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Autodesk's shares surge with impressive Q4 earnings and forward-looking FY25 guidance

AInvestFriday, Mar 1, 2024 12:58 pm ET
1min read

Autodesk, a leading developer of design software, has reported impressive Q4 earnings, surpassing both EPS and revenue expectations. The company's announcement of optimistic revenue guidance for FY25 propelled its shares to their highest levels since January 2022.

For Q4, Autodesk showcased significant growth, with adjusted EPS at $2.09 and revenues reaching $1.47 billion, marking an 11.5% increase year-over-year. Despite a 19% drop in total billings due to shifting from an upfront to an annual billings model, the enterprise business sector, fueled by early renewals and strong Enterprise Business Agreements (EBA) revenues, drove growth. The AEC segment led with an 18% increase, followed by gains in Manufacturing and M&E sectors at 16% and 8%, respectively.

Autodesk is transitioning its billing approach for multi-year contracts to annual terms, aiming to align more closely with customer workflows and foster long-term operating income and free cash flow growth. Although this shift has temporarily disrupted billings, remaining performance obligations (RPO), and free cash flow, the company expects these effects to start diminishing within the year.

For FY25, Autodesk anticipates revenues between $5.99 and $6.09 billion, forecasting a modest impact on revenue growth and a 3-4% boost in billings growth from the billing model change. Despite operating margin pressures highlighted by an adjusted EPS forecast of $7.89-$8.11 that fell short of expectations, the outlook for free cash flow is positive, projecting a 14% year-over-year increase at the midpoint after a 37% decrease in FY24.

The company's performance is bolstered by a stable macroeconomic climate and the potential of AI to enhance productivity through rapid 3D representation generation, automation of labor-intensive tasks, and simplification of modeling processes. Management emphasizes its AI initiatives are already showing promise in boosting customer productivity.

Autodesk's recent numbers and forward-looking guidance indicate easing billing model transition headwinds and stable economic conditions, positioning FY25 as a pivotal year for the company. Shares of Autodesk have responded positively, reflecting the market's optimism about the company's direction and potential for sustained growth.


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