Autodesk Inc at Morgan Stanley Technology, Media & Telecom Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. And a key focus for the story has really been this opportunity to expand margins, where you guys guided fiscal '26 guide for the underlying margin expansion of about 300 bps. And you did have to make some tough decisions with a 9% headcount reduction. But help us understand what the actions are here that you're taking today to help with the margin expansion that is setting you up for just not fiscal '26 but really well beyond?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : And you guys are clearly making a lot of changes and controlling what you can, which is on the expense side. The area that is somewhat less under your control is on the demand side. And the uncertain macro has certainly been taking its hit. As a result, you guys have been operating towards that lower end of the prior 10% to 15% revenue target range and last week did walk away from some of those targets. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 03, 2025 / 9:50PM, ADSK.OQ - Autodesk Inc at Morgan Stanley Technology, Media & Telecom Conference So my question is has anything fundamentally changed as it relates to your outlook and your confidence on the long-term growth of the business? And are there any guardrails that you could provide just to assess where a floor could be as we look forward to receiving those targets at the Analyst Day in Q3?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : And within the clouds, one of the most impressive data points from the last earnings call was the 400 new logos in Construction Cloud. And compared to peers in the space, there was a significant number of new adds. So how are you driving that success? Is it underpenetrated downmarket customers? Or is it new regions? Just help us understand what's driving that momentum in Construction Cloud.

Question: Elizabeth Elliott - Morgan Stanley - Analyst : And I'd love to better understand how you see Autodesk's role evolving in this intersection between Design and Make in the cloud. What investments are you making to maintain that leadership in AEC? And then also, how do you balance investment between some of the traditional AutoCAD products and then the newer growth opportunities?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Yeah. And we've seen some really interesting announcements, whether it was auto-constrained in Fusion or drawing automation, really driving this AI proliferation into the core products. So I want to ask, how does Autodesk's AI strategy -- how is it differentiated from competitors? What are the unique advantages that you have in the space? Andrew, I'll let you start with that one.

Question: Elizabeth Elliott - Morgan Stanley - Analyst : And as we're seeing AI become increasingly integrated into the products, you're driving more value. How are you actually measuring the productivity gains for customers? And what's the broader framework for capturing some of that value back to Autodesk?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Got you. And something we often hear about the environment is just the headcount limitations that you have today. It would sound like we're pretty constrained. I'm just kind of finding those new heads. But what are you hearing on that side of the conversation?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. And then also kind of going back to some of the productivity side. Within your own productivity, you mentioned the transaction model taking a little bit of an impact. And it was something that we heard in our general partner conversations as well just, hey, I have to do more handholding with existing customers, getting them up to speed. And so the new business piece has really been one of the drags on your recent growth. What are the specific initiatives that you guys are implementing to drive that new business growth higher? And a question I often get is what drives your confidence that there is something more structurally changing in the market on the new business side?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. And then before I get to some questions for Janesh, another one on --

Question: Elizabeth Elliott - Morgan Stanley - Analyst : On the transaction model, so you guys are able to unlock a lot of sales and marketing efficiency, and as you just mentioned, by Autodesk owning that contract and the billing with the end customer. So what does it fundamentally enable for Autodesk from a visibility standpoint that just wasn't possible before?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Yeah. I think that's really important to understand where you were versus where you're going because a lot of people just assume that you have that visibility right off the bat.

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Yeah. And as the partners themselves are going from this buy-sell model to more of the agency model, how are you managing the relationship, particularly for some partners that might feel that their role is somewhat diminished?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : So it's almost like the partner is becoming that much more of a new business engine for you guys?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Yeah. So, Janesh, with your recent appointment into CFO, it would be great to understand what your immediate priorities are. And what excites you the most about Autodesk's longer-term potential?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. And one of the things that we're looking forward to is, once all the sales and marketing optimization is complete, you guys have acknowledged the ability to deliver GAAP margins among the best in the industry. And the software industry has a wide range of margins. And so we're looking forward to hearing some of the more quantitative outlook at the Analyst Day in Q3. Qualitatively, is there any high-level direction you could point us to as it relates to who are the type of peers in the industry that we should be looking to that services the most appropriate comparables for Autodesk?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. Looking forward to that event. Your guidance for fiscal '26 reflects underlying revenue growth of 8% to 9%, excluding the impacts from the transaction model, from FX. There's a lot of changes going out of that as we've talked about with the transaction model, some of that productivity hit. The risks, still, we are in a bit of an uncertain macro. So does the guidance appropriately account for some of those operational risks that the company could experience over the next year?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. So I'm going to ask another question and then we will open up to audience Q&A. But I wanted to first talk on the free cash flow. The transaction model creates a lot of noise on the revenue, on the margin side, but free cash flow remains one of the cleaner metrics to focus investor attention on. So what are you seeing in the business that actually drove the confidence to raise that fiscal '26 free cash flow guidance up from that initial view?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. Do we have any questions from the audience? One up here in the front. Unidentified Participant So any update on the Starboard activist stances and what you guys have said you met with them in the past, but just wonder if there's any update on that?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Any other questions on the back? Unidentified Participant Yes. Hi, thank you. So obviously, it's been top of mind, especially today with some new announcements coming from the administration. But I do have to ask the question around tariffs. Obviously, that is going to impact your construction companies, your customers in that space. How do you see that playing out for you guys? And how can you help your customers navigate this?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Any other question? I wanted to ask about the buyback. You announced a $1.1 billion to $1.2 billion in buybacks, which is about 30% higher than last year. Historically, Autodesk has really just used the buyback to largely offset dilution. So what's the opportunity to lean in more heavily into the buyback, particularly as the free cash flow generation starts to rebuild?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. And then related on the M&A strategy, you guys have done a lot of recent acquisitions, whether it was Payapps or NVIDIA, you had them as well. How are those expected to contribute to growth? And ultimately, can they drive some margin expansion as well over the next couple of years? And then just more holistically, how are you thinking about the strategy to expand the portfolio through M&A?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. And so with about a minute or so left, I wanted -- you spoke a lot about margin expansion, getting this transaction model rolled through, new business coming back. So if we were to have a report card to really grade you guys on maybe two, three things that we're really looking forward to next year, what would that be?

Question: Elizabeth Elliott - Morgan Stanley - Analyst : Great. With that, we're just about up on time. So, Andrew, Janesh, thank you so much for joining us today.