Product design software company PTC (NASDAQ:PTC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, with sales up 42.7% year on year to $893.8 million. On the other hand, next quarter’s revenue guidance of $630 million was less impressive, coming in 1.4% below analysts’ estimates. Its non-GAAP profit of $3.47 per share was 52.7% above analysts’ consensus estimates.
Is now the time to buy PTC? Find out in our full research report (it’s free for active Edge members).
PTC (PTC) Q3 CY2025 Highlights:
- Revenue: $893.8 million vs analyst estimates of $752.9 million (42.7% year-on-year growth, 18.7% beat)
- Adjusted EPS: $3.47 vs analyst estimates of $2.27 (52.7% beat)
- Adjusted Operating Income: $526.3 million vs analyst estimates of $367.6 million (58.9% margin, 43.2% beat)
- Revenue Guidance for Q4 CY2025 is $630 million at the midpoint, below analyst estimates of $639 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $7.72 at the midpoint, beating analyst estimates by 4.3%
- Operating Margin: 48.5%, up from 31% in the same quarter last year
- Annual Recurring Revenue: $2.48 billion vs analyst estimates of $2.47 billion (9.9% year-on-year growth, in line)
- Billings: $948 million at quarter end, up 35.5% year on year
- Market Capitalization: $22.76 billion
StockStory’s Take
PTC’s third quarter delivered revenue and non-GAAP profit meaningfully above Wall Street expectations, but the market responded negatively, reflecting concerns addressed by management on the call. CEO Neil Barua pointed to strong execution around large strategic deals and early benefits from a new go-to-market approach, with multiproduct adoption across industries. The quarter also included the announcement of a definitive agreement to divest the Kepware and ThingWorx businesses, a move designed to increase focus on PTC’s Intelligent Product Lifecycle vision. Barua explained, “We delivered 8.5% constant currency ARR growth and 16% free cash flow growth year-over-year,” highlighting operational improvements and disciplined execution during a volatile environment.
Looking ahead, PTC’s forward guidance reflects a transition period shaped by the pending divestiture and ongoing transformation of its sales and product strategy. Management expects momentum in large deal execution and customer adoption of AI-enabled offerings to offset short-term variability from deal structures and macroeconomic uncertainty. Barua emphasized that the company is “focused on making [go-to-market gains] more repeatable and sustainable,” while CFO Kristian Talvitie noted that guidance incorporates potential disruption from the asset sale and a range of macro scenarios. Product roadmap execution, particularly embedding advanced AI capabilities across CAD, PLM, and service software, is central to the company’s outlook for the upcoming quarters.
Key Insights from Management’s Remarks
Management attributed the quarter’s outperformance to successful execution on large multiyear contracts, progress in its Intelligent Product Lifecycle strategy, and organizational realignment toward core growth areas.
- Strategic divestiture announced: PTC signed an agreement to sell its Kepware and ThingWorx businesses to TPG, narrowing its focus to core segments like CAD (computer-aided design), PLM (product lifecycle management), ALM (application lifecycle management), and SLM (service lifecycle management). CEO Neil Barua said this move will “fully focus all our portfolio and energy across executing across the Intelligent Product Lifecycle vision.”
- Go-to-market transformation: Management saw early benefits from restructured sales and customer success teams, citing improved coordination and success in closing large strategic agreements. Chief Revenue Officer Robert Dahdah highlighted the positive impact of aligning sales by industry verticals and deeper engagement with systems integration partners.
- Record customer commitments: The quarter featured PTC’s largest-ever Codebeamer and Onshape deals, with customers in automotive and med tech sectors moving to cloud-native SaaS offerings and next-generation product data strategies. Barua noted these wins as validation of the company’s multiproduct, AI-driven approach.
- Deferred ARR strength: While reported annual recurring revenue (ARR) growth was steady, management pointed out a record level of deferred ARR under contract, providing visibility into future periods as multi-year contracts ramp up.
- Organizational leadership update: Jon Stephenson was appointed Chief Product Officer, tasked with increasing the pace and predictability of product roadmap execution, particularly in embedding AI capabilities and enhancing user experience across the portfolio.
Drivers of Future Performance
PTC’s outlook is shaped by disciplined execution on its Intelligent Product Lifecycle vision, ongoing adoption of AI features, and the expected transition from its divested assets.
- AI integration across core products: Management is embedding artificial intelligence in CAD, PLM, ALM, and SLM platforms, aiming to help customers build structured product data foundations necessary for advanced analytics and automation. CEO Barua said, “AI is cementing the importance of structured product data foundations and PTC is uniquely positioned to make these possible.”
- Operational focus post-divestiture: The sale of Kepware and ThingWorx is expected to enhance focus, but management acknowledged potential short-term disruption as resources shift and customer transitions are managed. CFO Talvitie said guidance reflects a range of outcomes depending on macro conditions and the smoothness of the asset transfer.
- Go-to-market execution and pipeline: The company’s restructured commercial teams and increased deferred ARR are expected to provide momentum, though management cautioned that variability in large deal structures may lead to uneven quarterly results. Continued alignment with industry partners and vertical sales strategies remain priorities for sustaining growth.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) progress on closing the Kepware and ThingWorx sale and the resulting impact on operational focus, (2) adoption rates and customer feedback on AI-enabled enhancements across CAD, PLM, and service software, and (3) consistency in deferred ARR conversion as large, multi-year contracts ramp up. The ability to maintain go-to-market discipline and execute on product roadmap milestones will also be important markers.
PTC currently trades at $186.10, down from $189.79 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free for active Edge members).
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