Autodesk (NASDAQ:ADSK) Reports Q3 In Line With Expectations But Quarterly Guidance Underwhelms

Radek Strnad /
2022/11/22 4:06 pm EST

Design software company Autodesk (NASDAQ:ADSK) reported results in line with analyst expectations in Q3 FY2023 quarter, with revenue up 13.6% year on year to $1.28 billion. However, guidance for the next quarter was less impressive, coming in at $1.31 billion at the midpoint, being 1.39% below analyst estimates. Autodesk made a GAAP profit of $198 million, improving on its profit of $136.7 million, in the same quarter last year.

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Autodesk (ADSK) Q3 FY2023 Highlights:

  • Revenue: $1.28 billion vs analyst estimates of $1.28 billion
  • EPS (non-GAAP): $1.70 vs analyst expectations of $1.70
  • Revenue guidance for Q4 2023 is $1.31 billion at the midpoint, below analyst estimates of $1.32 billion
  • Free cash flow of $460 million, up 86.9% from previous quarter
  • Gross Margin (GAAP): 90.6%, down from 91.8% same quarter last year

"We recently announced Autodesk Fusion, Forma, and Flow, our three industry clouds, which will connect data, teams and workflows in the cloud on our trusted platform," said Andrew Anagnost, Autodesk president and CEO.

Founded in 1982 by John Walker and growing into one of the industry's behemoths, Autodesk (NASDAQ:ADSK) makes computer-aided design (CAD) software for engineering, construction, and architecture companies.

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Sales Growth

As you can see below, Autodesk's revenue growth has been mediocre over the last two years, growing from quarterly revenue of $952.4 million in Q3 FY2021, to $1.28 billion.

Autodesk Total Revenue

This quarter, Autodesk's quarterly revenue was once again up 13.6% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $43 million in Q3, compared to $67 million in Q2 2023. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Autodesk is expecting revenue to grow 8.16% year on year to $1.31 billion, slowing down from the 16.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 11.7% over the next twelve months.

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What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Autodesk's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 90.6% in Q3.

Autodesk Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.91 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop that is still a great gross margin, that allows companies like Autodesk to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Autodesk's Q3 Results

With a market capitalization of $44.5 billion, more than $1.8 billion in cash and with free cash flow over the last twelve months being positive, the company is in a very strong position to invest in growth.

We struggled to find many strong positives in these results. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results were not the best we've seen from Autodesk. The company is down 2.81% on the results and currently trades at $203 per share.

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The author has no position in any of the stocks mentioned.