Design software company Autodesk (NASDAQ:ADSK) reported results in line with analyst expectations in Q2 FY2023 quarter, with revenue up 16.7% year on year to $1.23 billion. Guidance for the full year was in line with expectations with revenues guided to $5.01 billion at the midpoint. Autodesk made a GAAP profit of $186 million, improving on its profit of $115.6 million, in the same quarter last year.
Is now the time to buy Autodesk? Access our full analysis of the earnings results here, it's free.
Autodesk (ADSK) Q2 FY2023 Highlights:
- Revenue: $1.23 billion vs analyst estimates of $1.22 billion (0.99% beat)
- EPS (non-GAAP): $1.65 vs analyst estimates of $1.57 (4.96% beat)
- Revenue guidance for Q3 2023 is $1.28 billion at the midpoint, above analyst estimates of $1.26 billion
- The company reconfirmed revenue guidance for the full year, at $5.01 billion at the midpoint
- Free cash flow of $246 million, down 41.7% from previous quarter
- Gross Margin (GAAP): 90.3%, in line with same quarter last year
"We are moving from products to platforms and capabilities, and bringing those capabilities to any device, anywhere, through the cloud," 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.
The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games or interactive movies.
Sales Growth
As you can see below, Autodesk's revenue growth has been mediocre over the last year, growing from quarterly revenue of $1.05 billion, to $1.23 billion.
This quarter, Autodesk's quarterly revenue was once again up 16.7% year on year. On top of that, revenue increased $67 million quarter on quarter, a strong improvement on the $41.6 million decrease in Q1 2023, and a sign of acceleration of growth, which is very nice to see indeed.
Guidance for the next quarter indicates Autodesk is expecting revenue to grow 13.9% year on year to $1.28 billion, slowing down from the 18.2% 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 12.5% over the next twelve months.
In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.
Profitability
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 90.3% in Q2.
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. This is 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. It is good to see that the gross margin is staying stable which indicates that Autodesk is doing a good job controlling costs and is not under pressure from competition to lower prices.
Key Takeaways from Autodesk's Q2 Results
Sporting a market capitalization of $46.4 billion, more than $1.52 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.
It was good to see Autodesk provide next quarter revenue outlook exceeding analysts’ expectations. We were also glad to see the strong free cash flow. On the other hand, revenue growth is overall a bit slower these days. Zooming out, we think this was a decent quarter, showing the company is staying on target. The company is up 6.42% on the results and currently trades at $228 per share.
Should you invest in Autodesk 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.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.
The author has no position in any of the stocks mentioned.