Autodesk's Q2 2026 Earnings Call: Contradictions Emerge on M&A Strategy, Channel Impact, Macroeconomic Uncertainty, and Sales Optimization

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 28, 2025

Financials Results

• Revenue: Up 17% YOY as reported (18% cc); contribution from new transaction model approx. $105M
• EPS: Non-GAAP EPS exceeded the high end of guidance; exact figure not disclosed
• Operating Margin: Non-GAAP 39%, up 140 bps YOY; GAAP 25%, up 240 bps YOY

Guidance:

• FY26 revenue guidance raised to $7.025B–$7.075B (FX tailwinds; tougher H2 comps, esp. Q4).
• FY26 billings guidance raised to $7.355B–$7.445B.
• FY26 non-GAAP operating margin ~37% reported (~40% underlying, excl. transaction model).
• FY26 free cash flow guidance raised to $2.2B–$2.275B (+$88M at midpoint).
• FY26 share repurchases now $1.2B–$1.3B (40%–50% above FY25).
• Large EBA renewals expected in H2; macro bottom-end assumptions remain cautious.
• Long-term: FY29 reported non-GAAP operating margin 41% (~45% underlying); path not linear with FY27 headwinds from transaction model.

Business Commentary:

• Strong Financial Performance and Guidance Increase:
• Autodesk delivered strong Q2 financial results, with revenue and non-GAAP earnings per share topping the higher end of guidance ranges.
• Billings, non-GAAP operating margin, and free cash flow exceeded expectations, leading to an increase in full-year guidance.

• The performance was driven by sustained strength in AECO, the new transaction model, and cost discipline.

• AECO and Construction Cloud Momentum:

• AECO, particularly benefiting from sustained investment in data centers and infrastructure, contributed significantly to revenue growth.
• The Autodesk Construction Cloud showed strength, with increased adoptions and expanded customer relationships, enhancing efficiency and sustainability.

• This momentum is supported by the comprehensive end-to-end industry clouds and platform, which drive convergence and extend into larger growth segments.

• AI and Product Innovation:

• Autodesk's AI initiatives, including generative design and AI-driven CAD engines, are poised to disrupt long-standing technology paradigms.
• Products like Project Bernini and AI-powered tools, like Sketch AutoConstrain, demonstrate significant productivity gains, with acceptance rates reaching 60%.

• The company is leveraging AI to create integrated solutions that enhance collaboration, productivity, and data management across project life cycles, leading to improved efficiency and risk reduction.

• New Transaction Model and Channel Efficiency:

• The new transaction model contributed approximately $105 million to Q2 revenue and $129 million to billings.
• This shift is enabling Autodesk to capture more business directly, improving customer engagement and price realization efficiency.

• The model allows Autodesk to engage directly with more customers, enhancing customer understanding and optimizing go-to-market strategies.

• Operational Margin Expansion and Strategic Priorities:

• Autodesk raised its non-GAAP operating margin guidance for fiscal '26 to approximately 41%, with an underlying margin improvement of approximately 500 basis points.
• The company remains focused on optimizing sales and marketing efficiency, capital allocation, and strategic priorities in cloud, platform, and AI.
• Margin expansion is supported by inherent operating leverage and ongoing cost discipline, with additional benefits expected as the new transaction model scales.

Sentiment Analysis:

• “Revenue and non-GAAP earnings per share topped the higher end of our guidance ranges… we are raising our guidance for the full year.” “Second quarter GAAP and non-GAAP operating margins were 25% and 39%, reflecting year-over-year increases of 240 and 140 basis points.” “We’ve raised our free cash flow guidance… to $2.2B–$2.275B.” “Momentum in our construction business is unchanged… no deceleration.” “We’ve raised our non-GAAP operating margin guidance for the year… expect reported non-GAAP operating margin to be 41% in fiscal ’29.”

Q&A:

• Question from Saket Kalia (Barclays): What is your appetite for transformative M&A?
  Response: Prioritize organic investment; pursue targeted tuck-ins to accelerate road map; typical deal sizes hundreds of millions to low billions, not tens of billions; excess capital goes to share repurchases.

• Question from Saket Kalia (Barclays): Walk through assumptions behind the FY29 41% margin goal.
  Response: Margin expansion driven mainly by sales/marketing optimization and operating leverage; designed to be achievable across growth scenarios; progress won’t be linear due to transaction-model headwinds in FY27.

• Question from Adam Borg (Stifel): What’s driving ongoing momentum in construction and outlook for ACC domestically/internationally?
  Response: Construction momentum unchanged and broad-based; strong U.S. and international wins across tiers; payments business strong; expect further advances in preconstruction and field capabilities.

• Question from Adam Borg (Stifel): EBA renewal opportunity size and pipeline for the back half?
  Response: Large pool of EBAs and subscription renewals to close; strong H1 execution sets up well; pipeline supports confidence for H2.

• Question from Jay Vleeschhouwer (Griffin Securities): What mix dynamics drove the higher billings outlook?
  Response: Strength persisted in AECO, construction, and Make; robust net revenue retention; product innovation and go-to-market execution sustaining momentum.

• Question from Jay Vleeschhouwer (Griffin Securities): Adoption pace for APS, new data models, and granular data?
  Response: API usage rising among large and mid-market customers; granular data connecting processes; AI features (e.g., Fusion AutoConstrain) show high acceptance, supporting gradual adoption.

• Question from Jason Celino (KeyBanc): Drivers behind growth acceleration despite stable selling environment?
  Response: AEC outperformed (data centers, industrial, infrastructure); EBAs strong with upfront revenue; Autodesk Store strength from transaction-model shift; Middle East and India notable.

• Question from Jason Celino (KeyBanc): Confidence in FY29 margin target independent of growth?
  Response: Target built to be achievable across growth scenarios; sales/marketing efficiency and inherent operating leverage underpin confidence.

• Question from Elizabeth Porter (Morgan Stanley): How are tariffs affecting guidance and customer conversations?
  Response: Bottom-end guidance remains cautious; Autodesk not directly exposed; customers coping without new red flags; tougher H2 comps from prior acquisitions and transaction model.

• Question from Elizabeth Porter (Morgan Stanley): Channel productivity and new-business trends post transaction model?
  Response: Partner-driven new business is steadily improving as motions stabilize; expect continued gains through the year.

• Question from Taylor McGinnis (UBS): Why didn’t margins rise as much as revenue in the full-year guide?
  Response: On an underlying basis, ~two-thirds of incremental revenue flows to margin; disciplined costs and restructuring on plan; timing effects exist.

• Question from Joseph Vruwink (Baird): Autodesk’s role in AI—build vs. partner?
  Response: Building proprietary, industry-specific foundation models for tasks-to-systems automation while partnering selectively with startups; Fusion central but AI will span AEC as well.

• Question from Joseph Vruwink (Baird): Why implied step-down in 4Q underlying growth?
  Response: Prudent guidance posture maintained; assumptions unchanged amid uncertainty.

• Question from Hoi-Fung (Ken) Wong (Oppenheimer): Is the low end of guidance insulated against severe downside?
  Response: Yes—similar conservative downside assumptions as last quarter, with a shorter remaining period.

• Question from Hoi-Fung (Ken) Wong (Oppenheimer): End-market appetite for AI?
  Response: Strong demand for productivity; Autodesk will deliver in Forma and Fusion and monetize via subscription, consumption, and outcomes.

• Question from Josh Tilton (Wolfe Research): If uncertainty doesn’t materialize, how should we view H2 trajectory?
  Response: If environment holds, expect to outperform the low end; mid-to-high assumes status quo; focus on execution.

• Question from Josh Tilton (Wolfe Research): Is outperformance prudence or improving momentum?
  Response: Expect momentum to continue; partner new-business contributions are improving.

• Question from Sitikantha Panigrahi (Mizuho): Channel impact one year into the new transaction model?
  Response: Lower-tier partner transactions shifting direct improves efficiency; partners acclimating; partner new business rising; Americas renewals as expected; EMEA renewals next.

• Question from Sitikantha Panigrahi (Mizuho): ACC competitive dynamics and outlook with more direct sales?
  Response: ACC momentum steady; modern, connected stack with strong preconstruction; no signs of slowdown; new offerings should further accelerate.

• Question from Tyler Radke (Citi): Online store strength—any PLG or marketing changes?
  Response: Investing in PLG and store to capture transactional partner customers; building self-serve and data-driven cross-sell, which will mature over time.

• Question from Tyler Radke (Citi): Why pre-announce FY29 margin target and FCF outlook linkage?
  Response: Long-term plan nearly complete and investor interest high; over time, FCF should closely track operating income as the model settles, with some near-term tax puts/takes.

• Question from Koji Ikeda (BofA): What unlocks more budget for large global contractors?
  Response: Industry faces capacity constraints; regulatory streamlining helps, but backlog is large; industrialized construction/prefab is a key process unlock.

• Question from Koji Ikeda (BofA): NRR trend change versus last quarter?
  Response: Ex-transaction model, NRR remains within the 100%–110% range; difficult to disaggregate precisely; consistent with expectations.

• Question from Michael Turrin (Wells Fargo): Any macro improvement behind AEC strength and CAD growth?
  Response: Performance reflects Autodesk’s diversification across the built world; current strength in data centers, industrial buildings, and infrastructure.

• Question from Michael Turrin (Wells Fargo): FCF more Q4-weighted—why?
  Response: Timing of EBA and larger subscription renewals increases Q4 collections.