"Two years ago, we began this journey to move away from multi-year contracts billed upfront to multi-year contracts billed annually. I know that created some clouds for all of you on the outlook of Autodesk for 18 months. But look -- look at the results, okay. Two years ago the number of multi-year contracts billed upfront was measured in the billions. Today, you heard from Betsy, it's immaterial, right? Now the great thing about that is that billions from the past comes back to you, but it comes back to you in a nice smooth build up over time." - Andrew Anagnost
Autodesk Inc (ADSK) QQ2 2025 Earnings Review: 13% CC Revenue Growth, Margin Expansion, and Transition to a New Transaction Model
Executive Summary
Autodesk reported a solid Q2 2025, delivering 13% revenue growth in constant currency and 12% reported growth, supported by broad-based momentum in AEC and manufacturing. Billings rose 13% YoY with a modest tailwind from the shift to annual billings and a mechanical lift of ~2% from the new transaction model, even as co-terming and geography rollout effects introduced timing headwinds. Free cash flow in the quarter was $203 million, contributing to a cash balance of $1.513 billion and total liquidity that supports ongoing buybacks and selective capex. Management reiterated a disciplined investment stance aimed at margin expansion and higher sales and marketing productivity through the transition to the new transaction model, while acknowledging near-term margin headwinds as channel payments move from contra-revenue to S&M expense and as Western Europe launches in September.
Guidance was raised for fiscal 2025: billings now expected to be $5.88–$5.98 billion and revenue to $6.08–$6.13 billion, with non-GAAP operating margins at 35–36% and free cash flow guidance raised to $1.45–$1.50 billion. Management also signaled stronger free cash flow growth into fiscal 2026, with an expected midpoint around $2.05 billion, driven by renewal cohorts returning, the annual-billing transition, and a larger EBA base. The company maintains a target to achieve Rule of 40 discipline, aiming for 45%+ in the long run, underpinned by cloud/AI investments, product convergence, and a scalable go-to-market model.
Strategically, Autodesk continues to monetize secular trends in AEC, manufacturing, and media/entertainment through end-to-end, cloud-enabled platforms (Autodesk Construction Cloud, Fusion, and industry clouds). The management emphasis on earnings quality (non-GAAP profit as a primary metric during the transition) and capital returns (active buybacks) highlights a focus on durable value creation even as the company navigates the transition to annual billings and the new transaction model.
Key Performance Indicators
Revenue
1.51B
QoQ: 6.21% | YoY:11.90%
Gross Profit
1.37B
90.70% margin
QoQ: 6.64% | YoY:12.07%
Operating Income
343.00M
QoQ: 14.72% | YoY:30.92%
Net Income
282.00M
QoQ: 11.90% | YoY:27.03%
EPS
1.31
QoQ: 11.97% | YoY:25.96%
Revenue Trend
Margin Analysis
Key Insights
Total revenue: $1.505 billion in Q2 2025, YoY growth 11.9%, QoQ growth 6.21%.
Revenue by segment (constant currency): AutoCAD/AutoCAD LT up ~8%; AEC up ~15%; Manufacturing up ~low- to mid-teens (excluding upfront revenue); M&E up ~5%.
Revenue by geography: 13% YoY growth in all regions at constant currency; Direct revenue up 21% and representing 40% of total revenue, up 3 percentage points.
Gross margin: GAAP and non-GAAP gross margins broadly flat versus prior period (reported as ~90.7% gross margin).
Operating income: GAAP operating income ~$343 million; non-GAAP operating income margin ~22.7% (GAAP 22.8% implied by reported data).
Financial Highlights
Revenue and Growth:
- Total revenue: $1.505 billion in Q2 2025, YoY growth 11.9%, QoQ growth 6.21%.
- Revenue by segment (constant currency): AutoCAD/AutoCAD LT up ~8%; AEC up ~15%; Manufacturing up ~low- to mid-teens (excluding upfront revenue); M&E up ~5%.
- Revenue by geography: 13% YoY growth in all regions at constant currency; Direct revenue up 21% and representing 40% of total revenue, up 3 percentage points.
Gross, Margin and Profitability:
- Gross margin: GAAP and non-GAAP gross margins broadly flat versus prior period (reported as ~90.7% gross margin).
- Operating income: GAAP operating income ~$343 million; non-GAAP operating income margin ~22.7% (GAAP 22.8% implied by reported data).
- Net income: ~$282 million; net income margin ~18.7%; Earnings per share (diluted): $1.30–$1.31.
- Stock-based compensation: expected to fall by >1 percentage point as a share of revenue in FY25, contributing to margin trajectory.
Cash Flow and Balance Sheet:
- Free cash flow (quarter): ~$198 million; operating cash flow: $212 million.
- Cash and cash equivalents: $1.513 billion; total cash and short-term investments: $1.878 billion.
- Share repurchases: ~471k shares repurchased for ~$115 million (avg price ~$245).
- Deferred revenue: down 13% to $3.7 billion; RPO: $5.9 billion; current RPO: $3.9 billion (growth +12% and +11%, respectively).
- Net debt: ~$1.09 billion; total debt: ~$2.603 billion; liquidity remains solid to support buybacks and capex.
Capital Allocation and Outlook:
- Fiscal 2025 guidance: billings $5.88–$5.98B; revenue $6.08–$6.13B; non-GAAP operating margin 35–36%; free cash flow $1.45–$1.50B.
- Fiscal 2026 outlook (approximate): FCF around $2.05B at the midpoint; revenue growth near 11% in 2025 with higher revenue tailwinds in 2026 due to renewals and annual billing, offset by margin headwinds from the new transaction model and continued investment in people/process automation.
- Management emphasizes Rule of 40 framework with a long-term target of 45%+.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.51B
11.90%
6.21%
Gross Profit
1.37B
12.07%
6.64%
Operating Income
343.00M
30.92%
14.72%
Net Income
282.00M
27.03%
11.90%
EPS
1.31
25.96%
11.97%
Key Financial Ratios
currentRatio
0.64
grossProfitMargin
90.7%
operatingProfitMargin
22.8%
netProfitMargin
18.7%
returnOnAssets
2.83%
returnOnEquity
11.4%
debtEquityRatio
1.05
operatingCashFlowPerShare
$0.98
freeCashFlowPerShare
$0.92
priceToBookRatio
21.61
priceEarningsRatio
47.4
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Theme: Strategy and model transition
- Quote: Andrew Anagnost, on the new transaction model and financial discipline: “Two years ago, we began this journey to move away from multi-year contracts billed upfront to multi-year contracts billed annually... the money is coming and it is building up.”
- Theme: Margin and profitability trajectory: Betsy Rafael, on guidance and margins: “The tailwind to revenue growth will be greater in fiscal '26 than in '25.”
Theme: Operational execution and market backdrop
- Andrew discusses construction and manufacturing momentum, with several customer wins (e.g., Thornton Tomasetti renewed EBA with Autodesk and expanded it by >50%; European water operators consortium expanding BIM Collaborate usage) illustrating the growth of end-to-end workflows across project lifecycles.
- Betsy emphasizes the impact of the new transaction model on billings/revenue timing and the focus on S&M efficiency to drive long-term margin expansion.
Two years ago, we began this journey to move away from multi-year contracts billed upfront to multi-year contracts billed annually. I know that created some clouds for all of you on the outlook of Autodesk for 18 months. But look -- look at the results, okay. Two years ago the number of multi-year contracts billed upfront was measured in the billions. Today, you heard from Betsy, it's immaterial, right? Now the great thing about that is that billions from the past comes back to you, but it comes back to you in a nice smooth build up over time.
— Andrew Anagnost
The tailwind to revenue growth will be greater in fiscal '26 than in '25.
— Betsy Rafael
Forward Guidance
Guidance and outlook: Autodesk reinforced a constructive trajectory through the Q2 results and the ongoing rollout of the new transaction model. Key drivers include:
- Western Europe go-live in September, contributing a ~1.0–1.5 percentage point uplift to reported billings in FY25; North America co-terming effects add ~3–4 percentage points to billings in FY25. Net effect: ~5–6 percentage point tailwind to FY25 billings.
- Revenue growth: FY25 guidance raised to a midpoint of ~11% (6.08–6.13B revenue implies mid ~6.10B); the 40M uplift to the top end reflects Western Europe launch and acquisitions.
- Margin: Non-GAAP operating margin targeted at 35–36% for FY25; margin improvement (~1–1.5 payroll/headwind offset) expected from the new model and efficiency gains; stronger gross margins reflect high subscription mix and product resilience.
- Free cash flow: FY25 free cash flow guidance raised to $1.45–$1.50B; FY26 FCF guidance implied to be around $2.05B at the midpoint, supported by renewal backlogs, the annual-billing tailwind, and a larger EBA cohort.
- Investment thesis: Autodesk continues to pursue secular growth in AEC, manufacturing, and media/entertainment, leveraging cloud, AI, and platform strategies to improve customer outcomes and expand the ecosystem. management maintains a 45%+ Rule of 40 objective over time, signaling a balanced approach to growth and profitability.
Key factors investors should monitor: pace of transaction-model rollout by geography (especially Western Europe), renewal/contract mix dynamics, channel partner behavior during transition, and the evolution of ASPs in Fusion and ACC-related offerings.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ADSK Focus
90.70%
22.80%
11.40%
47.40%
INTU
74.70%
10.90%
2.09%
125.19%
ZM
75.50%
17.40%
2.57%
21.31%
SNOW
66.80%
-40.90%
-7.67%
-34.36%
NOW
79.00%
9.14%
3.02%
154.81%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Autodesk remains a structurally leveraged growth company with a strong subscription backbone and growing cash generation. The Q2 2025 results demonstrate resilience across core franchises (AEC, manufacturing, and M&E) even as the company transitions to a new transaction model. The near-term offsetting headwinds to margins are offset by mid- to long-term efficiency gains, increased S&M productivity, and a tailwind from European market expansion. The FY25 guidance raises the top-line trajectory and tightens focus on cash-based metrics (free cash flow). The anticipated FY26 free cash flow around $2.05B, supported by renewal backlogs and annual-billing mechanics, points to a compelling long-term cash-generation profile. The most important variables for investors are the successful rollout of the new model across geographies (especially Western Europe), the rate of renewal-driven cross-sell/upsell, and the degree to which margins normalize as efficiencies mature. In a competitive software landscape, Autodesk’s ability to monetize cloud-platform investments, maintain a robust customer ecosystem, and execute on capital returns should underpin continued shareholder value creation, with the caveat that near-term profitability is likely to be noisier during the transition.
Key Investment Factors
Growth Potential
Sustained growth from secular trends in AEC (infrastructure, construction digitization), manufacturing digital transformation, and media/entertainment; expansion of ACC, Fusion, and Industry Clouds; internationalization and mid-market expansion fueling multi-year ARR growth; higher ASPs driven by Fusion extensions and add-ons.
Profitability Risk
Near-term margin headwinds from the transition to the new transaction model and co-terming; execution risk in rolling out in Europe and other geographies; competition from Dassault Systèmes and PTC; macro/macro-policy/geopolitical risk affecting customer IT budgets; potential variability in larger enterprise deals and M&E project cycles due to strikes and geopolitical events.
Financial Position
Strong liquidity with $1.513B cash and $1.878B cash+short-term investments; debt level of ~$2.603B with net debt ~$1.09B; robust RPO ($5.9B) and current RPO of $3.9B; disciplined buyback program ($115M in Q2) and ongoing capital return strategy; high gross margins (~90%) and improving operating margins as the model transition progresses.
SWOT Analysis
Strengths
Diversified product portfolio across AEC, manufacturing, and Media & Entertainment with end-to-end cloud-enabled workflows (ACC, BIM, Fusion).
Very high gross margins (~90%) and strong annual subscription model.
Healthy renewal dynamics and a broad, global customer base with expanding international footprint.
Solid cash generation and disciplined capital allocation (buybacks, debt management) supporting shareholder value.
Clear strategic focus on platform acceleration and AI-enabled product velocity to improve efficiency.
Weaknesses
Near-term gross-to-operating margin headwinds from the transition to the new transaction model and co-terming effects.
Geographic softness in China and Korea; M&E softness due to Hollywood strikes; macro-driven demand variability.
Transitional timing risk as Western Europe rollout occurs and CFO search completes; execution risk in the Go-To-Market transformation.
Reliance on renewals for steady revenue; channel dynamics during transition may introduce quarterly volatility.
Opportunities
Accelerated monetization from ACC and Fusion extensions; higher attach rates and ASPs through digital ecosystem.
Expansion in Europe and other international markets; increased mid-market penetration.
Capitalizing on the LA28 partnership to showcase BIM/Construction Cloud capabilities and drive pipeline.
Further efficiency gains from the new transaction model and S&M productivity improvements.
Threats
Competition from DS (Dassault Systèmes) and PTC in design-to-build ecosystems.
Macro uncertainty and potential IT budget contractions; regulatory/currency headwinds in non-U.S. markets.
Potential delays in enterprise-wide contracts due to geopolitical or policy shifts; execution risk in global rollout.