Deutsche Bank upgrades Amadeus on AI resilience and cash flow growth

Deutsche Bank has upgraded travel technology company Amadeus IT Group from a "hold" rating to a "buy" rating, citing the firm's resilience in the face of artificial intelligence (AI) and robust cash flow growth. The investment bank explains that the market is currently undervaluing Amadeus' global distribution system, assuming AI will pressure volumes and pricing.

Deutsche Bank's analysts assert that despite AI's potential to change travel demand and search intensity, it does not eliminate the need for supplier connectivity, fulfillment, servicing, and corporate workflow.

Further analysis by Deutsche Bank revealed that a bearish scenario – in which AI disintermediation extends to complex itineraries and mix protection fades – could lead to a 5% decline in earnings per share by 2028. This impact, however, is deemed manageable rather than a significant earnings cliff. The reverse discounted cash flow analysis shows that free cash flow growth of around 3.5% from 2028 onwards is already factored into the current share price, which is slightly below Amadeus' expected high-single-digit free cash flow compound annual growth rate for 2025-28.

Deutsche Bank raised its earnings per share estimates by 1% for 2027 and 2028 while keeping 2026 estimates relatively unchanged. The bank currently values Amadeus at a 10% premium compared to the broader software peer group, using an average price-to-earnings ratio of about 20 times and an enterprise value/unlevered free cash flow ratio of around 18 times.

The company processed 484 million travel agency air bookings in 2025 and connects to over 60,000 travel sellers across more than 190 markets. Potential downside risks for Deutsche Bank include weaker global air travel, faster AI-led disintermediation, lower revenue per booking if mix protection fades, slower Airline IT monetization, and increased competition from new distribution channels.