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.
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: $21.32 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From PTC’s Q3 Earnings Call
- Ken Wong (Oppenheimer & Co.) asked about the rationale for selling Kepware and ThingWorx and whether further portfolio changes are expected. CEO Neil Barua explained the divestiture increases focus on core lifecycle solutions and said, “I feel good as we sit here around the portfolio and how it relates to the Intelligent Product Lifecycle.”
- Jason Celino (KeyBanc Capital Markets) inquired about the impact of tax changes and capital expenditure on free cash flow guidance. CFO Kristian Talvitie responded that the $1 billion free cash flow target absorbs both tax tailwinds and incremental CapEx from relocating an R&D center.
- Clarke Jeffries (Piper Sandler) asked whether customers were pushing for longer deal terms due to uncertainty. Barua clarified that ramp deals were fully contracted commitments, emphasizing the importance of securing customer demand, even as deal structures introduce variability in reported ARR.
- Blair Abernethy (Rosenblatt Securities) questioned whether the divestiture changes PTC’s view of its addressable market. Barua stated that the company now feels better positioned to pursue digital transformation opportunities in product data management and AI, and sees expanding potential with its refocused strategy.
- Matthew Hedberg (RBC Capital Markets) asked about further go-to-market changes post-vertical sales force reorganization. Chief Revenue Officer Robert Dahdah highlighted expanded engagement with partners and deeper C-level customer outreach as next steps, aiming to “create better traction and better win rates.”
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 $181.56, down from $189.79 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free for active Edge members).
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