ADSK Q2 2026: Raises Billings Guidance on AECO Strength
- Strong Business Momentum: The Q&A highlighted robust growth in key segments such as AECO and construction with consistent customer renewals and strong billings, underpinning solid near-term revenue and paving the way for sustainable long‐term expansion.
- Enhanced Channel & Transaction Model Efficiency: Management emphasized that the new transaction model is driving more direct customer engagement and channel consolidation, which is expected to improve pricing efficiency and renewals, thereby potentially increasing operational margins.
- Strategic Investments in AI & Platform Innovation: Executives discussed successful implementation of AI initiatives (e.g., Fusion’s auto constraint feature with a 60% acceptance rate) that boost productivity and operating leverage, setting up a clear path for margin expansion and long‐term free cash flow growth.
- Guidance Caution and Tough Comps: Autodesk’s guidance still incorporates cautious assumptions for the remainder of the year—with tougher comparisons in Q4 due to last year’s acquisition contributions and the impact of the new transaction model. This raises concerns that underlying growth may be challenged if external uncertainties persist.
- Channel and Transaction Model Risks: The transition to the new transaction model, while boosting direct digital sales, has led to a significant shift in the channel mix. Some partners are already starting their renewal cycles, and any delays or inefficiencies in the partner ecosystem could disrupt revenue growth and customer retention.
- Margin and Free Cash Flow Timing Concerns: Although Autodesk is targeting margin expansion, there are risks around cost discipline and timing. Incremental revenue is expected to flow through only about two‐thirds into margin growth, and with a heavier weighting of free cash flow in Q4, any deviations in expense timing or execution could strain margins.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Billings | FY 2026 | $7.16B to $7.31B | $7,355,000,000 to $7,445,000,000 | raised |
Revenue | FY 2026 | $6.925B to $6.995B | $7,025,000,000 to $7,075,000,000 | raised |
Free Cash Flow | FY 2026 | $2.1B to $2.2B | $2,200,000,000 to $2,275,000,000 | raised |
Non-GAAP Operating Margin | FY 2026 | Raised the bottom end of the guidance | Approximately 37% or approximately 40% on an underlying basis | raised |
Share Buyback Targets | FY 2026 | no prior guidance | Raised by $100,000,000 to between $1,200,000,000 and $1,300,000,000 | no prior guidance |
Long-term Non-GAAP Operating Margin Goal | FY 2026 | no prior guidance | Expected to be 41% in fiscal 2029 or about 45% on an underlying basis | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
New Transaction Model and Channel Consolidation | Discussed in Q1 with revenue contributions and smooth customer migration , in Q3 with details on revenue, billing contributions and some short‐term margin headwinds , and in Q4 with expanded efficiency and long‐term margin benefits | Q2 emphasis on improved execution, direct customer engagement, and successful partner renewals | Consistent focus with increasing efficiency and positive execution sentiment over time |
AI Integration and Platform Innovation | Raised in Q1 highlighting strong adoption and productivity gains with cautious monetization , in Q4 with the introduction of AutoConstrain and platform enhancements , and in Q3 showing broad integration across products with mixed monetization views | In Q2, strong adoption evidenced by high auto-constrain acceptance and ongoing platform innovation, though monetization remains a work in progress | Steady emphasis on AI with persistent high adoption but monetization still evolving |
Steady Business Momentum and Revenue Growth | Highlighted in Q1 with steady AEC and construction growth , in Q3 with consistent revenue and AEC growth driven by digital connectivity , and in Q4 with strong performance in construction and impressive AEC figures | Q2 reports similar robust momentum with 17% revenue growth, strong AEC and construction performance, and healthy new business | Consistent growth trajectory in core segments across periods |
Macroeconomic and External Uncertainties | Addressed in Q1 with prudent guidance adjustments and regional softness , in Q3 with a factoring in of geopolitical challenges while maintaining strong renewals , and in Q4 with emphasis on customer sentiment and new business challenges | Q2 continues a cautious stance with guidance built on stable yet conservative macro assumptions and steady customer investment | Persistent caution; external uncertainties remain factored into outlook while business momentum is maintained |
Operational Margin Expansion and Free Cash Flow Timing | Detailed in Q1 with margin improvements driven by restructuring and cost discipline , in Q3 focusing on margin guidance improvements and early free cash flow benefits , and in Q4 with improvement in margins and planned buybacks | Q2 emphasizes long-term margin expansion targets, improved sales/marketing efficiencies, and a shift towards back-end free cash flow collection with raised guidance | Increasing focus on margin expansion with evolving free cash flow timing dynamics indicating better long-term cost management |
Digital Twin and Owner/Operator Solutions | In Q1, digital twin solutions were noted via a partnership with Hitachi Energy to drive asset and data-driven capabilities and in Q3, Tandem was highlighted with increasing customer adoption and expanded owner/operator toolkit | Q2 mentions digital twin capabilities generally in the context of strategic initiatives but does not specifically address Tandem or owner/operator solutions | Diminishing emphasis compared to previous quarters, suggesting a reduced spotlight on owner/operator solutions in the current call |
Agency Transition and Partner Productivity Challenges | In Q3, some comments on partners’ resource allocation were noted though not a prominent focus , in Q4 the transition challenges and early productivity issues were acknowledged with efforts to optimize partner channels , and in Q1 the disruptions were discussed as largely resolved with expected improvements | Q2 reflects eased transition issues with partners now comfortable with renewals and improved new business generation | Transition challenges have largely diminished, with partner productivity showing marked improvement over time |
Evolving Pricing Strategy Concerns (Legacy Maintenance-to-Subscription Conversions) | In Q1, legacy maintenance-to-subscription conversions were discussed with a 10-year price visibility and upcoming program sunset. There is no significant discussion in Q3 or Q4 [N/A]. | Q2 does not specifically address this topic in detail [N/A] | Previously a point of discussion in Q1, the focus appears to have shifted in Q2, indicating that attention on legacy conversion challenges has reduced or been integrated into broader pricing strategies |
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Margin Outlook
Q: FY2029 margin target details?
A: Management expects non‑GAAP margins to reach 41% reported (and 45% underlying) by FY2029, driven by enhanced sales efficiency and operating leverage, reflecting a strong confidence in margin expansion. -
Billings Guidance
Q: What drove raised billings guidance?
A: Higher upfront revenue, strong AECO performance, and favorable mix dynamics drove an increase in billings guidance, highlighting the business’s robust underlying momentum. -
Channel Productivity
Q: How is the new transaction model impacting renewals?
A: The shift to the new transaction model is streamlining renewals and channel engagement, with lower‑tier partners moving directly to Autodesk and renewals coming in as expected, boosting efficiency and customer insight. -
AI Integration
Q: What role will AI play moving forward?
A: Management is investing heavily in organic AI initiatives and partnerships—embedding AI into Fusion and other products to improve productivity and set the stage for long‑term innovation. -
Direct Sales
Q: Any updates on PLG and store initiatives?
A: Significant investments in product-led growth and self‑service improvements at the Autodesk store are enhancing direct customer acquisition and cross‑sell opportunities, reinforcing a modern, data‑driven approach. -
Construction Demand
Q: What’s driving construction budget unlock?
A: Productivity challenges, combined with easing regulatory pressures and a focus on industrialized construction, are expected to stimulate demand—even as customers work through a significant backlog. -
M&A Strategy
Q: What is your appetite for M&A?
A: Management emphasizes targeted tuck‑in acquisitions to accelerate existing roadmaps, with a focus on tech adjacency rather than mega deals, while returning excess capital to shareholders. -
NRR Performance
Q: How are net revenue retention trends evolving?
A: Excluding the new transaction model’s impact, net revenue retention remains steady in the 100%–110% range, underscoring consistent customer performance and satisfaction. -
Free Cash Flow Timing
Q: Has free cash flow timing shifted?
A: Free cash flow is expected to be more weighted toward Q4 due to the timing of EBAs and larger subscription renewals, reflecting disciplined execution in cash flow management. -
Tariff Impact
Q: How are tariffs affecting customer pricing?
A: While tariffs are not directly impacting Autodesk, management notes that customers face pricing pressures; however, ongoing customer adjustments mean these are being managed without significant disruption.
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