Design and engineering software specialist Autodesk (ADSK -0.90%) reported fiscal 2025 third-quarter earnings on Tuesday, Nov. 26, that topped analyst consensus estimates. The report highlighted the company's robust performance, with revenue coming in at $1.57 billion against an expected $1.56 billion. The company posted an adjusted EPS of $2.17, beyond the $2.12 anticipated by analysts.
Despite some challenges, the overall quarter reflects positive momentum for Autodesk.
| Metric | Q3 FY2025 | Analysts' Estimate | Q3 FY2024 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $2.17 | $2.12 | $2.07 | 4.8% |
| Revenue | $1.57 billion | $1.56 billion | $1.41 billion | 11% |
| Adjusted operating margin | 36% | --- | 39% | (3 pps) |
| Free cash flow | $199 million | --- | $13 million | 1,431% |
Source: Autodesk. Note: Analyst consensus estimates provided by FactSet. YOY = Year over year.
Overview of Autodesk's Business
Autodesk's core business revolves around design and engineering software, servicing industries such as architecture, construction, and manufacturing. The company is known for its innovative product developments, including its AutoCAD software. Lately, Autodesk has concentrated on transitioning to subscription-based and cloud services, reflecting industry tendencies toward cost-effective, flexible solutions.
Subscription and cloud adoption have been crucial for Autodesk, securing predictable revenue streams and improving customer engagement. Recently, its efforts have centered on enhancing these subscription models, integrating them with cloud-based services. Strategic partnerships and diversification have also supported its sustained growth.
Quarterly Highlights
Autodesk noted considerable progress in Q3 with a 28% increase in "Make" revenue -- part of its Design and Make offerings. This validates the company's focus on product and service innovation. Subscription revenue climbed by 11%, adding to its recurring revenue stream totaling 97% of overall revenue. The strategic shift towards subscription-based models continues to benefit its revenue stability and growth predictability.
Geographically, Autodesk saw a robust 12% revenue uplift year over year in the EMEA region and a 10% rise in the APAC region. This growth signifies effective global operations and supports the company's strategy of regional diversification to mitigate localized economic challenges. Noted one-time events include progress in Autodesk's transaction model implementation in Western Europe, though these developments add to its strengthening position in the market.
Free cash flow surged to $199 million from $13 million in the previous year, reflecting a vast improvement in cash generation capabilities. While the adjusted operating margin slightly dipped to 36% from the prior year's 39%, it remained aligned with management's guidance. The operating margin was reported at 22%, as opposed to a 24% margin in the previous year.
Looking Ahead
For fiscal 2025's fourth quarter, Autodesk management projects revenue in the realm of $1.623 billion to $1.638 billion. The company also forecasts adjusted EPS between $2.10 and $2.16, suggesting continued steady performance. The full-year fiscal 2025 guidance was revised upwards for billings, revenue, and adjusted EPS, showcasing confidence in its ongoing momentum.
Investors should focus on Autodesk's continued emphasis on subscription models and cloud adoption as drivers of its future growth. The company's strategic alliances and channel initiatives underline its operational resilience and capacity for further expansion.
