Autodesk, Inc. (ADSK) Q1 2026 Earnings Call Transcript

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Overview

The earnings call summary shows strong financial performance with 15% revenue growth and 29% billing growth. The positive outlook is reinforced by a significant share repurchase program and optimistic guidance. Although there are concerns about macroeconomic uncertainties and restructuring impacts, the management has addressed these effectively in the Q&A. The strategic focus on AI and industry clouds, along with improved channel productivity, suggests a positive future trajectory. The strong non-GAAP operating margin and free cash flow further support a positive sentiment.

Key Financial Performance

Total Revenue $1.1 billion (15% growth year-over-year); driven by strength in AECO and the easing of friction from the new transaction model.

Billings $1.4 billion (29% growth year-over-year); reflecting the shift to annual billings for most multi-year contracts and the transition to the new transaction model.

RPO (Remaining Performance Obligations) $7.2 billion (21% growth year-over-year); indicating strong future revenue visibility.

Current RPO $4.6 billion (16% growth year-over-year); showing solid demand for Autodesk's offerings.

GAAP Operating Margin 14% (decreased by 7 percentage points year-over-year); primarily due to restructuring charges of $105 million and a one-time non-cash charge of $54 million.

Non-GAAP Operating Margin 37% (increased by 3 percentage points year-over-year); reflecting operating leverage from ongoing cost discipline and timing benefits from restructuring.

Free Cash Flow $556 million; indicating strong cash generation capabilities.

Share Repurchases 1.3 million shares for $353 million at an average price of approximately $269 per share; reflecting a commitment to returning cash to shareholders.

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Operating Highlights

New Transaction Model Contribution to Revenue: The contribution from the new transaction model to revenue was $78 million in the first quarter.

New Transaction Model Contribution to Billings: The contribution from the new transaction model to billings was $105 million in the first quarter.

AI-Powered Features: AutoConstrain feature has created over 580,000 constraints for Fusion users since launch, with user acceptance rates increasing to more than 50%.

Enterprise Business Agreements: A leading infrastructure consulting firm closed its sixth EBA with Autodesk, marking the second largest deal in the company's history.

Expansion in Construction Sector: Strong revenue and new customer momentum in construction, with significant partnerships like Hitachi Energy expanding their use of Autodesk products.

Free Cash Flow: First quarter free cash flow was $556 million.

Share Repurchases: Purchased approximately 1.3 million shares for $353 million at an average price of approximately $269 per share.

Board Refreshment: Appointment of new board members to guide the next decade of growth.

Focus on Cloud, Platform, and AI: Strategic investments are being made in cloud, platform, and AI to drive long-term shareholder value.

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Risk or Challenges

Geopolitical and Macroeconomic Uncertainty: The company acknowledges an uncertain geopolitical, macroeconomic, and policy backdrop that could impact future performance.

Transition to New Transaction Model: The transition to a new transaction model may introduce risks related to customer integration and operational efficiency.

Foreign Exchange Movements: The depreciation of the U.S. dollar against major currencies introduces volatility in revenue and billings, affecting financial guidance.

EBA Renewal Uplift Rates: There is caution regarding the potential deterioration of EBA renewal uplift rates, which could impact future revenue growth.

Stock-Based Compensation: Restructuring charges and adjustments in stock-based compensation may affect GAAP operating margins and overall financial performance.

Economic Damage from Natural Disasters: The company highlights the economic damage from recent wildfires, estimated at over $250 billion, which underscores the risks associated with natural disasters.

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Guidance & Outlook

Strategic Priorities: Autodesk is focusing growth investments on strategic priorities in cloud, platform, and AI.

New Transaction Model: The new transaction model aims to integrate more closely with customers, drive additional business, increase automation, and reduce duplicative workflows.

Board Refreshment: Appointment of new board members to guide the next decade of growth.

Convergence of Design and Make: Autodesk is at the forefront of convergence, evolving business models and platforms to capitalize on it.

Customer Success Stories: Examples include AECO's EBA, Hitachi Energy's adoption of Autodesk Construction Cloud, and GPJ's digital transformation.

AI Integration: AI-powered features like AutoConstrain are enhancing user experience and driving productivity gains.

Education Initiatives: Austin University is integrating Autodesk products into engineering curricula to prepare future engineers.

Revenue Guidance: Revenue guidance range increased to $6.925 billion to $6.995 billion.

Billings Guidance: Billings guidance range increased to $7.16 billion to $7.31 billion.

Free Cash Flow Guidance: Free cash flow guidance range increased to $2.1 billion to $2.2 billion.

Non-GAAP Earnings Per Share Guidance: Increased reflecting non-GAAP operating margin increase.

GAAP Earnings Per Share Guidance: Reflects one-time charges taken in the first quarter.

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Shareholder Return Plan

Share Repurchase Program: Purchased approximately 1.3 million shares for $353 million at an average price of approximately $269 per share.

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Key Q&A

Q:Could you just talk about how customer conversations are evolving, if at all?

A:Customers are flagging trade policy uncertainty, which is creating concern for them. However, they are more focused on the second half of the year, and overall, they are not seeing immediate impacts on their business.

Q:Could you just talk about your margin momentum a little bit?

A:Q1 margins were better than expected due to revenue outperformance and ongoing expense discipline. The sales and marketing optimization plan is on track.

Q:What are you doing in terms of accelerating the development of your industry clouds?

A:We are accelerating the roadmap around data management issues based on customer feedback and reallocating funds to focus on these priorities.

Q:What do you see as the benefits or risks of channel consolidation?

A:We are encouraging fewer, more solution-focused channel partners, which has led to robust activity and increased price realization.

Q:How is the transaction model progressing?

A:We are not seeing disruptions like last year, and channel productivity is expected to increase as partners adapt to the new model.

Q:What drove the uptick in revenue growth?

A:Strength came from AEC, upfront revenue from EBAs, and improved performance from the Autodesk store.

Q:What assumptions have changed in your guidance?

A:We have factored in greater macroeconomic uncertainty but have not seen any impact in the business yet.

Q:What are your thoughts on AI functionality opportunities?

A:We are focused on delivering specific AI enhancements that drive productivity gains for customers.

Q:What are your observations regarding the restructuring plans?

A:There was some disruption, but we have managed it well, and the new CRO is in place.

Q:Is the labor constraint still a challenge for customers?

A:Yes, the industry continues to face labor constraints, which drives the need for digital efficiency.

Q:What skills are you looking for in the new Revenue Officer?

A:We are looking for strong enterprise sales skills and cloud knowledge to support our strategic partnerships.

Q:How are you thinking about pricing philosophy for renewals?

A:We will give price increases consistent with the value delivered, but it's too early to discuss specifics.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the specific impacts of macroeconomic uncertainty on their business, stating they have not seen any impact yet but are being prudent in their guidance.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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