Evaluating Nemetschek SE's Earnings Beat and Long-Term Prospects in the AEC Software Sector

The Nemetschek Group's Q2 2025 earnings report delivered a resounding beat, with revenue surging 30.5% (currency-adjusted) to €290.0 million and EBITDA expanding 46.3% to €88.5 million. Annual Recurring Revenue (ARR) hit a record €1.08 billion, growing 38.7% year-over-year, driven by the acceleration of its subscription and SaaS transition. These results, coupled with a raised full-year revenue guidance (now 20–22% growth, up from 17–19%), underscore the company's ability to capitalize on the AEC (Architecture, Engineering, and Construction) software sector's tailwinds. But does this momentum justify its current stock valuation, and how does it stack up against peers in a rapidly evolving industry?

Strategic Execution and Sector Dynamics

Nemetschek's success hinges on its dual focus on AI integration and global expansion. The Build segment, bolstered by the GoCanvas acquisition, saw 63% currency-adjusted growth, while the Design segment grew 18.3%, reflecting strong demand for mid-rise residential BIM solutions. The company's pivot to recurring revenue models has been transformative: 92% of its revenue now comes from subscriptions, with SaaS revenue surging 72.5% to €208.5 million. This aligns with broader industry trends. The AEC software market, valued at $11.11 billion in 2025, is projected to grow at 8.8% CAGR through 2030, fueled by BIM mandates, cloud adoption, and AI-driven productivity tools.

Nemetschek's competitive positioning is further strengthened by its interoperability partnerships, such as its 2024 collaboration with Autodesk to streamline data exchange. This contrasts with rivals like Autodesk and Bentley Systems, which rely on proprietary ecosystems. Meanwhile, the Asia-Pacific region's 11% CAGR in AEC software adoption—driven by megacity infrastructure projects and government BIM mandates—positions Nemetschek to benefit from its expanded presence in India and Saudi Arabia.

Valuation Metrics: Overpriced or Justified?

Despite its strong performance, Nemetschek's stock currently trades at a trailing P/E of 78.48 and an EV/EBITDA of 49.09, significantly higher than peers like Autodesk (EV/EBITDA ~25x) and Trimble (8.7x). This premium reflects investor optimism about its SaaS transition and AI roadmap but raises questions about sustainability. For context, the AEC software sector's average EV/EBITDA is ~30x, and Nemetschek's 49x suggests a 63% premium to this benchmark.

The company's PEG ratio (though not publicly disclosed) would likely be elevated given its high P/E and moderate earnings growth projections. Analysts project 13% CAGR in revenue through 2028, but this pales compared to the 80% growth in subscription revenue. If we assume a 2025 EPS of €0.45 and a 2026 forecast of €0.75 (a 67% growth rate), the PEG would be ~1.17, indicating a modest premium to growth. However, this ignores macro risks, including potential margin compression from GoCanvas integration costs and geopolitical headwinds.

Risk and Reward Considerations

The key risks to Nemetschek's valuation include:
1. Margin Dilution: The GoCanvas acquisition, while accretive to revenue, is dilutive to EBITDA margins. The company expects a full-year EBITDA margin of ~31%, down from 30.5% in Q2, due to integration costs.
2. Macro Sensitivity: The AEC sector is cyclical, and a slowdown in construction activity—triggered by rising interest rates or geopolitical tensions—could dampen demand for BIM tools.
3. Valuation Multiples: At 49x EV/EBITDA, Nemetschek is among the most expensive AEC software stocks. While its SaaS growth justifies a premium, a correction is likely if earnings growth slows.

Conversely, the company's agentic AI roadmap and strategic M&A activity (e.g., Manufacton and Laubwerk acquisitions) position it to capture market share in niche verticals. Its 31% EBITDA margin target for 2025, despite GoCanvas integration, demonstrates disciplined cost management.

Investment Implications

For long-term investors, Nemetschek presents a compelling case:
- Growth Potential: The AEC sector's structural shift to cloud-based BIM and AI-driven workflows aligns with Nemetschek's strengths. Its 20–22% revenue guidance and 31% EBITDA margin target are achievable if integration risks are managed.
- Valuation Caution: The stock's premium to peers implies high expectations. A 30% pullback to ~35x EV/EBITDA (€100/share) would align it with sector averages, but this assumes slower growth or margin pressures.
- Strategic Catalysts: Upcoming product launches (e.g., Archicad 29) and AI integration could unlock further upside, particularly in high-growth markets like Asia-Pacific.

Verdict: Nemetschek's earnings beat and strategic execution validate its role as a key player in the AEC software sector. However, its valuation requires careful scrutiny. Investors with a 3–5 year horizon may find it attractive as a growth play, but should monitor integration progress and macroeconomic risks. For those seeking a more conservative approach, Autodesk or Bentley Systems offer lower valuations and steadier cash flows.