Core Insights - Adobe and Autodesk are leveraging AI to enhance their creative software offerings and improve workflow efficiency, with the creative software market projected to reach $10.25 billion by 2029, growing at a CAGR of 1.54% [1] - Both companies have faced stock declines due to tech sell-offs, with Adobe down 17.3% YTD and Autodesk down 8.6% [2] Adobe Insights - Adobe's growth is driven by strong demand for its Creative Cloud, Document Cloud, and Adobe Experience Cloud, with an AI business expected to double by the end of fiscal 2025 [5][8] - The company has expanded its AI portfolio with new tools like Adobe GenStudio and Firefly Services, enhancing collaboration and productivity for brands [6][7] - For fiscal 2025, Adobe anticipates total revenues between $23.30 billion and $23.55 billion, with Digital Media revenues projected at $17.25 billion to $17.40 billion [8] Autodesk Insights - Autodesk is benefiting from new business growth and strong subscription renewal rates, with a focus on cloud-based products and design suites [9] - The company has made significant progress in high-growth segments like Construction and Manufacturing, adding nearly 400 new construction customers in Q4 of fiscal 2025 [10] - Autodesk expects revenues for fiscal 2026 to be between $6.895 billion and $6.965 billion, with billings estimated at $7.06 billion to $7.21 billion [12] Earnings Estimates - Adobe's fiscal 2025 earnings estimate is $20.36 per share, reflecting a 10.53% increase from fiscal 2024 [13] - Autodesk's fiscal 2026 earnings estimate remains steady at $9.48 per share, indicating an 11.92% growth over 2024 [14] Valuation Insights - Both companies are considered overvalued, with Adobe trading at a forward Price/Sales ratio of 6.44X, lower than Autodesk's 8.09X [16] - Autodesk holds a Zacks Rank 2 (Buy), while Adobe has a Zacks Rank 3 (Hold), indicating a stronger investment case for Autodesk [18]

Core Viewpoint - Autodesk's stock has underperformed in the past six months, declining 10%, while facing challenges from a new transaction model, restructuring efforts, and macroeconomic uncertainties [1][2]. Group 1: Performance Overview - Autodesk shares have dropped 10% over the last six months, compared to a 0.5% decline in the Zacks Internet-Software industry and a 6.4% decline in the S&P 500 index [1]. - The stock has slightly outperformed the Zacks Computer and Technology sector, which saw a decline of 10.2% during the same period [1]. Group 2: Growth Drivers - Autodesk is making progress in high-growth segments such as Construction and Manufacturing, adding nearly 400 new construction customers in Q4 of fiscal 2025 [3]. - The company is seeing strong adoption of its cloud-based platforms like Fusion and Forma, which enhance productivity and reduce costs for customers [3]. - Investments in AI, such as the AutoConstrain feature in Fusion, are improving product capabilities and user efficiency [4]. - The strategic focus on converging design and manufacturing workflows positions Autodesk well to meet evolving industry needs [4]. Group 3: Challenges - Autodesk faces intense competition in its core verticals, with competitors like Trimble in AEC and Dassault Systemes and Siemens in manufacturing [5]. - The ongoing shift from perpetual licenses to cloud-based subscriptions is pressuring top-line growth, alongside higher operating expenses and restructuring costs [6]. - Sustained earnings improvement will depend on Autodesk's ability to drive meaningful revenue growth over time [6]. Group 4: Guidance and Estimates - Autodesk expects non-GAAP earnings per share in the range of $2.14-$2.17 and revenues between $1.60-$1.61 billion for Q1 of fiscal 2026 [7]. - The Zacks Consensus Estimate for Q1 fiscal 2026 earnings is $2.14 per share, indicating a year-over-year growth of 14.44%, with revenues expected to increase by 13.32% to $1.61 billion [8]. - Autodesk has beaten the Zacks Consensus Estimate for earnings in each of the last four quarters, with an average surprise of 5.73% [8]. Group 5: Conclusion - Despite near-term challenges, Autodesk shows promise in key growth areas like cloud, AI, and construction, suggesting a cautious approach for investors [10]. - A significant portion of Autodesk's revenues comes from international operations, making it vulnerable to foreign currency fluctuations, particularly with a strengthening U.S. dollar [11].

Financial Data and Key Metrics Changes - Total revenue in Q4 grew 12% year-over-year, with broad-based growth across products and regions [18][19] - GAAP and non-GAAP operating margins for Q4 were 22% and 37%, reflecting year-over-year increases of 90 basis points and 160 basis points, respectively [21] - Free cash flow for fiscal 2025 was $1.57 billion, exceeding guidance [22] Business Line Data and Key Metrics Changes - By product in constant currency: AutoCAD and AutoCAD LT revenue grew 9%; AECO revenue grew 15%; manufacturing revenue grew 10%; and M&E revenue grew 10% [18] - Direct revenue increased 35% in constant currency, representing 47% of total revenue, up 8 percentage points from last year [19] - Contribution from the new transaction model to revenue was $46 million in Q4 and $71 million for the year [19] Market Data and Key Metrics Changes - Revenue grew 11% in the Americas, 13% in EMEA, and 11% in APAC in constant currency [19] - RPO (Remaining Performance Obligations) of $6.9 billion and current RPO of $4.5 billion grew 14% and 12%, respectively [20] Company Strategy and Development Direction - Autodesk is focusing on the convergence of design and make in the cloud, enabled by platform, industry clouds, and AI [11][36] - The company is initiating an optimization phase of its sales and marketing plan to enhance customer satisfaction and productivity [8][10] - Future focus includes tighter channel partner integration and broad deployment of self-service capabilities [10][34] Management's Comments on Operating Environment and Future Outlook - Management noted that economic uncertainty continues to impact customer willingness to invest, but they are optimistic about new product subscriptions and emerging businesses driving growth [58][60] - The company expects constant currency billings growth of 17% to 19% and revenue growth of 8% to 9% for fiscal 2026, excluding the impact of the new transaction model [28][29] - Management emphasized the importance of executing their go-to-market optimization plan to drive higher margins over time [65][100] Other Important Information - The company plans to buy back between $1.1 billion and $1.2 billion of shares in fiscal 2026, a 30% to 40% increase compared to fiscal 2025 [31] - Autodesk is committed to further margin expansion beyond fiscal 2026, aiming for GAAP margins among the best in the industry [100] Q&A Session Summary Question: What drives new business growth higher over time? - Management indicated that enhancing channel productivity and investing in emerging high-growth businesses will drive new business growth [58][60] Question: Can you provide more color on margin potential and restructuring? - Management expressed confidence in margin expansion due to strong fiscal discipline and the ongoing optimization of the go-to-market strategy [62][65] Question: How is macro uncertainty affecting customer sentiment? - Management noted that customers desire certainty and that uncertainty is fueling customer angst, but they believe Autodesk's diversified business can absorb policy changes [72][73] Question: What are the critical product or technology executables for the future? - Management highlighted investments in industry clouds and AI capabilities as key areas for future growth [81][82] Question: How does the revenue guide reflect potential disruption from restructuring? - Management acknowledged that the guidance considers potential risks associated with restructuring and the CRO transition [88] Question: What is the timeline for seeing benefits from sales and marketing adjustments? - Management indicated that significant benefits are expected in fiscal 2026, with ongoing investments to build capabilities for future optimization [106] Question: How does Autodesk view M&A in light of recent changes? - Management reaffirmed their commitment to being an acquisitive company, looking for opportunities that align with their strategy [108]