PTC INC. (PTC) Q1 2025 Earnings Summary

Executive Summary

PTC delivered in-line top-line and strong cash metrics: revenue $565.1M (+3% YoY), GAAP EPS $0.68, non-GAAP EPS $1.10; ARR grew 11% YoY on a constant-currency basis and free cash flow rose 29% YoY, with results “slightly better than guidance” in a continued sluggish selling environment .
Against prior guidance set in November, revenue landed within the $540–$570M range, while both GAAP EPS ($0.68) and non-GAAP EPS ($1.10) finished above guided ranges ($0.28–$0.52 and $0.75–$0.95, respectively) due partly to ASC 606 variability and a $0.04 non-cash tax benefit .
FY’25 guidance was adjusted: revenue lowered to $2.43–$2.53B (from $2.505–$2.605B) and EPS ranges trimmed; ARR growth (CC) maintained at 9–10%, and FCF held at $835–$850M; Q2’25 guide calls for ~9.5% CC ARR growth and ~$270M FCF .
Strategic catalysts: go-to-market realignment (verticalization under new CRO) expected to gain traction exiting FY’25; AI roadmap accelerating with ServiceMax AI launch and Codebeamer AI pilots (VW/Microsoft); capital return resuming with ~$75M buyback in Q1 and ~$75M planned in Q2 .

What Went Well and What Went Wrong

What Went Well

Constant-currency ARR growth of 11% YoY to $2.277B and robust cash generation (OCF $238M, FCF $236M; +27%/+29% YoY), supported by subscription model and disciplined budgeting .
EPS outcomes exceeded prior guidance ranges; CFO reiterated revenue/EPS volatility under ASC 606 and noted a $5.4M ($0.04) non-cash tax benefit in GAAP EPS, while ARR/FCF remain preferred performance metrics .
Management advanced vertical go-to-market and AI initiatives. CEO: “we began the realignment of our go-to-market organization to align with the vertical industries we serve” and “delivered solid…ARR growth of 11% and cash flow growth above 25%” .

What Went Wrong

FY’25 revenue and EPS guidance were cut (revenue to $2.43–$2.53B; GAAP EPS to $3.36–$4.24; non-GAAP EPS to $5.30–$6.00), reflecting FX pressure and mix/ASC 606 dynamics even as ARR/FCF targets were maintained .
Operating leverage softer YoY in Q1: GAAP operating margin 20.4% (vs 21.6% Q1’24) and non-GAAP operating margin 33.9% (vs 36.2%), consistent with company emphasis on ARR/FCF amid revenue recognition variability .
Management highlighted a “challenging” selling environment and noted timing impacts (linearity of deferred ARR, a couple of contracts churned in Q1 but contracted to return later in FY’25); go-to-market changes will take time to fully benefit growth .

Financial Results

Headline metrics (P&L and Margins)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($M)	$518.6	$626.5	$565.1
GAAP EPS ($)	$0.57	$1.04	$0.68
Non-GAAP EPS ($)	$0.98	$1.54	$1.10
GAAP Operating Margin (%)	18.5%	31.0%	20.4%
Non-GAAP Operating Margin (%)	31.7%	44.1%	33.9%

Notes: Q1’25 GAAP EPS benefited from a $0.04 non-cash tax item; revenue/EPS remain subject to ASC 606 variability .

Cash Flow and ARR

Metric	Q3 2024	Q4 2024	Q1 2025
Operating Cash Flow ($M)	$213.8	$98.1	$238.4
Free Cash Flow ($M)	$212.2	$93.6	$235.7
ARR as Reported ($M)	$2,126	$2,255	$2,205
ARR Constant Currency ($M)	$2,125	$2,207	$2,277

Q1’25 Revenue Mix

($M)	Q1 2024	Q1 2025
License Revenue	$184.0	$172.8
Support & Cloud Services Revenue	$330.5	$361.0
Professional Services Revenue	$35.7	$31.4
Total Revenue	$550.2	$565.1

Q1’25 Actual vs Prior Guidance (set Nov 6, 2024)

Metric	Prior Guidance (Q1’25)	Actual (Q1’25)	Outcome
Revenue ($M)	$540–$570	$565.1	In range
GAAP EPS ($)	$0.28–$0.52	$0.68	Above range
Non-GAAP EPS ($)	$0.75–$0.95	$1.10	Above range

Context: CFO reiterated that ASC 606 drives revenue/EPS variability and that ARR/FCF are the preferred performance metrics .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Constant-currency ARR growth	FY’25	9%–10%	9%–10%	Maintained
Operating Cash Flow ($M)	FY’25	$850–$865	$850–$865	Maintained
Free Cash Flow ($M)	FY’25	$835–$850	$835–$850	Maintained
Revenue ($M)	FY’25	$2,505–$2,605	$2,430–$2,530	Lowered
GAAP EPS ($)	FY’25	$3.68–$4.57	$3.36–$4.24	Lowered
Non-GAAP EPS ($)	FY’25	$5.60–$6.30	$5.30–$6.00	Lowered
Constant-currency ARR growth	Q2’25	N/A	~9.5%	New
Operating Cash Flow ($M)	Q2’25	N/A	~274	New
Free Cash Flow ($M)	Q2’25	N/A	~270	New
Revenue ($M)	Q2’25	N/A	$590–$620	New
GAAP EPS ($)	Q2’25	N/A	$0.79–$1.05	New
Non-GAAP EPS ($)	Q2’25	N/A	$1.30–$1.50	New

Additional assumptions: FY’25 includes ~$20M cash outflows for go-to-market realignment; GAAP and non-GAAP tax rates ~25%; plan to repurchase ~$300M in FY’25 and retire $500M notes due Q2’25 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’24, Q4’24)	Current Period (Q1’25)	Trend
AI/technology initiatives	Focus on core product investment and digital thread; rebalanced resources from standalone IoT/AR to core; GTM optimization outlined .	Launch of ServiceMax AI (GenAI assistant); Codebeamer AI pilots with Volkswagen and Microsoft; forming aligned AI group across products .	Accelerating with concrete launches/pilots.
Supply chain/tariffs/macro	Selling environment unchanged and sluggish; pipeline solid .	Continues to be “challenging”; forward-looking risks include tariffs, FX, interest rates, geopolitics .	Stable/sluggish macro backdrop.
Product performance (PLM, CAD, ALM/SLM)	PLM CC ARR +13%, CAD +10% in Q3’24; similar trends in Q4’24 .	PLM +11% CC ARR, CAD +9% CC ARR; customer wins and cross-sell (Windchill+Codebeamer) highlighted .	Slight deceleration but resilient.
Regional trends	Low-to-mid double-digit CC ARR growth across regions in Q3/Q4 .	CC ARR growth: Americas +9%, Europe +12%, APAC +12% .	Broad-based; Europe/APAC slightly stronger.
Regulatory/Compliance	—	ServiceMax achieved FedRAMP certification, opening FA&D opportunities .	Positive catalyst for FA&D.
Go-to-market realignment	Announced verticalization, CRO addition planned; expected near-term disruption risk conservatively embedded .	Vertical GTM underway; new CRO Rob Dahdah in place; “stride” expected exiting FY’25 .	Implementation phase; benefits late FY’25.

Management Commentary

“In Q1’25, we delivered solid year-over-year constant currency ARR growth of 11% and cash flow growth above 25%…Our products are at the epicenter of driving business transformation at our customers.” – Neil Barua, CEO .
“We began the realignment of our go-to-market organization to align with the vertical industries we serve…so we can increase customer value while also enhancing shareholder returns.” – Neil Barua, CEO .
“We expect Q2’25 constant currency ARR growth of approximately 9.5%…and Q2’25 free cash flow of approximately $270 million. We also intend…approximately $75 million of buy backs in Q2’25.” – Kristian Talvitie, CFO .
“Our vertical approach and organizational changes will take time to bear fruit, and we expect to be hitting our stride as we exit the year…critical to delivering sustainable, low double-digit ARR growth.” – Neil Barua, CEO .
“The first of these [AI] offerings will launch next week with ServiceMax…We’ve been testing generative AI features in Codebeamer with Volkswagen Group and Microsoft.” – Neil Barua, CEO .

Q&A Highlights

AI organization and rollout: Management is aligning a central group to coordinate AI across products after successful team-led pilots; ServiceMax AI to be sold as a per-user SKU with additional features planned .
Competitive landscape: PTC focuses on PLM (Windchill) and ALM (Codebeamer) integration and democratizing product data across the enterprise, not moving into MES; differentiated vs Dassault/Siemens .
ARR trajectory: Back-half weighted year with low churn; some Q1 churn expected to return later in FY’25; sub-seasonal net new ARR until organization hits stride by Q4 .
Macro and pipeline: PMI uptick noted but focus remains on improving close rates against a robust pipeline; GTM discipline and vertical marketing emphasized .
Channel/base stability: Channel had a strong Q1; seat expansion of PLM beyond engineering (e.g., quality, supply chain, manufacturing) remains a large opportunity .

Estimates Context

Consensus from S&P Global for Q1’25 and near-term periods was unavailable at the time of this analysis due to a data access limit. As a result, we could not present revenue/EPS vs Street consensus. We benchmarked performance against the company’s prior Q1’25 guidance and updated FY’25/Q2’25 guidance instead .
Where applicable, company-stated emphasis on ARR and FCF as primary performance metrics underpins management’s guidance framework given ASC 606 variability in revenue/EPS .

Key Takeaways for Investors

Non-GAAP EPS and GAAP EPS exceeded prior guidance ranges despite a challenging sales environment; near-term narrative should focus on execution against ARR/FCF and the durability of cash generation .
FY’25 revenue and EPS guidance cuts are a headline risk, but ARR growth (9–10%) and FCF guide ($835–$850M) were maintained, signaling confidence in cash predictability and subscription resilience .
Vertical go-to-market realignment is the key medium-term driver; management expects benefits to build into late FY’25, with Q2 ARR growth guided to ~9.5% and ~$270M FCF .
AI catalysts (ServiceMax AI launch; Codebeamer AI pilots with VW/Microsoft) can enhance cross-sell and adoption across PLM/ALM/SLM, particularly in regulated and FA&D verticals (FedRAMP achieved) .
Capital allocation supportive: $75M buyback executed in Q1; ~$75M planned in Q2; intention to repurchase ~$300M in FY’25 and retire $500M notes due in Q2’25; leverage ~1.7x at Q1-end .
Trading lens: Expect shares to react to revenue/EPS guidance cuts vs positive cash/ARR signals; upside catalysts include verticalized GTM traction, AI monetization, and back-half ARR acceleration; downside risks include persistent macro slowness, FX, and timing of large-deal starts (ASC 606) .