Bentley Systems: A High-Growth, Resilient Play in the Digital Infrastructure Revolution

The digital transformation of infrastructure is no longer a distant vision—it is a present-day imperative. As global economies pivot toward smarter, more sustainable systems, companies like Bentley Systems (NASDAQ: BSY) are redefining the rules of the game. With a business model built on recurring revenue, free cash flow generation, and alignment with a multi-decade secular trend, Bentley is emerging as a must-own industrial software stock for 2025 and beyond.

Recurring Revenue: The Engine of Sustainable Growth

Bentley Systems' financials tell a story of disciplined execution and strategic foresight. In 2024, the company reported total revenues of $1.35 billion, with subscription revenue—the lifeblood of its business—surpassing $1.22 billion, up 13.2% year-over-year. This growth is underpinned by a 91% recurring revenue rate, a metric that reflects the stickiness of its software-as-a-service (SaaS) model. Annualized Recurring Revenue (ARR) reached $1.38 billion as of June 30, 2025, a 11.5% increase from the prior year.

The company's dollar-based net retention rate of 109% for its last twelve months of recurring revenue underscores its ability to upsell and retain customers. This is critical in an industry where infrastructure projects are long-term and require continuous digital tools for lifecycle management. Bentley's focus on digital twins—virtual replicas of physical assets—has become a differentiator. These models, powered by AI and real-time data, enable clients to optimize everything from road networks to power grids, creating a flywheel of recurring value.

Free Cash Flow: A Shield Against Volatility

While many software companies prioritize top-line growth, Bentley has mastered the art of converting revenue into cash. In 2024, the company generated $435 million in free cash flow, with a target range of $415–455 million for 2025. For the first half of 2025, free cash flow hit $273 million, a 5% increase from the same period in 2024. This resilience is a testament to its efficient capital allocation and low capital expenditure requirements (projected at $20 million for 2025).

Bentley's operating margins have also improved, with a 22.3% operating income margin in 2024 and a 23.2% margin in Q2 2025. Adjusted operating income margins, excluding stock-based compensation, remain stable at 28.9%, reflecting the company's ability to scale without sacrificing profitability. This cash flow generation provides flexibility for strategic initiatives, including share repurchases (to offset dilution) and dividend increases, which further enhance shareholder value.

Secular Tailwinds: The Infrastructure Digitization Megatrend

Bentley's growth is not just a function of its business model—it is inextricably linked to a broader, decades-long shift toward infrastructure digitization. Over the past 25 years, the IT sector's contribution to global GDP has more than tripled, yet it still accounts for just 8% of GDP. This gap highlights the vast untapped potential as industries adopt digital tools to address aging infrastructure, climate resilience, and urbanization.

Artificial intelligence is accelerating this transition. While AI adoption remains in its infancy (1–5% of work hours currently assisted by AI), its impact is already profound. For example, 25% of new code at Google is AI-generated, and AI-assisted engineers are 26% more productive. As AI models become cheaper (99% decline in access costs over two years) and more powerful, their integration into infrastructure planning, design, and maintenance will become ubiquitous. Bentley's AI-powered tools, such as Blyncsy for roadway analytics and OpenTower iQ for telecom tower management, are already positioned to benefit from this wave.

Moreover, the physical constraints of digital infrastructure—such as data center vacancy rates below 2% in the U.S. and grid connection wait times of 7–10 years—ensure that demand will outpace supply for years. This creates a natural moat for companies like Bentley, whose software solutions optimize the use of existing assets and reduce the need for costly new construction.

Strategic Positioning: Open Standards and Ecosystem Leadership

Bentley's commitment to open standards and interoperability further cements its leadership. The company's iTwin platform, built on open-source schemas, allows for seamless integration of data from disparate sources, fostering industry-wide collaboration. This approach contrasts with proprietary systems that lock customers into single-vendor ecosystems, making Bentley's solutions more attractive in an era of data democratization.

Strategic acquisitions, such as Cesium (3D geospatial technology) and Blyncsy (AI-driven infrastructure analytics), have expanded Bentley's capabilities and total addressable market. These moves, combined with partnerships like its collaboration with Google to integrate high-resolution geospatial data, position the company at the intersection of infrastructure and AI.

Investment Thesis: A Compelling Long-Term Play

Bentley Systems is a rare combination of a high-growth SaaS business and a capital-efficient industrial company. Its recurring revenue model, strong free cash flow, and alignment with a secular trend make it a resilient investment in uncertain macroeconomic conditions. With a $1.3 billion credit facility and a balance sheet of $89.6 million in cash, the company has the firepower to fund innovation, repurchase shares, and explore strategic acquisitions.

For investors seeking exposure to the digital infrastructure revolution, BSY offers a compelling entry point. The company's ability to monetize its digital twin and AI-driven solutions, coupled with its financial discipline, positions it to outperform as infrastructure spending accelerates globally. With a forward P/E ratio that remains attractive relative to its growth trajectory, Bentley Systems is not just a beneficiary of the current trend—it is a catalyst for the next era of infrastructure innovation.

In a world where physical and digital infrastructure are increasingly intertwined, Bentley Systems is the stock to own.