Product design software company PTC (NASDAQ:PTC) reported Q4 CY2025 results exceeding the market’s revenue expectations, with sales up 21.4% year on year to $685.8 million. On top of that, next quarter’s revenue guidance ($740 million at the midpoint) was surprisingly good and 7.9% above what analysts were expecting. Its non-GAAP profit of $1.92 per share was 22.8% above analysts’ consensus estimates.
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PTC (PTC) Q4 CY2025 Highlights:
- Revenue: $685.8 million vs analyst estimates of $633.7 million (21.4% year-on-year growth, 8.2% beat)
- Adjusted EPS: $1.92 vs analyst estimates of $1.56 (22.8% beat)
- Adjusted Operating Income: $309.6 million vs analyst estimates of $259.5 million (45.1% margin, 19.3% beat)
- The company slightly lifted its revenue guidance for the full year to $2.81 billion at the midpoint from $2.78 billion
- Management raised its full-year Adjusted EPS guidance to $7.92 at the midpoint, a 2.6% increase
- Operating Margin: 32.2%, up from 20.4% in the same quarter last year
- Annual Recurring Revenue: $2.49 billion (13.1% year-on-year growth, beat)
- Billings: $573.4 million at quarter end, up 6.7% year on year
- Market Capitalization: $18 billion
StockStory’s Take
PTC’s fourth quarter results surpassed Wall Street’s expectations, a performance management attributed to strong customer demand for its intelligent product lifecycle solutions and continued momentum in large deal activity. CEO Neil Barua credited the quarter’s growth to the company’s ongoing transformation efforts, particularly in embedding artificial intelligence (AI) across its product portfolio, as well as increased seller productivity and expanded customer engagements. Barua emphasized that customer commitments now span multiple product lines and stages of the product lifecycle, noting that, “the companies that will win are the ones that successfully leverage product data...as a foundation of AI-driven intelligence and transformation.”
Looking ahead, PTC’s updated guidance reflects management’s confidence in deferred annual recurring revenue (ARR) ramping in the second half of the year, fueled by multi-year customer contracts and a robust pipeline of AI-enhanced product releases. CFO Jen DeRico stated that a substantial portion of contracted ARR will begin to be recognized in subsequent quarters as customer implementations progress. Management is focused on ensuring that tight coordination between sales and customer success teams will help convert these commitments into recurring revenue, with Barua noting, “we feel confident that we put the right diligence...and as far tighter linkages now than there was twelve months ago.”
Key Insights from Management’s Remarks
Management credited the quarter’s performance to strategic expansion within core product lines, strong customer engagement, and continued progress embedding AI into existing solutions.
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AI integration accelerated: PTC launched new AI capabilities in CodeBeamer and Windchill, targeting improved product development workflows and parts management. Customers responded positively to embedded AI features, which are designed to be integral to existing enterprise systems rather than standalone tools. While the financial impact remains limited for now, management expects AI-driven products to become a significant driver of demand and differentiation over time.
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Deferred ARR growth: A key driver of future results is the rise in deferred ARR, which represents customer commitments not yet recognized as revenue due to implementation schedules. Management highlighted that deferred ARR entering Q4 is triple that of the previous year, providing increased visibility into future recurring revenue streams and supporting the company’s multiyear growth ambitions.
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Competitive displacement and expansion: The company saw large deals that both expanded existing customer relationships and displaced competitors, particularly in product lifecycle management (PLM) and application lifecycle management (ALM) with Windchill and CodeBeamer. Management noted that most growth still comes from expansion within the existing base, but competitive wins are increasing.
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SaaS adoption momentum: Windchill Plus and Creo Plus, PTC’s cloud-based offerings, continued to gain traction, with customers migrating from on-premises solutions. Management reported that SaaS transitions are starting to deliver higher annual recurring revenue per customer, typically yielding 1.5 to 2.5 times the previous on-premise contract value.
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Go-to-market transformation: Enhanced seller capacity, refined territory management, and vertical market focus all contributed to improved sales productivity. The company’s strategy of holistic lifecycle engagement is leading to larger and more strategic contracts, as demonstrated by recent automotive sector wins and increased activity in aerospace and defense startups.
Drivers of Future Performance
PTC’s guidance is shaped by growing deferred revenue, continued AI innovation, and the shift to SaaS, but management acknowledges some timing risks related to customer implementations and macroeconomic uncertainty.
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Deferred ARR conversion: Management expects a substantial increase in recognized ARR in Q4 and beyond, driven by the conversion of deferred customer commitments. These contracts are signed and contractually obligated, with CFO Jen DeRico noting triple the deferred ARR entering Q4 compared to last year. The timing of revenue recognition depends on customer implementation schedules, but tighter sales and customer success coordination is intended to reduce slippage risk.
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AI product adoption: The company anticipates that continued AI integration across its portfolio will enhance customer value and drive new demand, especially as proof-of-concept projects move to broader deployments. CEO Neil Barua highlighted that customers want AI capabilities embedded directly into trusted systems of record, positioning PTC’s core offerings as a foundation for AI-driven transformation.
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SaaS migration and pricing uplift: The transition of customers to cloud-based solutions like Windchill Plus and Creo Plus is expected to support recurring revenue growth and higher average contract values. Management is also watching for increased SaaS adoption in new customer segments, particularly among startups and verticals like aerospace and defense, which are defaulting to cloud-based deployments.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will focus on (1) the recognition pace of deferred ARR as customer projects move from contract to implementation, (2) adoption rates and measurable impact of new AI-powered product features across PTC’s portfolio, and (3) continued momentum in SaaS migrations, particularly in strategic industries like automotive, aerospace, and defense. Ongoing improvements in sales productivity and execution of cross-product expansion will also serve as key indicators of sustained growth.
PTC currently trades at $165.35, up from $151.34 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).
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