Autodesk, Inc. Q3 FY2026 earnings call

• Delivered strong results with revenue and non-GAAP earnings per share topping the higher end of guidance ranges, with billings, non-GAAP operating margin, and free cash flow exceeding expectations, and raising full-year guidance across the board. - Successfully executing on far-reaching transformations in enterprise software, redefining business model, go-to-market, products, and platform. Enhancing products with cloud-based capabilities, building a vibrant third-party ecosystem platform, and defining AI revolution for industries. - In AECO, Autodesk Construction Cloud has growing momentum with examples like a global food processor and South Carolina Department of Transportation. In manufacturing, customers are demanding convergence with examples like Micromatic and an American cosmetics company. AI-powered sketch auto constraint infusion has seen success, and there are strategic partnerships in education and diverse consumption ways for customers.

Total revenue in the third quarter grew 18% as reported and in constant currency. Excluding the impact of the new transaction model, total revenue grew 12% in constant currency. Billings increased 21% as reported and 20% in constant currency. Excluding the impact of the new transaction model, billings grew 16% in constant currency. RPO of $7.4 billion and current RPO of $4.8 billion both grew 20%. Third-quarter GAAP operating margin was 25% and non-GAAP operating margin was 38%, reflecting year-over-year increases of approximately 330 and 120 basis points, respectively. Third-quarter free cash flow was $430 million. Year to date, Autodesk has repurchased 3.7 million shares for approximately $1.07 billion. In product segments, AECO showed strength with sustained investment in data centers, infrastructure, and industrial buildings offsetting softness in commercial.

• Raised billings guidance range to between $7.465 billion and $7.525 billion and revenue guidance range to between $7.15 billion and $7.165 billion. - Raised non-GAAP operating margin guidance for the year to approximately 37.5% or approximately 40.5% on an underlying basis excluding the impact of the new transaction model. - Raised free cash flow guidance range to between $2.26 billion and $2.29 billion. - Expect little U.S. federal cash tax in fiscal 2026 due to utilization of U.S. deferred tax assets, and expect to buy back approximately $1.3 billion of stock, a 50% increase compared to fiscal 2025.

• Uncertainty in geopolitical, macroeconomic, and technological environments. - Incremental margin drag from the new transaction model on reported margins. - Potential macroeconomic disruption affecting the final quarter of fiscal 2026. - Potential disruption from the sales and marketing optimization plan execution.

Q: Saket Kalia asked about the theme from Analyst Day on seats versus consumption AI monetization and the broader ecosystem of partners and customers.

A: Andrew Anagnost responded discussing capacity challenge, balance between human and machine engagement, and capturing incremental consumption value while supporting people-based work.

Q: Adam Borg asked about Autodesk Construction Cloud existing customers' penetration and Fusion in the PLM market.

A: Andrew Anagnost answered about increased penetration in existing accounts and Fusion targeting mid-market for end-to-end digital productivity.

Q: Jay Vleeschhouwer asked about normalized growth's inorganic contribution and EBA cohorts' renewal behavior.

A: Janesh Moorjani replied there was no unusual M&A impact and strong engagement in Q3 with Q4 being large for EBA renewals.

Q: Jason Celino asked about normalized growth's inorganic contribution and EBA cohorts' renewal behavior.

A: Janesh Moorjani stated no unusual M&A activity affected growth and strong Q3 engagement with Q4 EBA renewals.

Q: Taylor McGinnis asked about billings growth mechanics and future growth alignment.

A: Janesh Moorjani explained billings and free cash flow growth rates were inflated this year and will normalize next year with underlying business performing well.

Q: Elizabeth Porter asked about AI capabilities' impact on multiproduct adoption and pricing power.

A: Andrew Anagnost talked about face automations being retentive, workflow automations offering incremental monetization, and system level optimizations capturing more value over time.

Q: Josh Tilton asked about near-term billings growth drivers and channel incentives.

A: Janesh Moorjani mentioned strong execution and stable macro contributing to Q3 outperformance, and Andrew Anagnost discussed incentivizing channel on new business over renewals.

Q: Joe Vruwink asked about FY 2027 outlook and Autodesk's role in large customers' AI applications.

A: Janesh Moorjani said details on FY 2027 would be in February and Andrew Anagnost stated Autodesk's platform being core in large customers' AI applications.

Q: Bhavin Shah asked about channel productivity and Autodesk's role in AI product evolution.

A: Janesh Moorjani discussed addressing operational friction and Andrew Anagnost said Autodesk's data and focus would excel in AI product evolution.

Q: Tyler Radke asked about direct revenue growth and FY 2027 potential changes.

A: Janesh Moorjani said Q3 direct revenue growth was as expected with store strength and broader growth.

Q: Ken Wong asked about channel incentives' early feedback and OBVA's impact.

A: Andrew Anagnost said no early behavioral changes and Janesh Moorjani stated no direct impact from OBVA on top line yet.

Q: Koji Ikeda asked about free cash flow seasonality and AI data access monetization.

A: Janesh Moorjani said free cash flow growth correlated with net income growth and Andrew Anagnost talked about API usage and monetization of data access.

Q: Michael Turrin asked about revenue growth drivers and AutoCAD business dynamics.

A: Janesh Moorjani said Q3 reflects consistent execution and Andrew Anagnost mentioned strategic decisions driving performance