Guidance falls short of expectations, NVIDIA software supplier stocks plummet 20%!

Dragged down by disappointing Q4 results and weak outlook for 2026, French industrial software giant Dassault Systèmes SE initially plummeted 21% in early European trading on Wednesday, approaching its largest intraday decline since listing. The stock triggered a brief trading halt after opening on the Paris Exchange and remains down around 19%.

According to Bloomberg data, Dassault Systèmes reported Q4 revenue of €1.68 billion (approximately $2 billion), down 4.1% year-over-year, missing the market expectation of €1.74 billion. The company forecasts non-IFRS revenue growth of 3% to 5% in 2026, also below analyst expectations. This company, once dubbed the “frontier of industrial AI” by NVIDIA CEO Jensen Huang, is now facing concerns over its traditional software business being acceleratedly replaced by emerging AI tools.

Despite previously viewing the AI wave as a key driver for industrial software upgrades, the latest results reflect a slower-than-expected transformation process. JPMorgan analyst Toby Ogg and his team noted in a report that the company’s growth forecast “even falls short of the most pessimistic investor expectations.” Amid competition from generative AI and other emerging tools, Dassault Systèmes’ weak guidance further fuels market worries about the narrowing moat of its traditional industrial software business.

NVIDIA Supplier Faces Setback

Although NVIDIA is one of Dassault Systèmes’ clients, providing generative 3D virtual environment software, this partnership has not alleviated the market’s strong reaction to weak performance.

NVIDIA CEO Jensen Huang told CNBC last week that the company has fully integrated CUDA-X, AI, and Omniverse platform technologies into Dassault Systèmes’ toolset, calling the move “completely revolutionary.” However, the optimistic sentiment in capital markets about technological synergy was quickly offset by weak guidance.

In response to investor concerns, Dassault Systèmes is accelerating the commercialization of its industrial AI product, 3D UNIV+RSES, claiming the platform will “lead the industrial AI transformation.” CEO Pascal Daloz stated:

“Dassault Systèmes will lead the industrial AI transformation through its 3D UNIV+RSES platform. This is not a short-term goal but a long-term commitment to redefine innovation, operations, and competitiveness across industries. In 2025 and 2026, we will focus on disciplined execution, aligning resources around strategic priorities to achieve measurable, industry-relevant impact.”

Performance Falls Short of Expectations

Dassault Systèmes reported on Wednesday that its Q4 software revenue declined 5% year-over-year, dragging full-year total revenue to €6.24 billion ($7.43 billion), below Refinitiv’s consensus estimate of €6.3 billion. Full-year software revenue was €5.64 billion, with overall growth remaining sluggish.

The earnings release also disclosed that both adjusted EPS and €1.75 billion revenue in Q4 fell short of FactSet analyst estimates. The company provided a cautious outlook for 2026, expecting full-year revenue between €6.29 billion and €6.41 billion, and EPS between €1.30 and €1.34, compared to prior market expectations of €6.58 billion and €1.37.

Due to declining demand from key industries such as automotive and pharmaceuticals, Dassault Systèmes’ Q4 results and full-year guidance both missed expectations. The company also disclosed its first annual recurring revenue (ARR) metric, measuring subscription and recurring income, which grew only 6% since Q4 2023.

Jaffray analyst Charles Brennan noted that “in an industry rapidly shifting to subscription models, this growth rate may be seen as disappointing.”

Facing growth slowdown pressures, CEO Pascal Daloz emphasized that the company is advancing its long-term strategic transformation. He stated that real transformation takes time and is not about short-term targets. He said:

“Our vision is built on decades of industrial and scientific expertise, and we are now building the capabilities to turn that vision into reality.”

“SaaS End Times” Trading Spreads

Dassault Systèmes’ stock plunged, exemplifying the recent widespread sell-off in the software-as-a-service (SaaS) sector. Last week, after Anthropic announced new AI tools, concerns about competition among software and data providers led to a more than 4% decline that week.

Senior investment advisor Aoifinn Devitt of Moneta described Wednesday’s sharp drop as the latest example of “SaaS end times” trading. She said:

“The market is broadly worried about the winners that led last year’s rally.”

Although Dassault Systèmes executives see the AI wave as a strategic expansion opportunity for industrial software, investor skepticism about its pace and execution remains clear. In the context of European software firms facing accelerated replacement of traditional product lines by emerging AI tools, market confidence recovery depends on clearer fundamental signals.

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