Autodesk Is Firing On All Cylinders, But Its Mastermind Is Joining Cisco

Last week, we saw Dell Technologies Inc DELL, VMware, Inc.'s VMW, and Best Buy Co Inc's BBY top estimates yet their shares slipped despite earnings beats. But it is the engineering software expert who saw its stock reach new all-time highs on Wednesday after a strong third-quarter earnings report. Autodesk, Inc. ADSK crushed Wall Street's expectations across the board while also raising its full-year guidance targets.

Autodesk Delivers Q3 Beat

During the fiscal third quarter, Autodesk generated a revenue of $952 million that rose by 13.02% YoY, topping the estimate of $942 million. Earnings per share also managed to beat the estimate of $0.96 as they amounted to $1.04, marking a YoY rise of 33.33%.

As for other figures, Autodesk's GAAP operating margin landed at 18%. This is the highest reading in more than a decade, completing a dramatic rebound from negative operating margins in 2016 and 2017. Additionally, free cash flows rose 29% YoY to $340 million. Its architecture, engineering and construction segment was its fastest growing with revenue rising 17% YoY to $419.4 million. Moreover, Autodesk completed its acquisition of Norway-based Spacemaker that provides cloud-based design tools for architects, urban planners and real estate developers.

It's official: Autodesk has successfully completed a strategic transformation that replaced permanent software licenses with recurring subscription fees for its cloud-based solutions and services. The shift was painful, but it should result in generous dividends over the long haul.

These strong results reflect the strength of its subscription business model as the company managed to thrive amid the lurking coronavirus crisis. By enabling the digital transformation that their customers are undergoing, Autodesk became their strategic partner. The company also revealed it signed a nine-digit deal in the quarter.

As for the full-year revenue outlook, Autodesk lifted the midpoint of its guidance now being in the range from $3.74 billion to $3.77 billion.

A Testament To Its Success

When the mighty Cisco Systems, Inc. CSCO grabs one of the chief architects of an audacious strategy shift, it's a solid testament to a job well done. After successfully transforming Autodesk's business model to a Software-as-a-Service (SaaS) revenue, its long-time CFO R. Scott Herren is moving on to join the crew of the networking equipment giant.

Losing a quality leader is never a good thing but if it has to happen, now is a good time. Autodesk is firing on all cylinders and is entering the next chapter from a position of strength, strengthened by record-high revenues, earnings and all-time highs share prices.

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