Dassault Systèmes Tumbles as AI Fears Hit Growth Story

Core Insights - Dassault Systèmes shares fell approximately 20%, marking their worst day on record, following disappointing fourth-quarter results and a weak outlook for 2026 [1][7] Financial Performance - Fourth-quarter revenue was €1.68 billion (about $2 billion), a 4% decline year-on-year and below expectations of €1.74 billion to €1.75 billion [2] - At constant currencies, growth was only 1%, at the lower end of the company's guidance range [2] - Software revenue remained flat, with transactional license sales decreasing by 7% [3] - Recurring revenue increased by only 3%, missing internal targets, while specific segments like Life Sciences and Medidata saw declines of 4% and 7% respectively [3] - Full-year revenue totaled €6.24 billion, slightly below the consensus estimate of €6.3 billion [4] Guidance and Market Reaction - For 2026, Dassault projected revenue growth of 3% to 5%, falling short of analyst expectations of around 6% [5] - The company also guided for a non-IFRS operating margin of 32.2% to 32.6% and EPS of €1.30 to €1.34 [5] - The market reacted negatively, with shares dropping as much as 22% intraday, resulting in a loss of approximately €6 billion in market value [7] Industry Context - Dassault Systèmes is central to European industrial software, providing tools for 3D design and simulation used in various sectors including aerospace and automotive [8] - The company has been viewed as a beneficiary of digital transformation, but current market dynamics raise questions about its future in the context of advancing generative AI [9] - The software market is experiencing a divide, with AI infrastructure providers thriving while traditional software as a service companies face challenges related to pricing power and revenue erosion [9]