Autodesk continues to strengthen its product portfolio through strategic acquisitions, such as Payapps Limited in fiscal 2025, which deepens its Autodesk Construction Cloud footprint. In manufacturing, the company acquired a simulation technology provider in fiscal 2024 to enhance its cloud-based solutions, aligning with its strategy to drive efficiency and sustainability.

The company's new transaction model has led to a significant shift towards direct sales, with direct channel revenue increasing by 82% to $1,087 million for the three months ended July 31, 2025, compared to $597 million in the prior year. Direct sales now represent 62% of total net revenue, up from 40% previously, indicating successful execution of its go-to-market strategy.

Autodesk is reallocating resources to strategic priorities including investments in cloud, platform, and artificial intelligence, as highlighted by the 2026 Plan. New product developments like Autodesk Forma, which uses AI-powered insights for early-stage planning, demonstrate a commitment to innovation and future growth drivers.

During the first quarter of fiscal 2026, Autodesk initiated a restructuring plan to optimize its go-to-market organization and reallocate resources to strategic priorities like cloud, platform, and AI. This plan resulted in $111 million in restructuring and other exit costs for the six months ended July 31, 2025, demonstrating management's proactive approach to operational efficiency.

The SEC and USAO notified Autodesk on August 19 and 21, 2025, respectively, that they were closing their internal investigation into the company's free cash flow and non-GAAP operating margin practices. This resolution removes a significant overhang and potential regulatory uncertainty for the company.

Autodesk's non-GAAP operating margin improved to 39% for the three months and 38% for the six months ended July 31, 2025, up from 37% and 36% respectively in the prior year. This indicates management's ability to drive core business profitability, excluding non-cash and non-recurring items such as stock-based compensation and restructuring costs.

The company identifies increasing regulatory focus on AI ethics, data protection (e.g., GDPR, PIPL), and cross-border data transfers as significant and escalating risks. New laws and potential legal challenges could lead to increased compliance costs, reputational harm, and limitations on product development, impacting future operations.

Autodesk highlights ongoing geopolitical conflicts (e.g., Ukraine/Russia, Israel/Hamas), global trade wars, and economic uncertainty (inflation, higher interest rates) as factors that could adversely impact international revenue and overall financial performance. International revenue constitutes 64% of total net revenue, making the company highly exposed to these external conditions.

The company relies on third-party and open-source software, which carries risks such as security vulnerabilities, intellectual property infringement claims, and potential requirements to disclose proprietary code. This reliance could lead to increased costs, re-engineering efforts, and reputational damage if not managed effectively.

Recurring revenue constituted 98% and 97% of net revenue for the three and six months ended July 31, 2025, respectively. The Net Revenue Retention Rate (NR3) remained above 110% on a constant currency basis as of July 31, 2025, demonstrating strong customer loyalty and the effectiveness of its subscription model in a competitive software market.

Revenue growth was robust across key product families for the three months ended July 31, 2025: AECO grew 23% to $878 million, AutoCAD and AutoCAD LT grew 13% to $440 million, and Manufacturing grew 13% to $334 million. This broad-based growth indicates strong demand and competitive positioning in its primary markets.

Total revenue from the largest distributor, TD Synnex, decreased significantly to 16% of net revenue for the three months ended July 31, 2025, down from 36% in the prior year. This reduction in concentration lessens reliance on a single channel partner, enhancing the company's competitive flexibility and reducing potential disruption risks.

Cost of subscription and maintenance revenue increased by 13% to $225 million for the six months ended July 31, 2025, primarily due to higher cloud hosting and employee-related costs. This reflects the ongoing investment in cloud infrastructure and talent necessary to support the subscription model and digital transformation initiatives.

The 2026 Plan, initiated in Q1 FY26, is designed to optimize the go-to-market organization and reallocate resources to strategic priorities. While incurring $111 million in costs for the six months ended July 31, 2025, management expects these actions to lead to future operational leverage, partially offsetting increased marketing and R&D expenses.

Marketing and sales expenses increased by 19% to $1,125 million for the six months ended July 31, 2025, primarily due to higher sales commissions recognized under the new transaction model. This is a planned shift in expense recognition from contra-revenue to operating costs, which is expected to positively impact calculated revenue growth but negatively impact operating margin in the short term.

Research and development expenses increased by 13% to $807 million for the six months ended July 31, 2025, compared to $714 million in the prior year. This substantial investment is directed towards advancing cloud, platform, and artificial intelligence capabilities, which are core to Autodesk's long-term growth strategy and product innovation.

Autodesk has been investing in AI for over a decade, focusing on building AI capabilities that augment, automate, and analyze customer workloads. New offerings like Autodesk Forma leverage AI-powered insights for early-stage planning and design, demonstrating a commitment to integrating advanced technology into its core products.

The acquisition of Payapps Limited and a simulation technology provider in recent fiscal years supports Autodesk's digital transformation strategy. These acquisitions enhance cloud-based offerings and streamline workflows in key industries like Architecture, Engineering, Construction, and Manufacturing, accelerating the delivery of new product functionality.

Autodesk repurchased 3 million shares of common stock for $709 million during the six months ended July 31, 2025, a significant increase from 0.5 million shares for $120 million in the prior year. With $3.17 billion and $5 billion remaining under existing authorizations, this signals management's confidence in the company's valuation and commitment to returning capital to shareholders.

In June 2025, Autodesk issued $500 million of 5.3% notes due 2035, using a portion of the proceeds to repay $300 million of existing debt. Concurrently, a new $1.5 billion unsecured revolving loan facility was established. These actions optimize the capital structure, providing additional liquidity for general corporate purposes and strategic investments.

The 13% increase in Research and Development expenses to $807 million for the six months ended July 31, 2025, demonstrates a clear capital allocation priority towards innovation. This investment supports strategic initiatives in cloud, platform, and artificial intelligence, which are critical for long-term growth and competitive advantage.

Autodesk is committed to advancing a more sustainable, resilient, and inclusive world, with efforts aligned to the UN Sustainable Development Goals. The company focuses on outcomes such as net-zero carbon buildings and sustainable products, and powers its business with 100% renewable energy, demonstrating a strong environmental commitment.

The company commits 1% of its annual operating profit to support impact programs, including philanthropic work and climate commitments. Initiatives like developing an inclusive culture, supporting students and educators with tools and training, and providing software donations highlight its social responsibility efforts.

Autodesk states that its ESG programs align with operational priorities and long-term growth strategy, fostering trust with stakeholders and enabling compliance with global regulations. This indicates an integrated approach to ESG, rather than treating it as a separate initiative, enhancing its sustainability and governance practices.

International net revenue accounted for 64% of total net revenue during the six months ended July 31, 2025, indicating significant global exposure. This dependency makes the company vulnerable to adverse movements in foreign currency exchange rates, geopolitical conflicts, and economic downturns in various countries, which are explicitly cited as risk factors.

Changes in foreign currency exchange rates had a negative impact on net revenue, reducing reported growth by 1% for both the three and six months ended July 31, 2025. While Autodesk uses hedging instruments, it does not fully mitigate this risk, indicating ongoing sensitivity to global currency markets.

The company faces an evolving regulatory environment, with new tariffs, trade barriers, and data privacy laws (e.g., EU's AI Act, UK DPF Extension, China's PIPL) impacting international operations. These changes increase compliance burdens and could affect market access and operational costs, particularly for cross-border data transfers.