Dassault Systemes hikes profit target as subscriptions surge

(Reuters) -French software maker Dassault Systemes on Wednesday hiked its 2023 profit outlook after a surge in subscription sales in the third quarter, sending its shares up 6%.

Total revenue increased by 11% in constant currency terms to 1.42 billion euros ($1.51 bln), at the top end of its quarterly forecast of 1.40-1.42 billion euros.

This was driven by an 18% jump in subscription revenue due to a higher share of large 3DEXPERIENCE contracts and a broad-based adoption of its subscription model, the company said.

Sales growth for the 3DEXPERIENCE platform, which offers 3D modelling, data management and project management tools, accelerated to 46% in the third quarter from 15% in the same period last year, and from just 2% in the second quarter.

"It is true that the outperformance was driven by some major 3DEXPERIENCE deals... but this is still a very solid publication from Dassault Systemes," brokerage ODDO BHF said in a note to clients.

Overall software revenue increased by 12% in the quarter, driven by 21% growth in Europe. The Americas region saw 9% growth and Asian sales rose by 5% in the quarter.

China stayed resilient with mid single-digit percentage growth in software revenues despite tough economic conditions, the company said.

Dassault Systemes expects fourth-quarter revenue of 1.64 billion to 1.68 billion euros and an operating margin of between 35.8% and 36.6%, compared to 31% in the third quarter.

It raised its full-year target for diluted earnings per share to 1.19-1.21 euros, compared with 1.18-1.20 euros per share previously, and confirmed its annual revenue outlook for 8-9% growth.

(Reporting by Pierre John Felcenloben in Gdansk; Editing by Milla Nissi and Jan Harvey)