Autodesk Lifts Outlook After Q2 Beat

Autodesk(NASDAQ:ADSK) reported second quarter fiscal 2026 results on August 28, 2025, exceeding guidance across revenue, non-GAAP operating margin, billings, and free cash flow, and subsequently raised full-year guidance for fiscal 2026 (ending Jan. 31, 2026). Total revenue (GAAP) grew 17% year-over-year, non-GAAP operating margin reached 39% (up 140 basis points YoY), free cash flow reached $451 million, and share repurchases totaled $709 million year-to-date; management provided updated targets on long-term margin and capital allocation, including full-year billings guidance of $7.355 billion to $7.445 billion, and articulated concrete progress on cloud, AI, and go-to-market strategic initiatives.

Operating margin guidance for 2029 underscores model scalability

Autodesk implemented a cost discipline and restructuring plan at the beginning of the year. Optimization in sales and marketing contributed to operating leverage. The new transaction model is expected to increase operating margin drag in fiscal 2027, with management targeting long-term expansion through controllable efficiency levers despite non-linear progress.

"Assuming no material change in the external environment, we expect reported non-GAAP operating margin to be 41% in fiscal 2029, or about 45% on an underlying basis, which excludes the mechanical impact of the new transaction model as it fully scales next year. This would represent a reported and underlying improvement of approximately 500 basis points and approximately 900 basis points, respectively, since we started to scale the new transaction model at the start of 2024."
-- Janesh Moorjani, CFO

Long-term profit expansion will be driven predominantly by improved sales and marketing efficiency and inherent operating leverage, positioning Autodesk for substantially higher margin structure as temporary transition headwinds subside.

Strategic capital allocation prioritizes organic innovation and targeted M&A

Autodesk repurchased 2.5 million shares year-to-date for $709 million, and increased fiscal 2026 share buyback targets to $1.2 billion–$1.3 billion. Management confirmed excess free cash flow dedicated to capital returns after funding product and AI initiatives, while clarifying the scale and focus of M&A activity.

"First and foremost, Saket, you know, we invest organically in the business to drive our strategy around AI and all the things related to our product strategy. The second thing we look to do is we look at M&A as the next option, and we look at it for tech tuck-in reasons, really things that accelerate our existing roadmap and move us forward. And we look at it through the lens of targeted acquisitions that extend our adjacency strategy, things like construction operations. These kinds of acquisitions tend to be in the hundreds of thousands to the billions of dollars range, not in the tens of billions of dollars range. The other thing, of course, we're doing is as we have excess capital, above and beyond those needs, we are accelerating the deployment of that to shareholders via stock buybacks that move beyond offsetting dilution and accelerate and reduce the share count."
-- Andrew Anagnost, CEO

This disciplined approach keeps capital allocation flexible but focused, with limited appetite for large-scale transformative deals and a clear preference for extending competitive strengths in core adjacencies through smaller acquisitions and buybacks.

AI and platform investments accelerate product adoption and differentiation

AI-powered features such as Fusion’s Sketch Auto Constraint have achieved an acceptance rate of more than 60%, with over 1.2 million dimensions delivered since launch in 2025, demonstrating measurable productivity gains among commercial users. Data model and API adoption is rising among large and mid-market customers, with foundation models and adaptive AI engines under development across 2D/3D workflows.

"For more than a decade, Autodesk, Inc. has been at the forefront of innovation. In BIM, SaaS, generative design, and now in generative AI. We have been building industry-specific foundation models and products capable of understanding and reasoning about 2D and 3D geometry, design and make data, complex structures, and even physical behavior. For example, last year, we introduced Project Bernini. A generative AI model for 3D, as part of a broader initiative to create professional-grade foundation models that will disrupt long-standing technology paradigms and redefine what we mean by software, platforms, and products. By combining our own spatial and physical reasoning with deep industry-specific knowledge, Autodesk AI will move beyond traditional, deterministic, and rule-based parametric CAD kernels to deliver adaptive and context-aware AI-driven CAD engines."
-- Andrew Anagnost, CEO

Rapid integration of AI across flagship platforms strengthens Autodesk’s long-term competitive moat, improves value proposition for enterprise accounts, and attracts third-party partnership opportunities.

Looking Ahead

Management raised full-year guidance, projecting billings of $7.355 billion to $7.445 billion, revenue of $7.025 billion to $7.075 billion, non-GAAP operating margin of approximately 37% (or 40% on an underlying basis), and free cash flow of $2.2 billion to $2.275 billion for fiscal 2026 (ending Jan. 31, 2026). Autodesk reiterated its expectation of a 41% reported non-GAAP operating margin for fiscal 2029 (45% underlying), along with continued elevated capital return via $1.2 billion to $1.3 billion in share repurchases. No material change was made to macroeconomic or policy risk assumptions embedded in the guidance; additional details on long-term strategy and AI initiatives will be provided at Autodesk University in September and Investor Day on October 7.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Autodesk. The Motley Fool has a disclosure policy.