Shares of French industrial software leader Dassault Systemes SE plummeted by as much as 21% during early European trading on Wednesday, approaching their largest intraday decline since listing, after the company reported disappointing fourth-quarter results and issued a weak outlook for 2026. The stock triggered a brief trading halt on the Paris exchange upon opening and was still down approximately 19% at the time of reporting.

According to data compiled by Bloomberg, Dassault Systemes' fourth-quarter revenue reached €1.68 billion (approximately $2.0 billion), a decline of 4.1% year-over-year, falling short of the market expectation of €1.74 billion. The company projected non-IFRS revenue growth of 3% to 5% for 2026, which also missed analyst forecasts. The firm, which NVIDIA CEO Jensen Huang has described as an "industrial AI epicenter," is facing growing concerns that its traditional software business is being rapidly displaced by emerging AI tools.

Although the company had previously identified the AI technology wave as a key driver for industrial software upgrades, its latest results indicate a slower-than-expected transition. Analysts from JPMorgan, led by Toby Ogg, noted in a report that the company's growth forecast was "even below the most pessimistic investor expectations." Amid competition from new tools like generative AI, Dassault's weak guidance has intensified market worries about the narrowing competitive moat of traditional industrial software businesses.

**NVIDIA Supplier Faces Setback** Although NVIDIA is one of Dassault Systemes' customers, utilizing its generative 3D virtual environment software, this partnership did little to cushion the market's strong negative reaction to the weak performance.

Last week, NVIDIA CEO Jensen Huang stated in an interview with CNBC that his company had fully integrated its CUDA-X, AI, and Omniverse platform technologies into Dassault Systemes' tool suite for the first time, calling the move "completely revolutionary." However, market optimism regarding this technological synergy was quickly overshadowed by the disappointing guidance.

Addressing investor concerns, Dassault Systemes 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 Systemes will lead the industrial AI transformation through its industrial artificial intelligence product 3D UNIV+RSES. This is not a short-term goal but a long-term commitment aimed at redefining how industries innovate, operate, and compete. In 2025 and 2026, we will focus on rigorous execution, integrating resources around strategic priorities to achieve measurable, industry-significant impact."

**Results Miss Expectations Across the Board** Dassault Systemes' fourth-quarter earnings report released on Wednesday revealed a 5% year-over-year decline in software revenue, contributing to flat annual total revenue of €6.24 billion (approximately $7.43 billion), which fell short of the Refinitiv market consensus of €6.3 billion. Full-year software revenue was €5.64 billion, indicating ongoing overall growth challenges.

The report also showed that both fourth-quarter adjusted earnings per share and revenue of €1.75 billion missed analyst expectations compiled by FactSet. The company provided a cautious outlook for 2026, forecasting full-year revenue between €6.29 billion and €6.41 billion and earnings per share between €1.30 and €1.34, whereas market expectations were €6.58 billion and €1.37, respectively.

Due to weakening demand from key clients in the automotive and pharmaceutical industries, Dassault Systemes' fourth-quarter performance and annual guidance both fell short of expectations. The company disclosed its Annual Recurring Revenue (ARR) metric for the first time, a key measure of subscription and recurring income, but this figure has grown only 6% since the fourth quarter of 2023.

Jefferies analyst Charles Brennan noted that in the current environment where the software industry is rapidly shifting towards subscription models, this growth rate "could be viewed as disappointing."

Amid growth slowdown pressures, CEO Pascal Daloz emphasized in a statement that the company is advancing its long-term strategic transformation. He stated that genuine transformation requires time and is not about pursuing short-term objectives. He said:

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

**'SaaS Doom' Trade Spreads** The sharp decline in Dassault Systemes' share price exemplifies a broader sell-off recently affecting the Software-as-a-Service (SaaS) sector. Last week, the company's stock had already fallen more than 4% over the week, driven by market concerns about the competitive landscape for software and data providers following the release of new AI tools by Anthropic.

Aoifinn Devitt, a Senior Investment Consultant at Moneta, suggested that Wednesday's plunge is the latest manifestation of what is being called the "SaaS doom trade." She stated:

"The market is developing broad-based concerns about last year's cohort of winners."

Although Dassault Systemes' leadership views the AI technology wave as a strategic expansion opportunity for its industrial software business, investors remain clearly skeptical about the pace and effectiveness of its transition. With European software firms broadly facing the challenge of emerging AI tools rapidly replacing traditional product lines, a recovery in market confidence awaits clearer positive signals from fundamental performance.