The Czech economy grew by 0.5% qoq in 2Q25. This is an upward revision from the GDP flash estimate of +0.2% qoq. However, this also represents a slowdown from the 0.7% qoq in 1Q25. Meanwhile, annual GDP growth accelerated from 2.4% in 1Q25 to 2.6% in 2Q25. These developments were broadly in line with our and the CNB forecasts. We had expected economic growth of 0.4% qoq and 2.6% yoy in 2Q25.

The Czech economy grew by 0.5% qoq in 2Q25. This is an upward revision from the GDP flash estimate of +0.2% qoq. However, this also represents a slowdown from the 0.7% qoq in 1Q25. Meanwhile, annual GDP growth accelerated from 2.4% in 1Q25 to 2.6% in 2Q25. These developments were broadly in line with our and the CNB forecasts. We had expected economic growth of 0.4% qoq and 2.6% yoy in 2Q25.

GDP growth was driven by domestic demand. Household consumption rose by 1.0% qoq in 2Q25, accelerating from 0.4% qoq in 1Q25. Nevertheless, it remained 1.3% below pre-pandemic levels. Government consumption increased by 1.2% qoq in 2Q. Domestic demand was also supported by fixed investment rising by 0.5% qoq, with government investment likely the main driver. Investment in other buildings and structures rose the most, which traditionally includes public investment in infrastructure. By contrast, corporate investment likely remained weak, with only investment in transport equipment increasing qoq. Quarterly GDP growth was also supported by a relatively solid contribution from inventories of +0.3pp.

The economy’s export performance weakened significantly. While net exports added +0.5pp to qoq GDP growth in 1Q25, their contribution swung sharply to a negative -0.8pp in 2Q25. This could be partly due to the fading effect of US frontloading, which was nonetheless still having an impact, according to several indicators. Manufacturing output continued to grow rapidly in 2Q25, coming in at a rate of 0.9% qoq, which was the same as in 1Q25.

We forecast the Czech economy to grow by 1.9% this year, before slowing down to 1.1% next year. This is based on our expectation of a weakening of the economy in 2H25, as we expect the US frontloading effect to fade and tariffs to have a negative impact on growth. Monthly data show that the economy grew strongly at the turn of 1Q and 2Q25, but momentum weakened significantly in May and June on both production and sales. Moreover, there was a sharp decline in new industrial orders from abroad in these months. Data for the coming months will therefore be crucial for predicting further economic developments and monetary policy. You can read more about our forecasts in the latest Czech Economic Outlook: https://bit.ly/CEO_3Q25_EN.

CEZ reported an increase in EBITDA of +7.2% yoy to CZK30.9bn for 2Q25, surpassing market expectations by +2.1%. This growth was driven by the Distribution and Sales segment. Net profit declined by 47% yoy to CZK4.0bn due to an increase in D&A. The extremely high effective tax rate caused the net profit to be 27% below consensus. However, due to lower operating and commodity costs and higher realized electricity prices, CEZ raised its full-year guidance for both EBITDA and the bottom line. We consider the reported figures to be strong and expect market consensus to increase.

CEZ reported an increase in EBITDA of +7.2% yoy to CZK30.9bn for 2Q25, surpassing market expectations by +2.1%. This growth was driven by the Distribution and Sales segment. Net profit declined by 47% yoy to CZK4.0bn due to an increase in D&A. The extremely high effective tax rate caused the net profit to be 27% below consensus. However, due to lower operating and commodity costs and higher realized electricity prices, CEZ raised its full-year guidance for both EBITDA and the bottom line. We consider the reported figures to be strong and expect market consensus to increase.

Revenues for 2Q25 reached CZK74.2bn, remaining almost unchanged yoy (-0.2% yoy). EBITDA increased by +7.2% yoy, reaching CZK30.9bn. The margin increased by 2.9pps to 41.7% due to lower commodity costs. The production segment decreased by 14% yoy due to trading, which experienced a temporary revaluation of derivatives and lower realized electricity prices. This quarter's results were driven by the Distribution and Sales segment. Distribution grew by 73% yoy following the consolidation of the acquired GasNet, boosted by growth in both gas and electricity volumes due to colder weather. Sales increased by 141% yoy due to lower commodity prices and higher sales resulting from colder weather. Adjusted net profit was CZK4.0bn, marking a 47% yoy decline. Net profit was primarily impacted by the substantial effective tax rate, which reached 74% in the 2Q25. This is the main reason why net profit is below market estimates (-27%). Net profit is also lower yoy due to increased D&A from the integration of GasNet into the consolidation group, as well as higher depreciation of coal-fired power plants.

Leverage (net debt to EBITDA) remained at 1.3x, unchanged from the first quarter. This is down from 1.5x at the end of 2024.

2025 Guidance: CEZ management has increased its full-year EBITDA and net profit projections. EBITDA is now expected to reach CZK132-137bn (previously CZK127-132bn), and net profit is expected to reach CZK26-30bn (previously CZK25-29bn). These figures represent increases of +3.9% and +3.7% for EBITDA and net profit, respectively. The new net profit target indicates a dividend of up to CZK 44.50 (an 80% payout and the upper end of the full-year target), corresponding to a gross yield of 3.6%.