Dassault Systemes downgrades margin guidance amid "volatile market"

(Alliance News) - Dassault Systemes SE on Thursday noted concerns around longer decision-making cycles tied to tariffs, as it posted weaker first-quarter net income despite improved revenue.

The Paris-based product development software maker reported a 9.3% decline in net income to EUR259.4 million in the first quarter of 2025 from EUR286.0 million in the prior year.

Diluted earnings per share fell to EUR0.20 from EUR0.21.

However, revenue actually improved over the period by 4.9% to EUR1.57 billion from EUR1.50 billion, driven by advances in Software revenue, strengthening the firm's recurring revenue.

Chief Financial Officer Rouven Bergmann commented: "In the first quarter, our revenue is driven by strong subscription growth.... As a result, recurring revenue now represents 86% of software revenue, highlighting the resilience of our business model."

The weaker profitability can be attributed to increased costs as Dassault Systemes saw total operating expenses rise 7.9% to EUR1.27 billion from EUR1.18 billion.

Marketing & Sales expenses rose 6.2% to EUR446.5 million from EUR420.3 million, while Research & Development expenses increased 12% to EUR348.6 million from EUR311.4 million.

Also weighing on the bottom line was an increase in the cost of software revenue, up 15% at EUR129.2 million from EUR111.9 million.

Shares in Dassault Systemes fell 6.8% to EUR31.57 on Thursday morning in Paris.

The firm maintained its outlook for 2025 of 6% to 8% total revenue growth, and 7% to 10% growth in EPS. In 2024, Dassault Systemes reported total revenue of EUR6.21 billion and a diluted EPS of EUR0.90.

Further, it revised down its operating margin target, with it now expecting year-over-year expansion of 50-70 basis points, down from 70 to 100 given prior. Its operating margin in 2024 was 21.9%.

Chief Executive Pascal Daloz commented: "We've had a solid start to the year. In the first quarter, the Manufacturing Industries sector performed well led by Aerospace & Defense and High Tech, along with Transportation & Mobility in China, Japan and US.

Bergmann added: "Entering 2025, our approach was to provide a risk-adjusted financial outlook. Since then, the introduction of new tariffs has created a more volatile market environment, which could lead to longer decision-making cycles. That said, our pipeline remains solid, and our current visibility aligns with the midpoint of our full year guidance."

By Christopher Ward, Alliance News reporter

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