Bentley Systems Earnings Call Highlights Durable Growth

Bentley Systems, Class B ((BSY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Bentley Systems, Class B struck an optimistic tone in its latest earnings call as management highlighted double‑digit growth in revenue and annual recurring revenue, a heavily recurring revenue base, and robust profitability and cash generation. Executives balanced this upbeat narrative with candid discussion of FX, China exposure, and early‑stage AI monetization risks that investors should monitor.

Strong Revenue and ARR Growth

Bentley reported first‑quarter revenue of $424 million, up 14.5% year over year or 11.9% in constant currency, underscoring resilient demand for its infrastructure software. Annual recurring revenue reached $1.495 billion, growing 11.5% in constant currency with a sequential gain of 2.5%, giving investors visibility into future cash flows.

Recurring and Subscription Revenue Momentum

Subscription and recurring revenues now make up 93% of total revenue and grew 14.7% in the quarter, or 12.2% in constant currency, reinforcing the stability of Bentley’s business model. Over the last 12 months, recurring revenue rose to $1.44 billion, up 13.3% year over year, as more users shift from one‑time licenses to ongoing subscriptions.

Healthy Retention and Net Revenue Expansion

Retention metrics remained a key strength, with constant‑currency account retention at 99%, indicating customers are rarely churning. Net revenue retention held at 109%, matching prior quarters and signaling that existing clients are steadily expanding their usage and spending with Bentley’s platform.

Profitability and Margin Profile

Bentley delivered GAAP operating income of $126 million in the first quarter, showcasing a profitable growth profile unusual for many software peers. Adjusted operating income less stock‑based compensation reached $141 million, translating to a margin of 33.2% and supporting management’s narrative of gradual margin improvement.

Cash Flow Strength and Capital Actions

Free cash flow was a standout at $188 million for the quarter and $492 million over the past 12 months, up 13% year on year and broadly tracking toward the full‑year goal. Management used this cash to retire $678 million of 2026 convertible notes, reduce net debt by $134 million, buy back $54 million of stock, and still expand credit capacity to $1.85 billion while cutting leverage to 1.9 times adjusted EBITDA.

Resources and Seequent Drive Sector Outperformance

The resources segment, powered by the Seequent acquisition, has become Bentley’s fastest‑growing sector and now exceeds 20% of sector‑attributable ARR, signaling a meaningful shift in mix. Since acquiring Seequent nearly five years ago, subsurface ARR in civil infrastructure has grown about fourfold, and that momentum continued through accelerated growth in 2025 and into the current quarter.

AI and Product Instrumentation Progress

Bentley’s infrastructure AI strategy is moving from concept to scale, with Asset Analytics already surpassing a $50 million annual run rate and a new general manager appointed to accelerate growth. The company also introduced an MCP server for STAAD so AI agents can directly optimize structural designs and plans to instrument more applications and monetize usage via APIs.

Commercial Momentum, New Logos, and SMB Program

New customer wins were a meaningful contributor, adding roughly 300 basis points to ARR growth during the quarter and demonstrating ongoing market share gains. The Virtuoso program, aimed at smaller and mid‑sized businesses, brought in more than 600 new logos while generating better cross‑sell, upsell, and retention, making it an increasingly important growth engine.

Persistent Headwinds in China and Geopolitical Limits

Despite global momentum, management underscored constraints in China, which accounts for about 2% of ARR but remains difficult to penetrate due to geopolitical tensions. They noted that around 25 major Chinese organizations represent a quarter of top design firm billings yet remain largely inaccessible, limiting Bentley’s addressable market in that region.

Perpetual License Revenue Decline

Perpetual license sales fell 18% in constant currency, highlighting ongoing pressure on the company’s smaller, more volatile non‑recurring revenue stream. While this shift aligns with the broader move toward subscriptions, it remains a drag on that portion of revenue and reinforces management’s focus on recurring models.

FX and Short‑Term Revenue Impact

Currency movements acted as a mild headwind, with a stronger U.S. dollar trimming approximately $2 million from first‑quarter revenue versus prior assumptions. If late‑April exchange rates persist, management estimates that revenues for the rest of the year could come in about $3 million below earlier forecasts, a modest but notable drag.

Early‑Stage AI Monetization and Margin Uncertainty

Management emphasized that AI instrumentation and API‑based consumption remain in the early stages, and commercial models have yet to be fully validated. They cautioned that incremental engineering and compute costs could pressure gross margins until usage and pricing structures mature, leaving some uncertainty around the ultimate profitability of AI‑driven revenues.

Churn Pressure from a Growing Virtuoso Base

The rapid expansion of the Virtuoso user base comes with a mathematical challenge: even with high renewal rates, the absolute dollars at risk from churn rise each period. Leaders stressed that ongoing new‑logo acquisition and expansion within existing small‑business accounts will be required to offset this growing churn dollar pool.

Timing Effects on Free Cash Flow Comparisons

Year‑over‑year comparisons for free cash flow were skewed by unusually strong collections at the end of 2025, which pulled some cash forward. Additionally, management has front‑loaded certain operating expenses into the first half of 2026, shifting more of the profitability and cash generation profile into earlier quarters and complicating short‑term comparisons.

Regional Disruption from Middle East Conflict

The company reported some disruption in the Middle East, where conflict‑related uncertainty has delayed projects and altered software consumption patterns. While performance in other regions helped offset these effects, management acknowledged the localized impact on users and employees and the potential for further volatility.

Dependence on Multiple Drivers for Upside

Reaching the upper end of Bentley’s 2026 outlook will require several growth levers to click simultaneously, including sustained strength in resources and mining, rapid Asset Analytics adoption, and continued momentum in core infrastructure software. Management also signaled that programmatic acquisitions may play a role, underscoring that upside is contingent on multiple interdependent drivers.

Guidance and Forward‑Looking Outlook

Management reaffirmed confidence in their 2026 outlook, including free cash flow guidance of $500 million to $570 million, supported by current ARR trends and margin performance. They flagged that operating expenses and cash‑flow timing will be more weighted to the first half and that modest FX headwinds persist, but stressed the strengthened balance sheet after retiring convertible notes, cutting leverage, and expanding borrowing capacity.

Bentley Systems’ latest earnings call painted a picture of a durable, high‑margin software franchise steadily expanding its recurring revenue base and advancing AI‑driven offerings. While investors must weigh FX, China access, AI margin risks, and churn dynamics, the company’s strong cash flows, balance‑sheet flexibility, and diversified growth drivers suggest a solid foundation for long‑term value creation.