Bernstein: Trimble lowers 2026 recurring revenue growth guidance; AECO continues to expand

Why is recurring revenue growth slowing?

Trimble reported third-quarter adjusted earnings per share of 0.86 dollars, in line with market expectations; however, management lowered its 2026 organic annual recurring revenue (ARR) growth guidance from 12%–14% to about 10%, because growth in Field Systems and Transportation & Logistics was below expectations. At the end of the third quarter, total ARR reached 2.56 billion dollars, up about 10% year over year.
Field Systems had already been affected by the exit from low-margin white-label positioning products; management also noted weaker agricultural demand in South America and below-expectation renewals of bundled positioning services. A weak freight market also pressured Transportation & Logistics.
The company expects 2026 organic ARR growth to be in the low single digits for Field Systems and the mid-single digits for Transportation & Logistics; by contrast, AECO is guided to grow by at least 13%.

AECO generated third-quarter revenue of 395 million dollars, up 9% year over year. Cross-selling and upselling to customers continued, net revenue retention was about 110%, and new ARR also grew. Demand is supported by data centers, infrastructure, energy, manufacturing and reshoring projects, while new-order growth accelerated in Asia Pacific.
The business’s third-quarter margin rose from 31.8% in the same quarter a year earlier to 33.5%, benefiting from software’s share of revenue, ARR growth and operating leverage. Bernstein expects these factors to drive further margin expansion in 2027, while noting that the timing of renewals will create a headwind of 90 million dollars in the first quarter of 2027.
The company’s overall backlog grew 13%, with software-as-a-service Bookings growing faster; Bernstein believes this supports future ARR growth.

The share of active users adopting AI-enabled quantity takeoff tools rose from 6% to 19%; the number of Tekla AI Assistant users grew by more than 50% quarter over quarter, and SketchUp AI credit consumption doubled quarter over quarter.
The company’s monetization approaches include premium subscriptions, usage-based pricing and credit consumption. Bernstein expects these charges to make a more meaningful contribution to ARR growth and margins as usage increases.

Bernstein lowered its forecast for Trimble’s adjusted earnings per share in 2027 from 4.30 dollars to 4.03 dollars, and cut its price target from 73 dollars to 67, while maintaining an Outperform rating.
The firm values the shares at about 17 times forecast earnings per share for 2027; its listed key risks include a slower-than-expected shift from hardware to recurring revenue and software, slower adoption of construction digitalization technologies, and higher-than-expected customer churn.