Analyst Note| Julie Bhusal Sharma |
Dassault Systèmes reported solid first-quarter results that came in at the high end and above management’s guidance. Despite the company’s continuous transition to a subscription model, software licensing revenue was strong, up 25% year over year. Still, cloud offerings underpin Dassault’s innovations across the board, with 95% of on-premises capabilities available as cloud solutions and cloud composing 18.5% of software revenue in the first quarter. We view the underlying goal of growing cloud to one third of software revenue by 2025 as not only doable but crucial to future margin expansion. We are encouraged by the increasing alignment between industry trends and technological demands within Dassault’s core verticals and the company’s platform-driven cloud-based solutions. As a result, we are raising our fair value estimate to EUR 160 ($194) from EUR 156 ($189) but still consider shares to be overvalued.