Autodesk's (NASDAQ:ADSK) Posts Q1 Sales In Line With Estimates But Quarterly Guidance Underwhelms

Anthony Lee /
2023/05/25 4:04 pm EDT

Design software company Autodesk (NASDAQ:ADSK) reported results in line with analyst expectations in Q1 FY2024 quarter, with revenue up 8.46% year on year to $1.27 billion. However, guidance for the next quarter was less impressive, coming in at $1.32 billion at the midpoint, being 1.11% below analyst estimates. Autodesk made a GAAP profit of $161 million, improving on its profit of $146 million, in the same quarter last year.

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Autodesk (ADSK) Q1 FY2024 Highlights:

  • Revenue: $1.27 billion vs analyst estimates of $1.27 billion (small beat)
  • EPS (non-GAAP): $1.55 vs analyst expectations of $1.56 (small miss)
  • Revenue guidance for Q2 2024 is $1.32 billion at the midpoint, below analyst estimates of $1.33 billion
  • The company reconfirmed revenue guidance for the full year, at $5.41 billion at the midpoint
  • Free cash flow of $714 million, down 20.9% from previous quarter
  • Gross Margin (GAAP): 90%, down from 91.2% same quarter last year

"We are deploying next-generation technology and services and end-to-end digital transformation within and between the industries we serve and shifting Autodesk from products to capabilities," 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 $989 million in Q1 FY2022, to $1.27 billion.

Autodesk Total Revenue

Autodesk's quarterly revenue was only up 8.46% year on year, which might disappoint some shareholders. But the revenue actually decreased by $49 million in Q1, compared to $38 million increase in Q4 2023. However, Autodesk's sales do seem to have a seasonal pattern to them, and considering management is guiding for revenue to rebound in the coming quarter we wouldn't be too concerned.

Guidance for the next quarter indicates Autodesk is expecting revenue to grow 6.71% year on year to $1.32 billion, slowing down from the 16.7% 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 8.97% 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% in Q1.

Autodesk Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.90 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 Q1 Results

Sporting a market capitalization of $42.1 billion, more than $2.13 billion in cash and with positive free cash flow over the last twelve months, we're confident that Autodesk has the resources it needs to pursue a high growth business strategy.

Billings beat and free cash flow was strong in the quarter. On the other hand, it was unfortunate to see that the revenue and EPS guidance for the next quarter missed analysts' expectations and gross margin deteriorated a little. Overall, it seems to us that this was a complicated quarter for Autodesk. The company is flat on the results and currently trades at $198 per share.

Autodesk may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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