Autodesk (ADSK)

3D design software company Autodesk (NASDAQ:ADSK) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 17.1% year on year to $1.76 billion. Guidance for next quarter’s revenue was better than expected at $1.81 billion at the midpoint, 1.9% above analysts’ estimates. Its non-GAAP profit of $2.62 per share was 6.9% above analysts’ consensus estimates.

Company Overview

Starting with AutoCAD in the 1980s and evolving into a comprehensive design ecosystem, Autodesk (NASDAQ:ADSK) provides software solutions for architecture, engineering, construction, manufacturing, and entertainment industries to design, simulate, and visualize projects.

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, 3D tours or interactive movies.

Autodesk's primary competitors include Dassault Systèmes (OTCMKTS:DASTY) with its SOLIDWORKS products, Bentley Systems (NASDAQ:BSY) in infrastructure software, Nemetschek Group (ETR:NEM) with its AEC solutions, PTC Inc. (NASDAQ:PTC) in CAD and PLM software, and Trimble (NASDAQ:TRMB) in construction technology.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, Autodesk grew its sales at a 11.7% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Autodesk.

This quarter, Autodesk reported year-on-year revenue growth of 17.1%, and its $1.76 billion of revenue exceeded Wall Street’s estimates by 2.3%. Company management is currently guiding for a 15% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 11.2% over the next 12 months, similar to its three-year rate. This projection is above average for the sector and suggests its newer products and services will help sustain its historical top-line performance.

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Autodesk’s billings punched in at $1.68 billion in Q2, and over the last four quarters, its growth was fantastic as it averaged 28.8% year-on-year increases. This alternate topline metric grew faster than total sales, meaning the company collects cash upfront and then recognizes the revenue over the length of its contracts - a boost for its liquidity and future revenue prospects.

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Autodesk’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a competitive market and must continue investing to grow.

Software is eating the world. It’s one of our favorite business models because once you develop the product, it usually doesn’t cost much to provide it as an ongoing service. These minimal costs can include servers, licenses, and certain personnel.

Autodesk’s gross margin is one of the highest in the software sector, an output of its asset-lite business model and strong pricing power. It also enables the company to fund large investments in new products and sales during periods of rapid growth to achieve higher profits in the future. As you can see below, it averaged an elite 91.7% gross margin over the last year. That means Autodesk only paid its providers $8.31 for every $100 in revenue.

Autodesk produced a 91% gross profit margin in Q2, down 1.2 percentage points year on year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs have been stable and it isn’t under pressure to lower prices.

Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

Autodesk has been a well-oiled machine over the last year. It demonstrated elite profitability for a software business, boasting an average operating margin of 21%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Analyzing the trend in its profitability, Autodesk’s operating margin decreased by 1.2 percentage points over the last year. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Autodesk generated an operating margin profit margin of 25.2%, up 2.4 percentage points year on year. The increase was encouraging, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Autodesk has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the software sector, averaging 28.5% over the last year.

Autodesk’s free cash flow clocked in at $451 million in Q2, equivalent to a 25.6% margin. This result was good as its margin was 12.1 percentage points higher than in the same quarter last year, but we note it was lower than its one-year cash profitability. Nevertheless, we wouldn’t put too much weight on a single quarter because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

Over the next year, analysts predict Autodesk’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 28.5% for the last 12 months will increase to 32%, it options for capital deployment (investments, share buybacks, etc.).

Autodesk reported $2.24 billion of cash and $2.73 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $2.61 billion of EBITDA over the last 12 months, we view Autodesk’s 0.2× net-debt-to-EBITDA ratio as safe. We also see its $3 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Autodesk blew past analysts’ billings expectations this quarter. We were also glad its EPS guidance for next quarter exceeded Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 11.3% to $321.43 immediately after reporting.

Updated: November 14, 2025 at 9:05 PM EST

Before investing in or passing on Autodesk, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Autodesk’s business quality ultimately falls short of our standards. To begin with, its revenue growth was uninspiring over the last five years, and analysts don’t see anything changing over the next 12 months. And while its admirable gross margin indicates excellent unit economics, the downside is its declining operating margin shows it’s becoming less efficient at building and selling its software. On top of that, its customer acquisition is less efficient than many comparable companies.

Autodesk’s price-to-sales ratio based on the next 12 months is 8.6x. Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $363.71 on the company (compared to the current share price of $300.04).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.