Autodesk has announced a record-setting quarter. It may be a surprise after doom and gloom economic forecasts, big tech’s fall from grace, world conflicts and the pandemic, but for Autodesk, it is proof that the company placed the right bet when it bet on the architecture, engineering and construction (AEC) market. Autodesk posted revenue of $1.24 billion million for the second quarter of its 2023 fiscal year. The company’s profit of $186 million was the best in the last three years—if you ignore a freaky Q4 FY21 with a $911 million spike. For comparison, Dassault Systèmes reported €1.38 billion ($1.37 billion) in revenue for its last quarter and PTC reported $462 million.
More than half of the company’s revenue comes from the licenses of software used for AEC. AEC-only software contributes 2.3 times as much revenue to Autodesk’s total revenue, as does product design-only software.
Autodesk’s emphasis on AEC, there from the start, has increased under President and CEO Andrew Anagnost. In 2017, early in Anagnost’s tenure as CEO, he took the stage at Autodesk University—the CAD industry’s biggest event. We expected Anagnost, degreed in aeronautical engineering and computer science (PhD, Stanford University) to push Autodesk’s mechanical design, simulation and manufacturing software. Instead, his keynote was all about AEC. We heard about how the construction industry wastes resources and is decidedly low tech, as well as how modular construction—with Autodesk’s help—will save the day.
It was a noticeable shift from Anagnost’s predecessor, the popular and product-centric Carl Bass, who had tried to maintain some semblance of balance between the company’s MCAD and AEC divisions. However, under Anagnost’s leadership, revenue from the AEC application has become dominant.[i]
Anagnost drove home the point that the building and construction industries needed to catch up to product design and manufacturing, which were, by availing themselves of every available technology (whether it be software, computers or the Internet) methodically and efficiently rolling products off assembly lines. Meanwhile, here were the building and construction trades still acting like overgrown children, playing outdoors, injuring themselves, and completing one project at a time—and usually late.
The wily Anagnost noticed that the gap between what the company offered and what its millions of customers used had closed on the product design side but still loomed large on the more lucrative building and construction side. This was a golden opportunity. Building and construction was estimated to be a $1.3 trillion industry—before the $1 trillion U.S. infrastructure bill was passed in 2021.
A Balancing Act
The commitment to the AEC led to R&D spending and acquisitions. Rarely does a quarter go by without an announcement of a new product developed or acquired for Autodesk’s growing cloud-based AEC platform. Last year, Autodesk paid $1 billion for Innovyze, its biggest acquisition ever,[ii] and in one stroke, pulled even with the leading infrastructure software provider, Bentley Systems.
Autodesk’s increasing AEC revenues have more to do with the addition of the Innovyze business (with estimated revenue of $100 million annually) than with the organic growth of the company’s own products. There are no claims of tremendous growth in revenue from software as a service (SaaS) BIM products, which add only a few dollars a month each to revenue.
Autodesk has tried to balance its portfolio. A year ago, the company offered to pay $3.9 billion for Australia-based electronic design automation (EDA) software maker Altium—17 times Altium’s annual revenue and dwarfing the $1 billion it had paid for Innovyze. The acquisition would have provided Autodesk with a holistic set of applications for product design, as modern product design depends as much on—if not more—its electronics as its mechanical design. The deal would have allowed Autodesk to compete product for product with Siemens, which had acquired EDA maker Mentor Graphics for $4.5 billion in 2016. But it was not to be. Altium rejected the offer.
A Path of Least Resistance
Autodesk may have realized that product design market expansion would be expensive and the competition heated. Arrayed against it are PTC with Creo, Dassault Systèmes with CATIA and SOLIDWORKS and Siemens with NX and Solid Edge, respectively. However, on the AEC side, Autodesk is on a much better footing with an established market lead in architectural design with Revit and AutoCAD.
With a rock-solid base of AEC practitioners using its desktop products, Autodesk has an undeniable and enviable advantage when it comes to converting these customers to the company’s cloud-based applications. We have to pity startups that will pitch their solutions to design and construction firms, educating them on the benefits of a single source of truth, collaboration, no IT support, freedom to use the application on any device at any location—all the great reasons to move to the cloud—only to have the firms realize that, wait a minute, doesn’t Autodesk offer this, too? And by staying with Autodesk, we don’t have to risk going with a startup. Autodesk has been around for 40 years. How long will a startup be around?
Other Quarterly Highlights
Citing strong market demand, “robust” new business, “excellent” renewal rates and “strong competitive performance” more than made up for the effects of geopolitical strife and sanctions (not being able to sell into China, Russia and Ukraine), recessions and the pandemic, according to Anagnost at the company’s earnings call.
Autodesk’s lead in implementing cloud technology in its product is cited as the reason for the great quarter.
“We are moving from products to platforms and capabilities, and bringing those capabilities to any device, anywhere, through the cloud,” said Andrew Anagnost. “By accelerating the convergence of workflows within and between the industries we serve, we are propelling the digital transformation of our customers and creating broader and deeper partnerships with them.”
If he’s not careful, people will forget that Anagnost was once only an engineer. So stellar has been his management of the whole of Autodesk. It may have been the popular Carl Bass who carried Autodesk into a product and technology leadership, as Steve Jobs did with Apple, but it is Anagnost who has produced steady growth quarter after quarter—a delight to its investors and board of directors, like Apple’s Tim Cook.
EMEA (Europe, Middle East and Africa) revenue ($473 million) is highest of all geographies, 12 percent higher than the company’s U.S. revenue.
AutoCAD (40 years old) and AutoCAD LT still provide 28 percent of the company’s revenue, up 13 percent over the prior year and more revenue than the company’s manufacturing products.
Autodesk has $1.44 billion in cash, so it is still able to consider additional acquisitions.
Fusion 360 passed the 200,000 subscriber mark and posted its first million-dollar contract.
The increasing strength of the U.S. dollar—while great for American tourists abroad—reduced Autodesk’s billing by $20 million and revenue by $5 million.
The company expects to close out the fiscal year with about $5 billion in revenue.
Kimley-Horn, a planning and design consulting firm, not only expanded its implementation of Civil 3D and Revit, increasing the use of BIM and the cloud, but also started to use Innovyze to grow its water infrastructure business.
Autodesk has signed the Indiana Department of Transportation (DoT) as a customer. It will be using Autodesk Build and Autodesk Construction Cloud Connect (ACC Connect). Should Bentley Systems be worried? Bentley has always been proud of having every DoT as a customer.
An unnamed commercial real estate and property management company implemented the full Autodesk Construction Cloud to connect preconstruction with project management, adding quantification estimating to BuildingConnected Pro and BIM Collaborate Pro in preconstruction and Autodesk Build for project management.
Monthly active users of Autodesk Build are growing by more than 45 percent quarter over quarter, reports Anagnost.
Manufacturing finally gets a shoutout, with a U.S. supplier of metal cutting tools creating a collaboration tool on Fusion that lets its salespeople demo the tool virtually.
Autodesk enjoys saying that every big automotive company is its customer. That is because every automotive company’s design department uses Alias. This quarter, a car seat manufacturer used Alias for the styling of its seats and generative design in Fusion 360 for their design.
Converting pirates to paying customers as a revenue strategy, mentioned on these pages here, continues.
“We closed seven deals over $500,000 with our license compliance initiatives, three of which were over $1 million,” said Anagnost.
[i] Revenue measured for Autodesk’s vertical applications. AutoCAD and AutoCAD LT are general purpose CAD programs and can be used for both architectural and mechanical design. If AutoCAD and AutoCAD use were broken down by industry, the portion of the company’s revenue due to its use in AEC would be even higher.
[ii] The biggest acquisition before Innovyze had been the $875 billion PlanGrid acquisition in 2018, which was also made to expand Autodesk’s AEC portfolio.