Nemetschek's Growth Surge Can't Shake Off the Dip: Is This a Golden Opportunity?

The stock market is full of paradoxes, and Nemetschek SE (ETR:NEM) is serving up one of the juiciest right now. The German software giant just reported 26.3% revenue growth in Q1 2025—driven by its booming subscription/SaaS business—and reaffirmed its full-year targets. Yet its shares fell 0.5% post-earnings to €111.60, erasing early gains. What’s going on here? Let’s dig in.

The Numbers Are Smashing It… Except Where They’re Not

Nemetschek’s Q1 results are a masterclass in SaaS dominance. Subscription and SaaS revenue jumped 83.6%, pushing Annual Recurring Revenue (ARR) to €1.038 billion—a 39.6% surge. Recurring revenue now accounts for 91.8% of total sales, up from 83% a year ago. That’s the kind of flywheel effect you want to see: sticky customers, predictable cash flows, and a moat against competitors.

But here’s the hiccup: the reported EBITDA margin dipped to 28.5%, down from 30.5% in Q1 2024. Analysts were expecting closer to 30.7%. The culprit? An unexpected mid-single-digit-million euro loss from a payment provider’s insolvency—a one-time hit that knocked the margin lower. Adjusted for that, the EBITDA margin would have been 31.4%, which actually beats last year’s Q1. Still, the market’s averse to surprises, and investors chose to focus on the headline number.

Why the Share Price Slump? Blame the “Margin Miss” and “Tariff Capers”

The post-earnings dip is partly due to short-term profit concerns, but also broader market jitters. Earlier in April, Nemetschek’s shares plummeted to €88.90—nearly a 30% drop from February’s peak—on fears about “tariff capers,” likely referencing U.S. trade policy shifts or global supply chain disruptions. While the stock rebounded ahead of earnings, the lingering uncertainty around geopolitical risks and economic slowdowns kept a lid on enthusiasm.

The Build Segment Is the Star, but the Design Segment Needs a Fix

Breaking down the segments:
- Build: Revenue soared 66% thanks to the GoCanvas acquisition and its SaaS transition. The organic margin (excluding GoCanvas) hit 38%, a huge improvement. This division is firing on all cylinders.
- Design: Revenue grew 11.6%, but EBITDA fell 13.5% due to the payment provider’s collapse and SaaS transition costs. Here’s the kicker: adjusted for the one-time loss, the Design segment’s margin would have been 300 basis points higher than reported. That’s a clear sign that its underlying business is solid—it just got hit by bad luck.

The Media segment also suffered from the same insolvency issue, but its adjusted performance would have been “high single-digit growth” with a margin above last year’s.

The CEO’s Playbook: Double Down on SaaS, Bet on Construction’s Digital Future

CEO Yves Padrines isn’t sweating the short-term noise. He’s doubling down on subscription models, which now make up nearly all of Nemetschek’s revenue. The construction sector is undergoing a digitization revolution, and Nemetschek’s tools—like its BIM software for 3D modeling—are the go-to for architects and contractors. With over 7 million users and a 31% EBITDA margin target for 2025, the long game is clear.

Risks? Sure, but They’re Manageable

• GoCanvas Integration: The acquisition will dilute margins in 2025 due to IFRS accounting rules, but its full impact isn’t reflected yet. By 2026, it should start contributing meaningfully.
• Geopolitical Risks: Padrines mentioned “no significant deterioration in economic conditions” as a key assumption. If trade wars or recessions hit, construction spending could slow—but Nemetschek’s recurring revenue model buffers it against downturns better than most.
• One-Time Losses: The payment provider’s insolvency was a fluke, not a recurring issue.

So, Is This a Buy?

The fundamentals scream YES. Here’s why:
1. ARR is exploding: The €1 billion ARR milestone is a game-changer. Every euro of ARR is a recurring dollar, and Nemetschek’s 39.6% ARR growth leaves competitors in the dust.
2. Margin resilience: Even with one-time hits, the adjusted EBITDA is ticking up. The 31% full-year target is achievable once GoCanvas is fully integrated.
3. Market leadership: Construction software is a $100 billion+ opportunity. Nemetschek’s ISO 27001 certification and TecDAX listing signal reliability and scale.

The dip to €111.60 is a golden entry point—especially if you’re willing to look past the noise. The shares are still up 30% year-to-date, and the €13 billion market cap reflects a company that’s not just surviving but thriving in its niche.

Final Verdict: Buy the Dip, Hold the Trend

Nemetschek’s Q1 results are a buy signal, not a sell. The margin hiccup was a one-off, and the growth story remains intact. If you can stomach short-term volatility, this is a stock to own for the next five years. The construction industry’s shift to digital tools isn’t slowing down—and neither is Nemetschek.

Bottom line: This is a hold for long-term investors and a buy for those who can wait out the next 12 months. The shares are down post-earnings, but the foundation is rock solid.