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    Autodesk Inc (ADSK)

    Q2 2025 Earnings Summary

    Reported on Jan 10, 2025 (After Market Close)
    Pre-Earnings Price$258.23Last close (Aug 29, 2024)
    Post-Earnings Price$270.00Open (Aug 30, 2024)
    Price Change
    $11.77(+4.56%)

    What went well

    • Autodesk is achieving non-GAAP targets ahead of schedule, demonstrating operational efficiency and margin improvement despite macroeconomic headwinds.
    • Strong growth in the Manufacturing segment, particularly with the Fusion product, where Autodesk is gaining market share and increasing average sales prices through higher attach rates.
    • Resilient performance in key markets like AEC and Manufacturing, with positive forward metrics like increased monthly active usage and bids on BuildingConnected, offsetting challenges in other areas and geographies.

    What went wrong

    • Autodesk's growth is partially driven by one-time factors such as acquisitions; for example, the acquisition of Payapps contributed to their 'make' revenue growth, indicating that organic growth may be lower than reported.
    • The company is facing headwinds in new business generation, particularly in the Media and Entertainment segment due to ongoing industry strikes, and weaknesses in key geographies like China and Korea, which may impact future growth prospects.
    • There is a delay in realizing returns from significant R&D investments, which may put pressure on margins in the near term, as management acknowledges delays between investment and value creation, especially in times of technological advancement.

    Q&A Summary

    1. Margin Outlook
      Q: Did you do anything to drive margin leverage?
      A: Andrew said they did nothing unusual to improve margins; it was the rate and pace of the business. Betsy added they intentionally saw underlying improvement in margins, anticipating headwinds from transitions.

    2. Free Cash Flow Guidance
      Q: Confidence behind free cash flow target for next year?
      A: Betsy stated they still estimate free cash flow in fiscal '26 to be around $2.05 billion at the midpoint. They are focused on managing margins despite the new transaction model impacting P&L.

    3. Transaction Model Impact
      Q: How will the new transaction model affect margins and sales?
      A: Andrew explained they see a line of sight to increasing productivity and effectiveness in sales and marketing, driving costs down per deal, leading to margin growth.

    4. Manufacturing Growth
      Q: Are you seeing share gains in Manufacturing?
      A: Andrew confirmed they are seeing share movement; Fusion performed well with consistent growth and increased ASPs through extensions, indicating a share shift.

    5. Construction Cloud Outlook
      Q: Outlook for Autodesk Construction Cloud and competitiveness?
      A: Andrew said they're maintaining momentum in a tough environment, seeing strong international growth, and their value proposition resonates with customers, leading to competitive wins.

    6. Demand Outlook
      Q: What are the new business trends and demand outlook?
      A: Andrew noted similar trends as previous quarters. AEC continues strong; Manufacturing did well, while Media and Entertainment faced drags due to strikes. China and Korea were drags geographically.

    7. Activist Engagement
      Q: Thoughts on Starboard Value's involvement?
      A: Andrew said they agree with Starboard that there's a lot more value creation coming from Autodesk, and they're excited about ongoing value and delivering results despite tough environments.

    8. Pricing Environment
      Q: Is the new transaction model helping control discounting?
      A: Andrew stated the biggest impact is with partners; it prevents less confident partners from undermining on price, allowing best partners to sell based on value. For Autodesk, it's about efficiencies, not pricing.

    9. Make Revenue Growth
      Q: Were there any one-time factors in make revenue growth?
      A: Andrew mentioned the core momentum is intact, with the acquisition of Payapps adding a little boost. The underlying momentum in Construction and Fusion is solid and consistent.

    10. Customer Feedback
      Q: What are customers saying about the transaction model?
      A: Andrew said for most customers it's a non-event, but some see benefits in cleaning up their relationship with Autodesk, gaining more power during renewal cycles.

    11. Billing Co-terming Effects
      Q: How are co-terming effects impacting license volume expectations?
      A: Andrew explained co-terming moves some billings forward, creating efficiency in renewals and making cross-sell and upsell easier, despite shifts in billing timing.

    12. Election Impact
      Q: Is the upcoming election affecting customer decision-making?
      A: Andrew believes their customers' issues are bipartisan, and they see little impact. Customers are not expressing concerns due to the election.

    13. R&D Investment
      Q: How much investment is being absorbed in margins?
      A: Andrew noted there's always a delay between R&D investment and return. They're in a time of technological advancement and share shift, so investments will lead to future growth.

    14. Future Margin Outlook
      Q: How should we think about margin trajectory into FY '26?
      A: Andrew said it's too early for specifics but wants to instill confidence they see line of sight to productivity improvements driving margin growth over the next couple of years.

    15. Free Cash Flow Timing
      Q: Is the free cash flow raise due to timing or core business?
      A: Betsy stated it's largely a timing issue. They didn't anticipate the significance of customers buying ahead of the North America launch, shifting free cash flow into the first half.

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