion. This move generated a massive capital gain for Formula Systems, which was reflected in its full-year net income attributable to shareholders soaring to $606.5 million from just $79.7 million in 2024.

While Formula ceded control, it has not exited its investment entirely. The company retained a significant 18.68% minority ownership stake in Sapiens, signaling continued belief in its long-term potential. The transaction allows Formula to de-consolidate Sapiens from its financial statements—now treating it as a discontinued operation—while crystallizing a massive return on its investment.

"Formula Systems concludes 2025 with strong operating performance and significant strategic milestones that position the group for continued long-term growth," said Guy Bernstein, CEO of Formula Systems. He noted that the Sapiens transaction contributed significantly to the reported net income and that the company remains focused on disciplined execution and strengthening its global footprint.

Capitalizing on the cash influx, Formula's Board of Directors has signaled its intent to distribute a dividend of up to $200 million, pending final approval of the 2025 audited financial statements. This move underscores a commitment to returning value directly to shareholders following the successful strategic divestment.

Forging an IT Services Powerhouse

While the Sapiens deal provided financial firepower, Formula’s other major strategic play was the consolidation of its core IT services assets. On February 24, 2026, the company announced the completion of the merger between its subsidiaries, Matrix IT Ltd. and Magic Software Enterprises Ltd. The all-stock deal creates a formidable entity positioned among the world's ten largest publicly traded IT services companies.

The combined company boasts pro forma 2025 revenues of approximately $2.4 billion and serves over 6,000 customers in 50 countries. The merger is seen as highly synergistic, combining Matrix's dominance in the Israeli market and its expertise in system integration with Magic’s strong international presence, particularly in the United States, and its proprietary low-code application development platforms.

"This strategic merger is designed to unlock substantial value for shareholders of both companies by creating a more robust, dynamic, and globally competitive organization," Bernstein explained. "By uniting two highly complementary organizations, this merger will create a stronger, more diversified company with expanded capabilities to serve clients worldwide, accelerate technological innovation, and drive long-term value creation."

The new entity is well-positioned to capitalize on surging demand for high-growth technologies such as cloud computing, cybersecurity, data analytics, and artificial intelligence.

Unpacking the Financials

Beyond the headline-grabbing Sapiens deal, Formula's underlying business showed robust growth. Full-year revenues for 2025 increased 18.4% year-over-year to $2.63 billion. The fourth quarter was particularly strong, with revenues climbing 26.9% to a record $708.4 million.

However, reported operating income for the fourth quarter saw a 13.5% decrease to $41.6 million. This was not due to operational weakness but rather a specific accounting adjustment. The company booked an $18.7 million increase in amortization expenses after reassessing the useful life of intangible assets related to a non-core activity, citing evolving technology and market conditions in Israel. When excluding this one-time impact, adjusted operating income for the quarter would have been $60.3 million, a healthy 25.5% increase year-over-year, painting a much stronger picture of core profitability.

Performance across Formula's other key subsidiaries remained strong. Matrix reported record-breaking fourth-quarter results, with revenues growing 16.4%. Michpal Technologies, a provider of payroll and HR solutions, grew its annual revenue by 24.2%. TSG, a defense technology subsidiary, also posted record results with 34% annual revenue growth, driven by demand in the counter-UAV and command-and-control sectors. These results highlight the diversified strength of Formula's portfolio, which continues to drive growth even as the company undergoes major strategic shifts.