Autodesk, Inc. (ADSK) Q2 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong financial performance, with increased revenue, billings, and free cash flow guidance. The company is confident in achieving its operating margin targets and has demonstrated growth across various sectors. Despite some vague responses in the Q&A, overall sentiment is positive, driven by strategic initiatives in AI, cloud, and platform development, as well as successful customer adoption and partnerships. The positive outlook for the second half of the year and improved shareholder returns further support a positive stock price reaction.

Key Financial Performance

Total Revenue Grew 17% as reported and 18% in constant currency. The contribution from the new transaction model to revenue was approximately $105 million in the second quarter. Excluding the impact of the new transaction model, total revenue grew 11% in constant currency.

Billings Increased 36% as reported and 34% at constant currency, reflecting the shift to annual billings for most multiyear contracts and the transition to the new transaction model. The contribution from the new transaction model to billings was approximately $129 million in the second quarter. Excluding the impact of the new transaction model, billings grew 26% at constant currency.

RPO (Remaining Performance Obligations) RPO of $7.3 billion and current RPO of $4.7 billion grew 24% and 20%, respectively, benefiting from tailwinds from the new transaction model.

Operating Margins Second quarter GAAP and non-GAAP operating margins were 25% and 39%, respectively, reflecting year-over-year increases of 240 and 140 basis points, respectively. This reflected operating leverage, ongoing cost discipline, and some timing benefits from restructuring, partly offset by the margin drag from the new transaction model.

Free Cash Flow Second quarter free cash flow was $451 million, which benefited from the earlier timing of billings in the quarter.

Share Repurchase Purchased approximately 1.2 million shares for $356 million at an average price of approximately $298 per share. Year-to-date, repurchased 2.5 million shares for $709 million.

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Operating Highlights

AI-powered Sketch AutoConstrain in Fusion: Delivered over 1.2 million dimensions since launch, with a 60% acceptance rate among commercial users and 90% of sketches fully constrained, providing substantial productivity gains.

Fusion with simulation, design, and data management extensions: Adopted by MotorScrubber to replace a competitive CAD solution, connecting disciplines, data, and workflows to drive efficiency and accelerate time to market.

Autodesk Construction Cloud: Adopted by Dynamic Energy to replace a competitive solution, addressing challenges with ERP integration, client billing, and forecasting.

Expansion in construction and manufacturing sectors: Sustained strong revenue and new customer momentum in construction, with Fusion driving strong growth in manufacturing.

Strategic engagement with Anna University, Chennai: Enhanced student employability through modern applied engineering education across 400+ affiliated colleges, supported by Autodesk's cloud-based platforms.

Go-to-market optimization plan: Remains on track, easing operational friction from the new transaction model implementation.

Increased operating margins: GAAP and non-GAAP operating margins increased by 240 and 140 basis points, respectively, due to operating leverage and cost discipline.

Focus on AI and generative design: Developing industry-specific foundation models and products, including Project Bernini, to redefine software and platforms with AI-driven CAD engines.

Hybrid consumption model: Adopted by an automotive manufacturer, combining named user subscriptions and Flex consumption tokens for scalable digital transformation.

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Risk or Challenges

Geopolitical, macroeconomic, and policy environment: Uncertainty in these areas could impact the company's ability to achieve its goals and maintain strong performance.

Softness in commercial sector: While there is strength in AECO, softness in the commercial sector could offset gains in other areas.

Operational friction from new transaction model: Although easing, the implementation of the new transaction model has caused operational friction, which could impact efficiency.

Macroeconomic uncertainty: Elevated uncertainty in the macroeconomic environment could affect the company's financial performance and strategic execution.

Tougher growth comparisons: The company will face tougher billings and revenue growth comparisons in the fourth quarter, which could challenge performance metrics.

Dependence on EBA renewals: A large pool of EBA renewals in the second half of the year introduces risk if these renewals do not materialize as expected.

Supply chain disruptions: Potential disruptions in the supply chain, as highlighted by a biopharmaceutical company example, could impact operations and customer satisfaction.

Regulatory compliance: Maintaining documentation and compliance in highly regulated industries, such as biopharmaceuticals, poses ongoing challenges.

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Guidance & Outlook

Full Year Revenue Guidance: Raised to a range of $7.025 billion to $7.075 billion, reflecting strong business performance and additional FX tailwinds.

Billings Guidance: Increased to a range of $7.355 billion to $7.445 billion, driven by strong business momentum and operational improvements.

Non-GAAP Operating Margin Guidance: Raised to approximately 37% for fiscal '26, or 40% on an underlying basis excluding the impact of the new transaction model. Expected to reach 41% in fiscal '29, or 45% on an underlying basis.

Free Cash Flow Guidance: Increased by $88 million at the midpoint to a range of $2.2 billion to $2.275 billion for fiscal '26.

Share Buyback Targets: Raised by $100 million to a range of $1.2 billion to $1.3 billion for fiscal '26, representing a 40% to 50% increase compared to fiscal '25.

Macroeconomic Assumptions: The macroeconomic environment is broadly stable but uncertainty remains elevated. Guidance reflects cautious assumptions for the second half of the year.

Long-term Operating Margin Expansion: Expected to improve by approximately 500 basis points on a reported basis and 900 basis points on an underlying basis by fiscal '29, driven by efficiency gains and operating leverage.

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Shareholder Return Plan

Share Repurchase Program: We purchased approximately 1.2 million shares for $356 million at an average price of approximately $298 per share. Year-to-date, we have repurchased 2.5 million shares for $709 million. We've also raised our fiscal '26 share buyback targets by $100 million to between approximately $1.2 billion and $1.3 billion, which is a 40% to 50% increase compared to fiscal '25.

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Key Q&A

Q:What is Autodesk's approach to transformative M&A?

A:Autodesk prioritizes organic investment in its business to drive its strategy around platform, AI, and product development. M&A is considered for tech tuck-ins that accelerate the existing roadmap or extend adjacency strategies, typically in the range of hundreds of thousands to billions of dollars, not tens of billions. Excess capital is returned to shareholders via stock buybacks.

Q:What are the high-level assumptions behind Autodesk's 41% margin goal for fiscal 2029?

A:The margin goal is based on various growth scenarios, balancing opportunity and risk. The largest contribution to margin expansion is expected from sales and marketing efficiency gains. Autodesk has inherent operating leverage and has demonstrated progress in optimizing sales and marketing. However, incremental margin headwinds are expected from the new transaction model in fiscal 2027, and annual progress towards the margin target will not be linear.

Q:What is driving Autodesk's momentum in the construction business?

A:Autodesk's construction business is performing well across the U.S. and internationally, with strong performance in the payments business and wins in both the top of the pyramid and mid-market. The company has built a comprehensive and modern end-to-end platform, focusing on areas like pre-construction and field experience. Autodesk plans to announce further advancements at AU.

Q:What is the EBA renewal opportunity for Autodesk in the back half of the year?

A:Autodesk has a large pool of EBA renewals and a significant product subscription renewal base to close. The company has executed well in the first half of the year and feels well-positioned for the back half, with continued momentum in renewals and expansions.

Q:What drove the increase in Autodesk's billings guidance for the year?

A:The increase in billings guidance is attributed to continued strength in AECO, construction, and Make segments, as well as strong net revenue retention rates. The broader momentum from product innovation and go-to-market execution in the first half of the year is expected to continue into the second half.

Q:What is Autodesk's approach to customer adoption of new technologies like APS and data models?

A:Autodesk tracks API usage and sees increasing adoption of granular data and APIs among customers. Adoption varies by industry and pace, but features like AutoConstrain in Fusion have high acceptance rates, demonstrating productivity gains. Autodesk expects ongoing experimentation and use of new technologies, with more updates to be shared at AU.

Q:What drove Autodesk's growth acceleration to 11% this quarter?

A:Growth was driven by strength in the AEC sector, particularly in data centers, industrial buildings, and infrastructure. EBAs were strong due to upfront revenue, and the Autodesk Store performed well, benefiting from the new transaction model. Geographically, the Middle East and India stood out due to infrastructure investments.

Q:How confident is Autodesk in achieving its 2029 operating margin target?

A:Autodesk is confident in achieving the target under various growth scenarios, balancing opportunity and risk. The company has demonstrated progress in sales and marketing optimization and operating leverage, which are key drivers for the margin target.

Q:How has the tariff impact influenced Autodesk's guidance and customer conversations?

A:Autodesk maintained the same assumptions for the second half of the year, considering the tariff impact. While tariffs do not directly affect Autodesk, some customers face pricing pressures and higher costs of goods. However, customers are coping well, and no additional red flags have been raised.

Q:What is the impact of the new transaction model on Autodesk's channel productivity and execution?

A:The new transaction model has led to a steady increase in new business from partners. Partners are becoming more comfortable with renewal motions and focusing on expanding customers and new business. The model has also driven efficiency improvements by capturing customers who previously worked with transactional-based partners.

Q:What is Autodesk's strategy for AI in manufacturing and other sectors?

A:Autodesk is focused on creating custom foundation models for AI that are useful to both the company and third parties. The strategy includes enhancing productivity through AI features like AutoConstrain in Fusion and developing new IP moats. Autodesk also partners with promising start-ups to extend its capabilities.

Q:What is the outlook for Autodesk's growth in the second half of the year?

A:Autodesk expects underlying momentum to continue, driven by improvements in partner-driven new business and consistent execution. The guidance assumes a cautious approach, but the company is well-positioned to outperform if the macro environment remains stable.

Q:What are the key drivers for Autodesk Construction Cloud's momentum?

A:Autodesk Construction Cloud's momentum is driven by its modern, connected stack and best-in-class solutions for design to make and preconstruction planning. The company continues to build functionalities and deliver on customer commitments, maintaining consistent performance and growth.

Q:What is Autodesk's approach to the online store and direct business?

A:Autodesk has invested in PLG motions and marketing initiatives to drive new business to the online store. The store captures customers who previously worked with transactional-based partners, improving efficiency and enabling better customer understanding. Self-service capabilities are being developed for future monetization.

Q:Why did Autodesk provide its fiscal 2029 operating margin outlook now?

A:Autodesk updated its internal long-term view and completed its long-term planning cycle, enabling it to share its fiscal 2029 operating margin outlook. The company aims to address high investor interest in long-term margins and demonstrate its progress in optimizing go-to-market efforts.

Q:Review of Unclear Management Responses

A:Management avoided directly addressing the potential for disruption risk from tariffs in the back half of the year, providing only general comments about customer coping mechanisms. Additionally, while discussing AI adoption and its impact, management used vague language about 'green shoots' and 'ongoing experimentation,' without providing specific data or timelines. Similarly, when asked about the direction of the business if uncertainty does not pan out, management provided general statements about momentum and execution without clear details.

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Earnings Word Cloud

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

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The earnings call summary and Q&A indicate strong financial performance, increased guidance, and positive business momentum. Raised revenue, billings, and share buyback targets signal confidence. The Q&A highlighted management's strategic focus on AI, automation, and margin expansion, although some uncertainties remain. Overall, the sentiment is positive, with potential for stock price growth.

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