Shares in industrial software company PTC (PTC -9.84%) were lower by 8.8% in the week to Thursday afternoon. The move comes after a poorly received first-quarter 2025 earnings released on Wednesday. The headline numbers were superficially disappointing, but the underlying metrics were acceptable, and the dip looks like an excellent buying opportunity.

PTC's underlying growth

Q1 earnings weren't the issue; they aligned with management's previous guidance. Instead, the company's updated full-year guidance concerned investors. It's understandable if PTC investors are sensitive to quarterly numbers because management is reorganizing its go-to-market strategy by focusing on selling in its five key industrial verticals.

Sales reorganizations can cause disruptions, so it's no surprise that investors acted negatively to PTC by lowering its full-year revenue and earnings expectations.

Data source: PTC presentations.

Annual run rate and free cash flow on track

As management outlined on the earnings call, accounting standards can make it difficult to forecast the timing of revenue and earnings recognition on PTC on-premise subscription sales.

Image source: Getty Images.

Instead, PTC has long argued that free cash flow (FCF) and its annual run rate, or ARR (the annualized value of its subscription software, software as a service, and support contracts) are the best ways to measure progress. Since that guidance was maintained, PTC remains on track for its underlying guidance in 2025. Consequently, don't be surprised if the stock recovers from here.