# France’s Dassault Systemes shares slump on reduced licence target
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-10-27
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Dassault Systemes Shares Drop Over 5% Amid Lower Growth
Meta Description: Find out why Dassault Systemes' shares plummeted after reducing licence growth forecast in Q3 results. Learn more about their revised earnings forecast!
URL: https://financedigest.com/frances-dassault-systemes-shares-slump-on-reduced-licence-targethtml

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By Karol Badohal

GDANSK (Reuters) -French software maker Dassault Systemes’ shares dropped more than 5% on Wednesday, erasing Tuesday’s gains, as investors reacted to reduced licence growth expectations in its third-quarter results.

The company, which sells software for carmakers, planemakers and industrial companies, raised its full-year earnings and revenue forecast, due in part to the stronger dollar, after reporting higher-than-expected quarterly results.

However, it lowered its 2022 objective for licences and other [software revenue](https://www.financedigest.com/iris-software-group-names-matt-tuson-as-chief-revenue-officer.html "IRIS Software Group names Matt Tuson as Chief Revenue Officer") growth on a non-IFRS constant currency basis to 5-7% from 9-11% previously.

Jefferies deemed the publication an “underlying disappointment, with licences [falling short of expectations”](https://www.financedigest.com/uk-manufacturers-expect-output-to-fall-3-2-in-2023.html "UK manufacturers expect output to fall 3.2% in 2023").

The [company’s third-quarter software revenue](https://www.financedigest.com/generic-oncology-drugs-market-2021-global-leading-companies-analysis-revenue-trends-and-forecasts-2027.html "Generic Oncology Drugs Market 2021 Global Leading Companies Analysis, Revenue, Trends and Forecasts 2027") grew by 8%, at the lower end of its guidance, but licences and other software revenue declined 2% year-on-year, the brokerage noted.

We [see this as a reminder of the cyclical risks](https://www.financedigest.com/heineken-sees-europe-resilience-offseting-asia-slowdown-risk.html "Heineken sees Europe resilience offseting Asia slowdown risk") at Dassault, which makes the extent of the current valuation premium hard to justify,” Jefferies said.

The company reported total revenue of 1.37 billion euros ($1.36 billion) in the quarter, up 8% on the year in constant currencies and above analysts’ forecast of 1.33 billion euros, [driven by strong subscription and support growth](https://www.financedigest.com/impact-com-ends-2022-with-strong-momentum-driven-by-client-and-agency-partner-growth.html "impact.com Ends 2022 with Strong Momentum Driven by Client and Agency Partner Growth").

The [bottom line](https://www.financedigest.com/the-severe-impact-of-downtime-on-companies-bottom-lines.html "The severe impact of downtime on companies’ bottom lines") of all of this, when you look at the total revenue mix, is that we accelerated the growth in subscription revenue, and this transition is well underway,” CFO Rouven Bergmann said in a call.

We are progressively increasing the [share of recurring revenue while we continue to deliver the top-line revenue and profitability objectives despite the lower](https://www.financedigest.com/britains-next-sees-lower-clothing-inflation-shares-dip-on-cautious-outlook.html "Britain’s Next sees lower clothing inflation, shares dip on cautious outlook") growth contribution from the licences,” he added.

Dassault Systems increased its non-IFRS diluted earnings per share [target for 2022 to 1.12-1.14 euro](https://www.financedigest.com/euro-zone-inflation-seen-just-above-ecbs-target-in-2025-poll-shows.html "Euro zone inflation seen just above ECB’s target in 2025, poll shows") from 1.08-1.10 euro previously.

It also raised full-year revenue target to 5.61-5.65 [billion euros](https://www.financedigest.com/telecoms-group-orange-signs-sustainability-linked-refinancing-of-6-billion-euros-syndicated-credit-facility.html "Telecoms group Orange signs sustainability-linked refinancing of 6 billion euros syndicated credit facility").

The company’s shares were down 5.1% at 1205 GMT, having gained 4.2% a day earlier.

The move also reflected big [tech stocks’ fall globally after grim results from Alphabet Inc and Microsoft Corp stoked fears](https://www.financedigest.com/cisco-forecast-raise-allays-tech-spending-fears-lifts-shares.html "Cisco forecast raise allays tech spending fears, lifts shares") of a global economic downturn.

($1 = 1.0047 euros)

(Reporting by Karol Badohal; additional reporting by Olivier Cherfan; editing by Josephine Mason, Milla Nissi and Louise Heavens)


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