Bentley Systems (BSY): A Resilient Play on the Infrastructure Software Megatrend

The global infrastructure software market is undergoing a seismic shift. As aging systems crumble under the weight of climate change, urbanization, and resource constraints, the demand for digital tools to design, build, and manage infrastructure has never been higher. Bentley Systems (BSY) stands at the intersection of this megatrend, leveraging structural demand in infrastructure modernization, digital transformation, and AI-driven productivity gains to solidify its position as a leader in a fragmented yet rapidly expanding market.

Structural Demand: A Tailwind for Long-Term Growth

The infrastructure software market is projected to grow from $220.25 billion in 2025 to $282.92 billion by 2029, driven by a CAGR of 6.5%. This growth is fueled by governments and corporations racing to modernize legacy systems, integrate renewable energy grids, and adopt smart city technologies. Bentley's core markets—transportation, water, energy, and urban planning—are directly aligned with these trends. For instance, the U.S. Bipartisan Infrastructure Law alone has allocated $1.2 trillion over eight years, creating a surge in demand for tools that optimize infrastructure lifecycle management.

Bentley's financials reflect this tailwind. In Q2 2025, the company reported revenue of $364.1 million, a 10.2% year-over-year increase, with subscription revenue accounting for 92% of total revenue. Annualized Recurring Revenue (ARR) reached $1.379 billion, up 11.5% from the prior year, underscoring the durability of its recurring revenue model. With a 109% dollar-based net retention rate, Bentley is not only retaining customers but also upselling them as demand for advanced AI and digital twin capabilities grows.

Digital Transformation and AI: The New Infrastructure Operating System

Bentley's iTwin platform is the linchpin of its strategy. This AI-enhanced digital twin ecosystem allows clients to create virtual replicas of physical infrastructure, enabling predictive maintenance, real-time monitoring, and scenario modeling. For example, a city using Bentley's tools can simulate the impact of a hurricane on its power grid or optimize traffic flow using AI-driven analytics. The platform's integration with generative design and climate resilience modules positions it as a one-stop shop for infrastructure professionals seeking to “do more with less.”

The company's R&D investments are accelerating this differentiation. In 2025, Bentley is rolling out AI-driven asset analytics via tools like ProjectWise and AssetWise, which predict maintenance needs and reduce downtime. These innovations are critical in an industry where 60% of infrastructure projects face delays due to inefficiencies. By automating repetitive tasks and enabling data-driven decision-making, Bentley is helping clients unlock productivity gains that directly translate to cost savings.

Navigating a Fragmented Market: Strategic Partnerships and Global Expansion

The infrastructure software market is highly fragmented, with competitors like Autodesk, ESRI, and Dassault Systèmes vying for market share. Bentley's open API ecosystem and geographic diversification provide a competitive edge. The company operates in 170 countries, with North America and emerging markets like Latin America driving growth. Partnerships with firms such as Blyncsy and Seequent enhance interoperability, allowing Bentley's solutions to integrate seamlessly with legacy systems and third-party tools.

Geopolitical risks and macroeconomic volatility remain challenges, but Bentley's recurring revenue model and strong cash flow generation mitigate these concerns. In Q2 2025, free cash flow hit $57.0 million, with operating margins expanding to 23.2%. This financial discipline enables the company to reinvest in innovation while maintaining a 100% dividend payout ratio, a rarity in high-growth tech stocks.

Investment Thesis: A High-Conviction Play on a Structural Shift

Bentley Systems is more than a software company—it is a critical enabler of the global infrastructure revolution. Its alignment with secular trends (climate resilience, urbanization, AI adoption) and its robust financials make it a compelling long-term investment. While the stock trades at a premium to traditional infrastructure software peers, its 12% ARR growth and 30%+ operating margins justify the valuation.

For investors seeking exposure to the infrastructure software megatrend, BSY offers a unique combination of recurring revenue durability, technological differentiation, and market tailwinds. However, risks such as regulatory shifts in emerging markets and competition from larger tech firms warrant cautious optimism. Those with a 5–7 year horizon should consider initiating positions in BSY, particularly as the company continues to scale its AI and digital twin offerings.

In a world where infrastructure is the backbone of economic progress, Bentley Systems is building the tools to future-proof it.