Cloud Platforms And AI Models Will Redefine Long Term Potential Here

Catalysts

About Autodesk

Autodesk provides software platforms that connect design, make and operate workflows across architecture, engineering, construction, manufacturing and media.

What are the underlying business or industry changes driving this perspective?

• Long-running investment in cloud-based platforms and Autodesk Platform Services, which supply identity, data models and compute for design and make workflows, positions the company to support more complex customer projects and can support revenue growth as usage based and project based models scale.
• Expanding use of Forma for Construction and broader AECO offerings by large owners, contractors and global consultancies, including data center and infrastructure work, ties Autodesk more tightly to long duration projects and can support subscription revenue and attach opportunities across the portfolio.
• Growing adoption of Fusion and its paid extensions, coupled with customers replacing fragmented legacy tools with Autodesk manufacturing solutions, can increase average spend per customer and support both revenue and non GAAP operating margin as more workflows sit on a single platform.
• Autodesk's proprietary 2D and 3D AI models trained on geometry rich, real world project data, combined with an agentic AI layer that can be priced through subscription, consumption and outcome based models, create multiple monetization paths that can support revenue and earnings over time.
• Modernized go to market, including the new transaction model, sales and marketing optimization and API monetization for heavy machine usage, is designed to tilt incentives toward new business and high value workloads, which can support billings growth, revenue and free cash flow, while disciplined stock based compensation and restructuring savings support net margins.

Assumptions

This narrative explores a more optimistic perspective on Autodesk compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Autodesk's revenue will grow by 12.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 15.6% today to 25.0% in 3 years time.
• The bullish analysts expect earnings to reach $2.6 billion (and earnings per share of $12.3) by about March 2029, up from $1.1 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $2.1 billion.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 42.3x on those 2029 earnings, down from 48.9x today. This future PE is greater than the current PE for the US Software industry at 27.3x.
• The bullish analysts expect the number of shares outstanding to decline by 0.94% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.63%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Autodesk is in the middle of a multi year shift in its sales model, including a new transaction model, sales restructuring and partner incentive changes, and management explicitly expects short term disruption to billings and revenue as customer facing roles are realigned. If this disruption is larger or longer than anticipated, it could weigh on revenue and free cash flow.
• The business is increasingly tied to large construction, infrastructure and data center projects, and management highlights that capacity constraints in the broader design and construction ecosystem already limit how much can be built. If demand in data centers or other key project types cools without an offset elsewhere, Autodesk could see slower new product subscriptions and weaker billings growth, which would pressure revenue and earnings.
• Autodesk is betting heavily on AI, agentic workflows and its proprietary 2D and 3D models to create new monetization paths, yet customers are still early in their AI adoption and are experimenting with multiple approaches. If AI features end up being harder to monetize than expected, or if customers rely more on third party or in house tools, it could limit subscription, consumption and outcome based revenue growth and cap margin expansion.
• The company is using restructuring and cost discipline to move towards higher non GAAP operating margins while still investing in platform, AI and go to market, but this balance depends on sustained execution. If savings from restructuring fail to materialize, or if Autodesk needs to reinvest more heavily to maintain its product and platform position, operating margin and free cash flow could be lower than bullish expectations.
• Autodesk’s model assumes ongoing success with enterprise agreements, multi year commitments and API based consumption, yet the company is also shifting more revenue to usage based structures and project level pricing. If customers respond by optimizing usage more aggressively, delaying expansions or pressuring pricing on renewals, this could dampen billings, slow revenue growth and limit gains in earnings and free cash flow per share.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Autodesk is $413.07, which represents up to two standard deviations above the consensus price target of $331.75. This valuation is based on what can be assumed as the expectations of Autodesk's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $460.0, and the most bearish reporting a price target of just $250.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $10.3 billion, earnings will come to $2.6 billion, and it would be trading on a PE ratio of 42.3x, assuming you use a discount rate of 8.6%.
  
• Given the current share price of $260.75, the analyst price target of $413.07 is 36.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.