Cloud Adoption And AEC Investment Will Open New Markets

Key Takeaways

• Expanding cloud and AI-driven solutions, plus SaaS models, are enhancing recurring revenue, margin stability, and differentiation in core AEC markets.
  
• Strategic acquisitions and focus on sustainability are growing Autodesk's product ecosystem, customer value, and positioning as a key enabler of digital transformation.
  
• Rising competition from open-source and alternative platforms, evolving customer preferences, and regulatory challenges threaten Autodesk's pricing power, market share, and long-term profitability.

Catalysts

Provides 3D design, engineering, and entertainment technology solutions worldwide.

• Strength in Autodesk's core AEC (Architecture, Engineering, Construction) markets is driven by sustained investment in infrastructure, data centers, and industrial buildings, underpinned by increased global urbanization and infrastructure buildout, which is likely to fuel ongoing growth in Autodesk's addressable market and support robust revenue expansion.
  
• Accelerating adoption of cloud-based platforms-such as Autodesk Construction Cloud and Fusion 360-and ongoing rollout of subscription and SaaS models are increasing recurring revenue, improving revenue visibility, and enhancing net margin stability due to higher operating leverage and sales efficiency improvements.
  
• Continued innovation and integration of AI-driven tools (e.g., generative design, AutoConstrain) and industry-specific foundation models are boosting customer productivity and differentiating Autodesk's offerings, supporting premium pricing and driving margin expansion and long-term earnings growth.
  
• Focused strategic tuck-in acquisitions and strong cross-sell activity are expanding Autodesk's product ecosystem, allowing deeper integration and higher customer lifetime value, raising the potential for long-term revenue acceleration and resilient net margin improvement.
  
• Rising importance of sustainability and regulatory-driven climate action, together with increased demand for digitally-enabled energy efficiency solutions, are positioning Autodesk as an essential technology provider for customers' sustainable transformation efforts, driving higher-value software adoption and supporting both topline growth and higher-margin service offerings.

Autodesk Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Autodesk's revenue will grow by 12.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 15.8% today to 21.0% in 3 years time.
• Analysts expect earnings to reach $2.0 billion (and earnings per share of $9.29) by about September 2028, up from $1.0 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $1.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 48.9x on those 2028 earnings, down from 65.1x today. This future PE is greater than the current PE for the US Software industry at 36.6x.
• Analysts expect the number of shares outstanding to decline by 0.93% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.52%, as per the Simply Wall St company report.

Autodesk Future Earnings Per Share Growth

Risks

• The increasing adoption of open-source and lower-cost software solutions globally could erode Autodesk's pricing power, as evidenced by customer examples switching from competitive solutions, potentially leading to price compression and pressure on long-term revenue growth.
  
• Ongoing customer adaptation to the new transaction model and frequent migrations may cause friction, slowing net new customer acquisition and risking higher churn rates, which can negatively affect recurring revenue streams and overall earnings.
  
• Rapid advances in AI and generative design-areas in which Autodesk is investing but where emerging competitors and start-ups are active-could enable new entrants to leapfrog Autodesk's technology if Autodesk's own innovation pace slows, threatening its competitive moat and long-term margins.
  
• Heightened data privacy and global regulatory requirements, as Autodesk continues its transition to cloud-based and AI-enabled solutions, may increase compliance costs and operational complexity, creating headwinds for operating margins over time.
  
• Accelerated adoption of alternative, agile, or in-house software platforms-particularly as the construction industry explores modular and industrialized construction methods-may bypass legacy Autodesk solutions, constraining Autodesk's total addressable market in its traditional AEC business and impacting future revenue growth.

Valuation

• The analysts have a consensus price target of $358.964 for Autodesk based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $430.0, and the most bearish reporting a price target of just $270.97.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.3 billion, earnings will come to $2.0 billion, and it would be trading on a PE ratio of 48.9x, assuming you use a discount rate of 8.5%.
  
• Given the current share price of $317.51, the analyst price target of $358.96 is 11.5% 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.