A strong quarter reflecting growing customers on cloud computing and resilience of the subscription business model affirms Autodesk's impressive run. The stock is trading at record highs after a 30% plus rally in 2020.
The modeling design software company is coming off an impressive third-quarter, depicted by revenue, earnings, and free cash flow coming above expectations. Healthy software subscription renewal rates and success with enterprise customers underscore growth in the core business.
Despite facing uncertain macro-economic conditions, Autodesk management continues to execute with strength, with performance obligations growing 16% year-over-year. The current business model leaves Autodesk well-positioned to profit as the cloud transition accelerates in the secular industry.
Similarly, Autodesk remains well-positioned during the post-pandemic era to disrupt the future digitization opportunity. The company is staring at tremendous opportunities in the construction and manufacturing industries.
Earnings Beat
The multinational software corporation reported a 13% increase in revenues that came in at $952 million with operating margin improving 5 percentage points to 18%. A recovery in subscription renewal rates largely drove the increase.
Earnings more than doubled to $132.2 million or 59 cents a share against $66.7 million or 30 cents reported a year-earlier period. The company exited the third quarter with $334 million in free cash flow.
For fiscal Q4, revenues are expected to grow by between 4.9% to 6.5% or between $999 million and $1.01 billion. The Chief Executive Officer, Andrew Anagnost, is projecting continued double-digit growth in fiscal 2023.
However, Autodesk faces a string of headwinds heading into fiscal 2022. Some of the lagged effects pertain to the nature of the subscription revenue recognition. The lag could be greater than initially projected.
Spacemaker Acquisition
Separately, Autodesk has moved to strengthen its business empire by acquiring Norway-based Spacemaker for $240 million. Once complete, it would represent Autodesk’s thirteenth investment in design and construction solution providers. Likewise, the acquisition will equip the modeling and software company with a powerful platform to drive modern user centric automation.