Earnings Preview: Autodesk (ADSK) looks set to deliver another strong quarter

Autodesk, Inc. (NASDAQ: ADSK) has constantly diversified its business over the years, distributing across multiple industries and geographies. Those initiatives have enabled the company to better prepare itself for the digital transformation wave and AI boom.  

Q4 Report on Tap

When the San Francisco-based design software maker announces fourth-quarter 2024 results on February 29, after the closing bell, it is expected to report net income of $1.95 per share, excluding one-off items. The forecast is slightly below the mid-point of the management’s Q4 guidance of $1.91-1.97 per share. The company had earned $1.86 per share in the fourth quarter of 2023, on an adjusted basis. The forecasted year-over-year earnings growth reflects an estimated 8.6% growth in revenues to $1.43 billion. The top-line outlook is broadly in line with the Autodesk leadership’s expectation of $1.422-$1.437 billion.

The cloud-based software company’s stock ended 2023 on a strong note and maintained the momentum so far this year. It has gained 28% in the past three months alone and outperformed the market during that period. The valuation is reasonable, which makes the stock a good investment option for the long term. The company’s aggressive AI push — including the recent launch of Autodesk AI, a technology that enhances productivity and boosts innovation — should drive revenue growth going forward.

Cautious Outlook

Last year, new business trends for the company were consistent, and renewal rates remained stable despite macroeconomic uncertainties and geopolitical headwinds, thanks to effective customer diversification and the subscription business model. However, overall growth slowed during that period as the company reduced spending and signed shorter-term contracts. The management expects the slowdown to continue and sees slower revenue growth in the next fiscal year.

From Autodesk’s Q3 2024 earnings call:

“We intend to transition our indirect business to the new transaction model in all our major markets globally. In the new transaction model, partners provide a quote to customers, but the actual transaction happens directly between Autodesk and the customer. The new transaction model is an important step on our path to integrate more closely with our customers’ workflows enabled by, among other things, Autodesk Platform Services and our industry cloud, Fusion, Forma, and Flow. Autodesk, its customers, and partners will be able to build more valuable, data-driven, and connected products and services in our industry cloud and on our platform.”

Key Numbers

The company has a good track record of delivering bigger-than-expected quarterly earnings and revenues, and the trend continued in the most recent quarter. In the third quarter of 2024, adjusted earnings jumped 22% annually to $2.07 per share. The growth was driven by a 10% increase in revenues to $1.41 billion. A 25% fall in Maintenance revenues, which accounts for about 93% of the total, was more than offset by growth in Subscription and Other revenues. Meanwhile, there was an 11% decrease in total billings.

Shares of Autodesk traded slightly higher on Monday afternoon and continued to stay above the 52-week average. The stock has gained 19% in the past six months.