Siemens DI software revenue up 14%, again led by EDA

Siemens today reported decent results for its fiscal third quarter even with the stresses in component supply chains and the European energy markets. The part we care most about, Digital Industries, reported revenue of €4.9 billion, up 18% (and up 12% in constant currencies), which was ahead of the company’s 10% guidance. Within the DI total, Software revenue was €1.2 billion, up 14% (and up 3% in constant currencies).

About the overall DI results, Siemens said that,

Revenue [was] up in all businesses, with the strongest growth contributions coming from the motion control and factory automation businesses; higher revenue in the software business due to double-digit growth in the electronic design automation (EDA) business, including a significant contribution from larger contracts. On a geographic basis, orders and revenue rose in all three reporting regions, led by Asia [and] Australia … profit in the software business declined due mainly to lower revenue in the product lifecycle management (PLM) business and higher expenses related to cloud-based activities, including the transition to software as a service (SaaS)

During the earnings presentation, CEO Roland Bush added a bit more detail:

• Discrete Automation revenue was up 16%, driven by Motion Control
• Process Automation revenue was up 8%
• Revenue from EDA software was up 20%
• The SaaS transition is “on track,” but that doesn’t cover its importance to Siemens — see below
• The Supplyframe integration and performance ahead of plan

This slide is from the Siemens FQ3 investor presentation. It highlights how SaaS and cloud are vital to the company’s technology-first strategy:

See how quickly the recurring revenue (ARR, top left) rises? That’s the goal for many software companies who seek to smooth out otherwise lumpy revenue prospects. Next, look down on the left — see how much Siemens is investing in cloud capabilities. That’s a lot. Finally, check out the metrics on the right, which showcase how quickly Siemens and its customers are moving into cloud apps — successful in small and medium enterprises after initial success in the larger accounts that Siemens’ direct sales teams were able to gain access to in the early stages of the offering’s rollout. [And, before you ask. “Cloud ARR increased to 12%, up 3ppt q-o-q” means that cloud ARR was up 3% quarter to quarter”].

In case the company’s intentions aren’t clear enough, Siemens AG CEO Roland Busch said in prepared remarks, “We made significant progress as a focused technology company in the third quarter with the launch of our open digital business platform, Siemens Xcelerator, accelerating the digital transformation of our customers. We also acquired Brightly Software, an outstanding software-as-a-service player in the building space, which perfectly complements our leading position in smart buildings.”

Exiting Russia has proved expensive for Siemens, with the company taking €572 million in charges in FQ2 and announcing a further €558 million of charges in Q3 due to lease write-off, adjustments to the value of loans, and severance costs in DI, among other things.

The company left its guidance unchanged for FQ4 and the year — which investors seem to believe means that Siemens sees a soft FQ4. Siemens expects Digital Industries to achieve constant currency revenue growth of 9% to 12% for fiscal 2022, which ends on September 30.