Autodesk Stock

All right. Good evening, everybody. I think before we kick it off, we're going to have Janesh read a safe harbor statement.

All right. This is the best part of my job. We may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements. I feel a lot better now.

All right. Me too. Now with that out of the way, good evening -- good afternoon, everybody. We've got Autodesk. We've got Andrew Anagnost, CEO, I think your first time at the conference, so welcome. And Janesh Moorjani, CFO, who has been here a couple of times. So welcome to the conference, guys.

Thanks for having us.

Awesome. Well, Andrew, let's kick it off with you. So Autodesk has been through a pretty remarkable evolution across the business model, the product portfolio, the platform. As you look at the company today, what feels most different about the opportunity ahead versus even a few years ago?

Yes. So look, the thing that feels the most different is our ability to execute on the growth opportunities in front of us. One of the things we did over the last 3 years is we actually changed the fundamental guts of the company in terms of how we execute from a go-to-market perspective, not just from a technological perspective. We've been executing on AI and automation of our technologies and the industry clouds for quite some time. But now what we've done is we've aligned all of our go-to-market activities to basically line up on new business growth and not so much on renewal of existing business. And I think that's a powerful opportunity because we have all of this technology now to feed into that new go-to-market engine.

Okay. Great. Janesh, Autodesk's recent results held up well despite the uneven demand backdrop, while the sales reorg and channel changes are still maturing. As you look beneath the headline numbers, where is demand proving most resilient? And where are those go-to-market changes actually beginning to improve execution?

Yes, it's a great question, Matt. One of the things that we've talked about is just the fundamental strength that Autodesk has from the diversification of our business. No matter which way you look at the business across geographies, across segments, across industry verticals, we serve so many different end markets and so many different customers in all of those that when there are strengths in some areas or weaknesses in other areas, those all tend to balance out.

And that's actually given us great resilience in the business model over time, and it's helped us just deliver consistently year after year. And that's the same as what we're seeing now. What we saw in Q2 was a continuing theme of some of the areas of strength that we've seen in the earlier part of the year. The broad macro stayed roughly stable as well. And areas like industrial and infrastructure and even data centers continue to perform well, and there is softness in other areas like commercial, for instance. So all of these are continuing themes.

From the standpoint of go-to-market, the go-to-market reorganization that we did at the start of this year, in the early part of this calendar year, that's actually playing out as we expected it would. We are seeing many -- in most parts of the world, we're seeing our sales force return there to a normal level of productivity. It's taking a little bit of longer time in Western Europe mainly, and that's mainly because of the -- it took us a little bit longer to implement the reorg over there just given local consultation requirements and local labor laws. So that's, again, all very consistent with what we expected.

Okay. Great. And Andrew, let's bring it back to you. I think in the most recent earnings call, you started talking about more connecting design, make and operate around project intelligence, right? So can you bring that vision to life for us? Like what -- when those workflows and data sets are truly connected, what does a customer do differently than they do today?

Yes. So what this essentially allows people to do is maintain a continual thread of intelligence across everything they do. We recognized a long time ago that we were going to automate a lot of what happens in the design process. It's something that we've aspired to, to kind of remove the UI of creating kind of designs. And what we moved to was actually helping customers converge Design and Make processes together so that you can actually connect instantaneously the decision processes of what a design decision has in terms of an impact on how you construct or manufacture something or how some of your manufacturing and construction capacity changes what you might design.

We want to make that a real-time decision seamlessly connected. This thread of project intelligence across Design and Make is how we capture that context and maintain that context. So what it's going to do is it's going to unlock capacity for our customers. It's going to allow them to deploy fewer resources per project and execute on more projects. We have a fundamentally capacity-constrained ecosystem we serve. We want that ecosystem executing on more projects. Now we've extended that from the life cycle of months and years that are on specific projects all the way into operate.

So this closes out the loop that we've been aspiring to close out, design, make, operate, bringing that context loop all the way around, allowing our customers to execute on projects with fewer people and execute on more projects, bid and win on more projects, which is the key value proposition we're going to be bringing to them.

Okay. Now you talked about fewer resources per project. Andrew and Janesh, this is for both of you. I guess there's a broader debate about what higher productivity ultimately means for seats and seat-based models. As you spend time with customers, what is shaping your view of how that plays out with all of this?

Look, every one of our customers, everyone we talk to, they don't have enough capacity to execute on the business they see in front of them. They also see a backlog of business that they'd like to bid on that they can't bid on. So they can't find enough people. They certainly don't have enough money, and they don't have enough materials in the ecosystems they work in to efficiently execute on all the projects. They want more capacity. So every customer in every geography in every place I talk to wants to be able to deploy fewer people on a project so that they can execute and bid on more of these projects.

This is universal. And this kind of efficiency and this kind of effectiveness in a labor-constrained world for almost everybody is really something that an unlock they want. And as a result, what they're not looking to decrease their investment in Autodesk, what they're looking to do is get more out of their investment in Autodesk so that they can actually execute on more of these projects. This is the capacity problem that is endemic in the industries we serve.

Janesh, anything to add there?

Well, I'd just add that, as Andrew was saying, as customers can do more with Autodesk and as they get greater benefits from AI, that actually allows them to take on even more projects. So the volume of work that they have to do and that they can do expands as they continue to adopt the technology. And in terms of then how that plays out in our business model on seats versus consumption, we laid out our monetization framework for AI really along 3 vectors. And the first was just simply task automation, making the individual user more productive. That doesn't have any impact on seats.

In fact, it increases the value in a seat, and you've seen that in stronger renewal rates in our business already play out this year so far. And then as they move towards workflow automation and eventually system automation, that drives more consumptive workflows, and we monetize those through consumption revenue streams. We've been -- we've had consumption revenue streams in the portfolio for a long time now, roughly 16%, 17% of our business already comes from consumption. So it's a model we're very familiar with.

Okay. Great. Andrew, let's move to AI products. AutoConstrain has seen strong engagement and Fusion. You introduced Building Layout Explorer. That's a very different AI experience in AEC. As you look across all those early examples, what are you learning about the functionality that genuinely changes how customers work?

Yes. So look, it's our goal to reduce the amount of UI that the customer has to go through to create a model to just basically 0. So any technology that allows us to do that allows our customers to unlock the value of having a model. The value isn't in creating the model, that's the step you have to go through to unlock the value of using the model. So we want to get to using the model as quickly as possible. All of these technologies are in service of that. And you're going to see a lot more of these technologies rolled out at AU, where we're essentially shortening the distance between here's the idea I want to execute. Here's the model that helps me visualize it and it helps me iterate on the design concepts and helps me solve Design and Make problems.

So what we're learning is there's an appetite to stop doing grunt work in the products to create models. And there's a desire for us to deploy these technologies faster, not slower. So there's got a lot of exciting stuff that Autodesk University will talk about, including the new version of the Autodesk Assistant, which is going to be very much agent-first that really is all about getting the value out of the model once you created it and using the minimum amount of effort to create the model.

All right. Stay tuned, AU '26 next week. Let's talk about Autodesk Assistant. You just brought it up. You talked about reducing the UI. It looks like Assistant basically becomes the connective layer across the portfolio. So as automation expands, like could the industry eventually move toward a world where users are spending less time in individual applications and more time interacting with, let's say, an intelligent layer on top of them? Like how do you think about Autodesk's role in that?

Yes. So you want to think about the Autodesk Assistant, especially the next generation of Autodesk Assistant, which I will be presenting at AU next week. As kind of the -- basically the context layer and the orchestration layer that actually picks and chooses the right model for the right task, whether it's one of our proprietary models that are highly efficient for certain tasks or maybe a frontier model that might be trying to solve a particularly different task.

So you want to look at it as that layer that AU -- that controls the context, exposes the context to the underlying model orchestration underneath.

So it abstracts away a lot of what our products do for our customers. And what you'll see next week is you'll actually see an agentic environment that the user is constantly in the flow of Design and Make and the environment brings to them the tool or capability that they need to solve the problem. And it might not even be bringing a product, it might be bringing a microservice or a piece of a product. And it's going to be a really exciting demo because it kind of shows how you can keep a customer in the flow of solving design problems or Design and Make problems and bring the tools that they need to solve the problem to them based on their context, based on the problem they're trying to solve, based on where they are in the actual project context. It's like the full fruition of project intelligence. So I'm excited to unveil that. I'm not going to kind of describe the demo at this point. You'll have to wait to see it next week.

And I guess the point here is that -- in terms of the risk of LLM sort of abstracting away sort of the UI of Autodesk, this is sort of the response to that.

Well, we've always believed that the UI between creating a model and using a model should be 0. Using the model is where the value is created. Any tool out there that helps us create models faster, we'll use, but it has to be able to do it fast, accurately because accuracy is a premium in our space. We're dealing with the built world. Probably wrong is right -- I mean, probably right is wrong. Let me inverse, reverse that, do the Willy Wonka thing, stop reverse. So probably right is wrong in our space, you need accuracy and you also need cost effectiveness.

So what we're going to do is we're going to bring the tools to bear that allows us to do that, and that's going to be a combination of proprietary models we've built, open-weight models and other models that are out there in the industry right now that do things. That's the goal, speed, accuracy and cost effectiveness built on the design context that our customers are working in.

All right. Let's build on this theme. There was some big news last week. OpenAI launched their Astra model. It sparked a lot of discussion among investors about what increasingly capable multimodal AI could mean for design and engineering software. How do you view that announcement? And how do you think about the implications for Autodesk?

Yes. That's a perfect example of misunderstanding where Autodesk value is, right? The value is not in creating the model. The value is in using the model. And any technology that helps us create models faster with minimal UI is we'll use it. We'll take advantage of it as long as it's accurate and cost effective. And this is super important. That's why it's going to be a combination of models that our customers need, including ours and some of these other models because it has to be accurate and it has to be cost effective. So what you saw with Astra is just like another example of what you're seeing with world models.

These are all tools that help us generate things quickly that help us start the process, but they don't actually take you through the process of doing Design and Make decisions and capturing the context that's required to do that. We are going to be the system of record and action that brings all together all of that context, all of that design capability into the project intelligence and helps people actually solve these problems in cost-effective ways. Again, fast, accurate, cost-effective is the mantra for what we're trying to deliver to our customers.

Is there a way to help us kind of think about what that means in practice beyond sort of just the conceptual design phase of what we saw in the Astra demo and to actually what Autodesk is doing day-to-day? Because I think in some respects, investors look at it and say, "Hey, Autodesk does design, but that's sort of the end-all, be-all. It's not really the reality." So...

Yes. People are confusing visualization with design sometimes. They also confuse the creation or the generation of a part with the design problem. Our customers do complex things. They're fitting together large amounts of different things into complex buildings, machines and assemblies, and they're also trying to do this in such a way that it's actually buildable in a way that's predictable and validatable. It has to be able to sign off on it. An architect has to be able to sign off on a building. A mechanical engineer has to be able to sign off on a design, a civil engineer has to be able to sign off on a design.

These require context engineering rules. They require context about where something is being built in the world. It requires context about what the previous projects in that space, how they were built and how they were designed. This is not just simply creating an individual part or an individual model or visualizing something. It's a much more complicated process that requires us to carry a thread of project intelligence through the entire thing. And that's what we're doing. And that's why it's so important to stay grounded in the fact that accuracy and cost effectiveness are incredibly critical. You can't do some of the things that customers need to do on just some of these models that just create models. You need to create designs, you need to create systems and they need to be constructible and manufacturable.

Okay. Very clear. Let's touch a little bit on neural CAD. This is becoming a central part of Autodesk's vision for Design AI. We've touched on flavors of this. But as you think about the broader tech stack, like what does Autodesk ultimately need to own? Where do frontier model labs and partners fit? And how do those pieces ultimately come together for customers?

So again, everything serves this mantra of doing things fast, accurate and cost effectively. So neural CAD is a set of models that we build that are million-parameter models that actually do specific tasks in a design process highly accurately and predictably. Remember, accuracy is so important. It can't be a probabilistic outcome. It has to be an accurate deterministic outcome. So the -- some of our neural CAD models do things, understand things like, for instance, we talked about laying out the complete design of a building, laying out where all the walls and rooms are and understand that's a neural CAD model that we built to do that, designed to specifically do that, and it lays out the room in a way that's constructible using -- that's compliant with the local standards and requirements and codes and all the things associated with that.

We will have a set of models like that. We already have several. We'll probably have dozens in the future that we'll call upon to do these kind of high-efficiency tasks. They cost pennies to execute. And we'll also call other models. We'll call frontier models when it's appropriate for us to use those models to get to the customers -- to get the customer's goal of fast, accurate, and cost effective. So it's not -- we choose the right model for the job. It's the context layer and it's the system of record and the system of action that we're trying to put together in a way that keeps the customer in the design problem and the make problem solving mode.

Okay. I want to shift gears to the industry clouds and the platform advancements that you guys have made. If we just kind of drill into AEC specifically, customers know Revit deeply, but more of the cloud and AI road map is taking shape in Forma. How do you see those experiences coming together over time? And what does that path look like from a customer's perspective?

Yes. So first off, let's talk about what Forma is. So Forma is an end-to-end Design and Make system on a single database, granular data, cloud native, agent-ready, agents can talk to it, use it. It's basically a next-generation environment that goes all the way from design through to construction, okay? And that's really important because it's how we create value in the future. Revit is a modeling application for 3D design that is almost entirely focused on the design phase and building a model that can be used in the future.

What we do is we make sure we build a bridge between where the customer is at and where they need to be in the future. Forma is obviously the future. It's where everything is connected on a single database. It's where the project intelligence sits. It's where things can be connected in highly granular ways and in real time. But we've set up Revit in such a way with Forma, we call it a Connected Client so that the user can start in Forma and go out of their workflow, if Forma has a gap today, they can go out and execute in Revit and then go back into Forma and continue the workflow down into preconstruction and construction planning.

So we make sure that the 2 environments work together because our customers move gradually. One of the things that's important to know about our ecosystem is that they don't adopt technology as fast as some other ecosystems. They're complex industries, accuracy is at a premium, projects last sometimes years to decades. They don't change in the middle of projects. They're regulated industries. Some of them are really regulated, some of them lightly regulated. They're highly fragmented.

So that the ecosystems adopt technology over a gradual period of time, no matter how advanced the technology is, it diffuses in over a gradual period of time. So it's hyper-important that we connect where they're at today with the future we want them to be moving to. And that's what we're doing. We're doing that also. We're connecting AutoCAD into Forma in interesting ways, but Forma is absolutely the future.

And then I guess maybe if we take that to Fusion because this is one of the clearest examples of Autodesk's broader platform strategy actually starting to take hold. What do you think -- why do you think that approach has worked so well there? And what lessons can Autodesk apply to the rest of the portfolio?

Yes. Again, it comes down to -- so what we've done with Fusion is we've converged Design and Make in a single environment. And we've made it easy in a cloud-based granular data, simultaneous collaboration environment to basically move from Design to Make and make Design to Make decisions that are connected and do it packaged up in a way that the mid-market likes.

So we're actually taking share with that product. It's growing rapidly. It's actually proving out the whole strategy of the new industry clouds and what they do. We've also introduced a lot of the AI capabilities. First in Fusion. Fusion has more AI capabilities actually than some of the AEC products because we want it to be a demonstration of what's possible.

Okay. That's great. This one is for both of you guys. I guess when you think about more innovation happening through APIs, agents, external applications, how do you think about building an open ecosystem while still ensuring Autodesk remains a central part of that value creation?

Look, I think you need to meet the customers where they are. It's good to have connections to everything that's going on in the ecosystem because we want customers using our tools no matter how they're accessing the tools and how they're approaching them. It's always very valuable for us for our tools to be everywhere in the process. Ultimately, to get the project intelligence we want, they want to be centralized in.

But the whole point of moving to granular data and moving to the industry cloud is to create an open ecosystem where anyone can plug in where they're at to the environment. We'll make sure that we charge them for that access. I mean we charge for all the points of access in that ecosystem. But openness is better. You want to be everywhere where the customer is at, but you want to bring them into the high-value project intelligence environment because that's where they get the biggest bang for their buck over time.

And then, Janesh, maybe just ground us in sort of how that open platform ultimately gets monetized through Autodesk.

Yes. It's -- like Andrew said, it's about meeting customers where they are and giving them a choice. We give them the choice of commercial models that they can use as they think about the various technologies from Autodesk that they deploy, whether that's existing subscriptions, whether that's Flex tokens that we have today, in the future hybrid subscriptions. So there's a variety of different choices that we give them, and we meet them where they are. That also means, by the way, thinking about the size of the transactions and thinking about the size of the transaction, and thinking about how they consume and how much they consume. So for example, for many of our small business customers, we used to have Flex packs that were $300 in size, and we lowered that barrier to -- or that threshold to about $100 in size. So people can adopt at much more granular levels if they choose to.

Okay. And then maybe sticking with you, Janesh. Autodesk has already navigated one major business model transition from license to subscription. The next evolution is toward consumption and machine-driven usage, but it's early, right? Flex is 2% of revenue. I think EBAs are 15%. So how do you see a path toward a more blended model? And what ultimately becomes the right unit of value as more of the workflow is automated?

Yes, it's a great question, Matt. But maybe for starters, I would be careful not to describe it as a transition because we internally don't see it as a transition. We see it as giving customers choice. And in terms of how that shows up in the financial model for a number of investors is you won't see any of the kinds of noise that we historically had with the perpetual to subscription transition or more recently with the new transaction model that we introduced. So those are, for the most part, behind us. But as I think about the ultimate evolution of the monetization streams, as I said earlier, consumption is already a significant portion of the business today. It's about 16%, 17%.

I see that gradually increasing over time, both as enterprises continue to adopt more at the high end, but also as we think about giving customers choice around subscriptions versus consumption-oriented models, the consumption-oriented models will increase. But on a business that's operating at scale like we are north of $8 billion in revenue, those mix shifts take a long time to drive. So we will see strong growth in these consumptive models, but I'm not expecting a big step function change in the composition of the business overnight.

Okay. Andrew, let's go back to just the private ecosystem and some of the innovations there. There's a growing number of companies exploring how AI can reshape design and engineering. As you watch these new entrants emerge, what do you think they're underestimating about these markets? And what will matter most in sustaining Autodesk's leadership for the next decade?

Yes. So first off, there's a couple of things like I said earlier about our markets. Our markets transition slowly over time, and that's important. Some aspects of the market move faster than others, but they transition slowly over time. Proprietary data because of the accuracy that's required in our space, the accuracy of getting it right, making it buildable, making it safe, making it actually validatable and sign-offable. You need a moat of proprietary data that you can use to train some of your models for validation on. So it's really important to this flow of data context and the ability to craft an experience that's tailored towards designing and making.

And that's kind of where we're focused internally is doing that for the broader markets that we serve, the mid-market in manufacturing and the broad AEC ecosystem. Other players are going to come in. We embrace that. We embrace the competition. Most of them are either going to end up in the high end of manufacturing, where there's highly specialized workflows. Very few of them have the proprietary data set we have in AEC that's required to kind of get the accuracy we need. So in terms of where we're going to execute, we're going to focus on our data context and our experience advantage in terms of getting the right kind of levels of project intelligence to our customers.

Okay. Now let's shift to MaintainX. You recently made a big bet on operations with that acquisition. I guess as Autodesk extends further across the asset life cycle, where do you see the first really compelling opportunities to connect operational data back into design and construction workflows?

Yes. So first, let's go back to the thesis of moving into operations. This is something strategically Autodesk has been looking at for some time. And the reason that we want to move into operations are twofold. One is we want to get into the real operational data that shows how an asset is performing in the real world because that data can be used to inform how something is designed or redesigned in the future. But also, we want to engage the owners deeper into a model-based ecosystem, where the flows are driven by a model-based flow that's flowing on the project intelligence that we're trying to create with our industry clouds.

The reason we want the owners involved in this is because we believe that these processes are much more efficient. They're a big capacity unlock for the ecosystem, and they're also beneficial to the owners because they're ultimately the ones writing the check. They want the maximum value from their investment, and they want to be able to execute more projects. So we're getting into operations for all of those reasons. The reason we started with MaintainX is we began a project several years ago called Tandem. We've been working on it for about 5 years. And Tandem was about building an informational digital twin. And we always have the goal to move from an informational digital twin to a predictive digital twin to an operational digital twin because that's how you move up the value curve for digital twins.

When we began that journey, it was quickly apparent to us that the first place you want to get in there in terms of a predictive digital twin and an operation, is in maintenance. Because that's where you collect the failure modes of what's going on in the facility. It's where you get live data on how the machines are being used. So we had a real sense to go in and go after the maintenance space. Now there's other spaces that we want to go to in operations as well, but maintenance is the key anchor space. And when we looked at the space, there was one player that was the next-gen technology player with the best SaaS tools and the best AI tools and the fastest growth, and it was MaintainX.

And they bring us now into this market of actually collecting data on the real-time performance of built assets in the manufacturing space. We're going to bring them into the built space and into the infrastructure space and into the international space. But this helps us close this loop from design, make to operate and gives us the entire life cycle context of the built world. And I think that's a great place for Autodesk to be in the future.

And so what else is left to sort of round out the operate portfolio? Like what are the product gaps that you're looking to fill to sort of drive the value?

You'll learn more about those in the future as we go along. There are some product gaps we'll want to fill, but I don't want to kind of preannounce any of those areas.

Janesh, how should we think about then, I guess, just broadly capital allocation philosophy? Obviously, Autodesk has been very acquisitive over the last several years. So just help us think about that.

Yes. I mean both from the standpoint of M&A philosophy and capital allocation. From an M&A standpoint, as Andrew was just saying, our goal is to make sure we're pulling the future into the present by rounding out the portfolio. We'll build where it makes sense to build. We'll buy where it makes sense to buy. On operations, in particular, the playbook is going to be very similar to the playbook that we followed in construction, where we laid down a cornerstone acquisition. And then we built around that with smaller acquisitions as well as organic investments that we made.

So expect the same in operations. But all of that is against the backdrop of capital allocation where we laid out that subject to M&A needs in the business, we expect that we will return about 50% of our free cash flow to shareholders every year. And we've been able to do that. We did that despite the maintenance -- the MaintainX acquisition, we are sustaining our share buyback program this year as well. But that's the way we're fundamentally thinking about it. But it's a balanced view. We'll save room to invest in the business. But at the same time, return capital to shareholders every year as well.

Okay. Great. Let's stick with you, Janesh. Autodesk is balancing significant investment in AI, platform, MaintainX. You're still committed to reaching the 41% non-GAAP operating margin in fiscal '29. I guess the question here is where do you see the biggest sources of leverage? And which investments are most important to protect going forward?

Yes. There's inherent leverage in the business model itself as there are with many software companies, for every dollar that we produce on the top line and revenue, we don't need to necessarily reinvest a full dollar back into the business to secure future growth. So those are conscious trade-offs that we make. If I think about within R&D, we are shifting investments within the portfolio more towards areas of growth and continuing to shift towards areas best positioned to drive growth in the future. You've seen us do that for many years with all the investments we've made in AI, all the investments we've made in our platform strategy, all of those have been by shifting from the past to the future.

And then on the sales and marketing side, we continue to get terrific operating leverage from the overall sets of changes that we made, starting with all of the go-to-market structural changes that we made with the new transactional model leading up to the 2-year go-to-market optimization program that we had, the reorganization that we did at the start of this year. So those things have given us a fair amount of operating leverage. And beyond this, we will continue to get some degree of leverage from all the different areas. And we will consciously choose where we invest back in the business, absorb dilution from future acquisitions where we need to. But all of that in terms of working towards the 41% non-GAAP gross margin for '29.

And just on the transaction model change, like we talked about sort of the cost advantages like renewals automation, for instance. But there's another side of this, too, right, just in terms of the high fidelity data that you're capturing with your customers. Are you actually starting to see some of the benefits of that come through the model today?

We are starting to see some of those benefits quite naturally. The model was intended to focus on new business and expansion and help both our partners as well as our direct sellers drive new business and more expansion, while at the same time, driving a highly automated and highly efficient renewals machine. So we're seeing benefits on both of those. On the renewal side, you're already seeing that in the form of savings that we took through the actions that we had taken at the start of the year. And despite that, we actually have very strong renewal rates and renewal rates that have improved over the course of the past couple of quarters.

And if I think about the new business productivity, that's what the reorg was intended to do. And the best indication of that is how well sellers are achieving their quotas. We knew there would be some disruption in the earlier part of the year that played out in the range of expectations that we had. But ultimately, we set the plans higher and sellers are on track to achieve that. So we are starting to see the benefits for sure.

Okay. Great. And Andrew, maybe back to you to close out in the last 2, 3 minutes that we have here. You've been living and breathing design and engineering for your entire career, right? And so -- when you look out 5 years from now, I mean, what do you think will change most fundamentally about how the world designs and makes things? And what role does Autodesk need to play in bringing that future about?

Yes. I think things are going to be much more hyperconnected than they are today. We've been talking about this notion of convergence for some time, converging Design and Make together. Now we're talking about converging design, make and operate together. And we've been also talking about the industrialization of construction, which really means the industrialization of the AEC ecosystem. So our goal is not just to provide technology, but to actually transform the ecosystems we serve. We believe deeply that there needs to be a capacity unlock.

So when we look forward to 5 years, I think you're going to find small groups of people working intensely on Design and Make problems in real time, where they're getting real-time feedback about what a decision in an early design process, how it impacts how something is made, how it impacts the cost in real time instantaneously so that they can actually make better decisions early on to get better outcomes later in the process. And it really is going to be a small group, not isolated, not divided by contractual things, but they're going to be working off a single model, highly granular in the cloud, telling them exactly what they need to work on, where they're getting it wrong and how they should proceed forward.

I think that's going to be revolutionary in many respects. It's already common practice in manufacturing, but it's going to get much more hyperautomated in manufacturing and taking that all the way to operate and being able to design something and then immediately have it go into a factory that knows exactly what to do with the model once it arrives there is going to be really powerful. And I think that's within our grasp in 5 years.

For AEC, this whole industrialization concept, this whole notion of using industrial processes for tracing who did what, how things are done, making sure that one model is continuously flowing through the process end-to-end is just going to be revolutionary to eliminating waste in this ecosystem. Now, again, the ecosystem changes slowly. The technology to enable this change will exist in that 5-year time frame, all of it. Will the ecosystem have adopted it all fully? I would likely say probably not, given the history of the ecosystem. But the technological platform, the ability to do that is going to exist, and it's going to have a level of fidelity and project intelligence that we just can't imagine today.

Fantastic. Well, that's a great place to leave it. Andrew, Janesh, thank you for joining us.

Thanks for having us.

Yes. Thank you.

Hi, everyone. I'm Tyler Radke, Citi's Co-Head of U.S. Software. Thank you for joining day 2 of Citi's Global TMT Conference. We're happy to have Autodesk back, who is a regular attender at the conference and excited to have a great discussion with a practitioner, I would say, at Autodesk.

We have Bob Bray, the VP and GM of Autodesk Tandem. Bob, thanks for making it out to New York City. I know you got a big conference in Las Vegas next week, you're probably busy prepping for. But for the benefit of the folks in the room, give us a sense of your background, what are the things that you do day-to-day at Autodesk just to set the stage?

Yes. I mean I live and breathe in the trenches. I build software. I run teams to build software. I've been doing it for Autodesk for almost 30 years, all through our architecture, engineering and construction business for a lot of that time, was part of the foundation of our Construction Technology business as we did some foundational acquisitions there. And now I am kind of leading the way into the operations business for Autodesk, so that next pillar of growth for us. So excited to be here.

Yes. And what is Autodesk Tandem just for folks that may be less familiar with it?

You can think of Tandem as an operational intelligence platform. Autodesk for years has helped customers design and build things. Tandem is more about how do we help customers operate those things effectively, efficiently, reduce downtime, increase operating efficiency, whether that's throughput of a factory, whether that's helping people get through TSA lines more efficiently, whatever that may be, it's really about driving efficiency in operations. And if you think about the flywheel that creates, that knowledge from operations then feeds back into helping people design and build things better in the future. So it really connects the value chain for Autodesk from end-to-end and for our customers.

Just to add that, the operations market TAM is about $40 billion. That's about 4x the size of the construction TAM. But as Bob said, there's sort of a couple of interesting attributes about it. One is it's a decades-long business, whereas our construction business and design business is sort of 3- to 5-year business, a massively longer duration business. And the second thing is it opens up a whole and massively bigger data set for us because it's not just a new build where you get the data, it's the existing built environment, of which there's vastly more than the annual new build as well. So for example, a very large global retailer in Q2 signed an EBA with us to digitize their entire estate. And it's not just the new build, they're digitizing their entire existing estate. So that's really exciting using Tandem.

And when you say it's -- I think you said 10- or 20-year opportunity versus 3- to 5-year, what you mean...

It's actually a 50-, 60-, 70-year opportunity? Yes.

So think about -- so you design a building, you're going through the architecture and engineering process for maybe 3 to 5 years. You're building that building, you're going through 5 years of process. Typically, it's 10 years of subscription for us. Whereas if you're maintaining that building, you're maintaining that building for 50, 60, 70 years, that's a long lifetime of subscription.

I see. I see. Yes, sort of thinking about the duration of the project and the use case. That makes sense. Within sort of the building and construction design side, Autodesk has long talked about the BIM standard, I think, probably for the past decade, maybe not 30 years. But how is that -- where are we in the adoption of BIM? And how is that driving growth for Tandem and some of the operations products that we sell?

The adoption of BIM is really about data interoperability and data flow from early-stage planning through design, through engineering into construction and then into operations. So keeping that data consistent and having a smooth set of data all the way from end-to-end. So a concrete example of this in the real world, a large contractor in Europe, BAM. They are now digitizing every project from beginning to end with the end deliverable being a Tandem digital twin for use in operations. And they also do -- they have extended their business in the last decade into facility management services. So they'll sign a 25-year contract to actually maintain a building after they built it and they use Tandem all the way through that process from beginning into operations.

Okay. And they've already called us about having a conversation with MaintainX as well.

Yes. Yes. No, that's super exciting. As you just kind of look at the lay of the land within the AECO segment, like, how are you seeing the puts and takes? Obviously, data center demand, construction projects are off the charts, but there's certainly offset areas. So how would you kind of blend it together? I mean you've been at Autodesk 30 years, seen many cycles. Where are we, kind of, in those ranges?

There's always an ebb and flow. Obviously, commercial construction starts are not exactly high right now, but other things are high right now. So there's always an ebb and flow in the construction industry. If commercial buildings are being built, data centers or pharmaceutical facilities or other types of facilities. So there's no shortage of demand for building things. That's for sure.

Yes. Got it. And this concept of the digital twin, we've heard a number of design and simulation companies talk about that in the industry. Like what differentiates your approach in your digital twin product versus some of the others you might care of?

Our approach is life cycle based. The whole asset life cycle from early-stage planning all the way through design, simulation of how that will perform, building that and tracking the twin through construction and using simulation of scheduling and all kinds of things through the construction life cycle and then into operations and then being able to compare is this factory producing at the rate that I simulated that it would? If not, why not and being able to optimize based on that. So it is really that whole life cycle approach that differentiates Autodesk and our approach to this process.

Right, right. Got it. You touched on MaintainX and obviously, it's a big acquisition, probably very exciting given where you sit within the organization. But how do you, I guess you touched on some customer anecdotes, but what's sort of been the customer response? And how are you sort of envisioning where that product goes versus where Tandem goes going forward?

Great question. I mean we're super optimistic about this acquisition. Customers have started engaging with us significantly around this acquisition. And why is because if you think about what we built with Tandem, we built the system of intelligence. So we can understand when a product might fail or a component might fail in the building. Now we have an application that we can basically assign a technician to go and fix that problem and also provide them context to what the root cause might be or what the solution might be. So it's again, connecting those systems together intelligently. So we go from understanding there might be a problem, what is the problem and now assigning someone to go take action to fix the problem.

So that connection through the life cycle is really important. As Simon said, we've had a global contractor who's been using Tandem for a few years now, call us recently because now they see that opportunity to connect those systems end-to-end. That retailer also very interested in their refrigeration units is where they started with Tandem, understanding when failure might happen because highly expensive to throw food away. Now they can assign a technician to go and fix that problem.

And so there's sort of 2 threads of opportunity. One is the sort of the owner thread. And owners want a complete view of the assets end-to-end, both of their existing estate and then that informs also their new build. And then you've got the sort of service companies that are servicing them to help them build it, who are doing the sort of same thing. And we are serving both of those constituencies sort of end-to-end. And then opens up the opportunity, which is in AECO, as we've told you that already -- so MaintainX has primarily been in factories and manufacturing. But any asset, whether it be a factory is a building with stuff in it, as is an office block, as is a piece of infrastructure, they're all stuff with -- buildings with stuff in it basically.

The other opportunity is in enterprise. MaintainX has primarily been in small and medium-sized business. And then the sort of third opportunity is in sort of Internet. And so all 3 of those are significant opportunities for us to take MaintainX to help them expand. And then the sort of longer-term one then as we've been talking about is the data, both in operations as sort of stand-alone, but then also taking operations data upstream.

Right, right. And as we think about just the MaintainX business and where -- like what type of customers, what industries they're the strongest and maybe this is also in conjunction with Tandem, but where do you have the most success doing operations? I imagine doing operations for retail is very different than a data center or a complex manufacturing plant. Like give us a sense of where you sit in kind of those today.

The highest impact and the customers that are adopting are those that have critical assets, where if the asset fails for any reason, they're losing revenue typically. So factory, industrial, health care, airports, data center and even into retail. One of the funny things about MaintainX that I learned early on is one of their earliest customers and their largest early adopter was actually car washes. Now think about that. If car wash fails, they're not making money. It makes perfect sense. So that notion of the asset being critical and uptime being critical is where we see adoption.

I see. So talk to us a little bit about the data side of that, right? I mean because these are really complex environments, the mix of operational data, IoT data. And we've seen approaches from PTC, for instance, with some of the acquisitions and then subsequent divestitures they've made in terms of IoT. But where are you getting all this data from? And how do you kind of ensure that you're able to have that full view of really critical and complicated environment?

We made a very small acquisition a couple of years ago, small enough that didn't make radar of what it was an integration platform, and it was a hybrid integration platform that allows us to both connect to enterprise systems in a bidirectional way. So an IBM Maximo or an SAP systems like that, but also allows us to connect to technology that runs in the OT network within the building. So that could be a building management system that's controlling temperature in this room. It could be an MQTT system or a SCADA system that's controlling the equipment in a factory or an industrial facility.

And so we have that ability to connect to various systems and ingest that data from just about any system today. That is a tool that is low code, very easy to deploy, and we're starting to bring AI into that to basically create the citizen integrator, if you will, to make that easier and easier.

The critical difference between what we're doing and what PTC is doing is that we are taking an owner view, which is of the entire asset. As you see with Tandem, also MaintainX is the same thing. Whereas PTC, things like ServiceMax is much more of a vendor view. So it's only a subset of the assets that are in the building, which is less useful to the owner.

Fair. Okay. That's helpful. And I guess as you think about the AI opportunity, specifically within MaintainX and Tandem, I mean, what are some of the key features that you've released thus far? What are some of the things that you're working on? I'm sure we'll hear a lot next week at AU, but talk to us just how you see it.

You'll hear a lot of things at AU. But in terms of Tandem and operational intelligence, we think about AI in 3 areas. One, helping customers take the massive data that they have, which is really what they have. They have a lot of fragmented silos of data and turn it into structured information. AI is exceptionally good at that. So helping them onboard and create their digital twin is one thing.

Second thing, you hear a lot of customers that complain about dashboard fatigue. I don't want to pay somebody to look at the dashboard. I want the system to understand where the problem is and tell me where that problem is. So again, using AI to infer from data, produce the right context and then inform the customer what the challenge is. And then long term, it's taking action. So using Agentic AI to actually take action within a customer's facilities. Now this is -- there's trust issues there. Customers need to trust that before they're going to have them control critical facilities in any kind of building, but customers are asking. And those barriers are starting to come down.

In MaintainX, it's understanding a maintenance schedule is one thing or like a manual will tell you this piece of equipment needs to be maintained every month. But if you use utilization, you can create a predictive maintenance schedule that's much more optimized. They're using AI to infer from data and then create optimized schedules, provide root cause analysis for the technician, basically give the technician at their fingertips what they need to know to fix the problem, cause a lot of problems, and it basically improves efficiency for the technician.

Right. Right. And it sounds like this MaintainX and maybe Tandem to a lesser extent, like the primary customer is the target customers, the owners, right? How would you -- if we look at the Autodesk business today, right, clearly dominant still in design, which maybe is less on the owner side. How would you sort of frame how big the owners revenue or installed bases today? Is this -- and the reason I ask that is like understanding, is this more of a new logo or a cross-sell opportunity?

I won't harp on the term owner. But -- so there's the capital project teams. We supported capital project teams at Autodesk for many, many years. So that's a cross-sell opportunity into their operations business. At the same time, there's new logo opportunity in supporting operations businesses across the spectrum. The retailer that Simon mentioned earlier, used to be an EBA years ago, walked away. They're now an EBA again. And it's really because we introduced Tandem and an opportunity to digitize their operations business, and now they're working back upstream into our design and because they want to digitize their entire portfolio. So it's both new logo and expansion for us.

Okay. Okay. Got it. I guess as we sort of look at the AEC business broadly and maybe manufacturing as well, but sort of separating out MaintainX and Tandem. Where are you seeing kind of the greatest interest just as customers are looking to deploy AI for Autodesk. Clearly, there's a lot going on in the industry with some of the new model releases, Astra, et cetera. But at the same time, you have massive backlogs of projects with a lot of manual processes that still haven't been automated by AI. So where do you kind of see the opportunities...

For AEC firms in AI, it's about automating the mundane. They do a lot of things repetitively and getting rid of the mundane constraints. We talked about that today multiple times of just having a constraint solver that will automate constraints is a huge time [indiscernible] just automating drawing production, automating the design of things that have a consistent shape to them, bathrooms or architects complain about designing bathrooms all the time. How many times do I need to design a bathroom. There are certain things that can be automated in a repetitive way. And that's where AI is an early adoption within all AEC firms because it takes away that kind of repetitive work and allows the architecture to do the things.

Let me thread on that a little bit as you mentioned the magic word, but the -- so this is going to be a longer answer, but a few things. So firstly, our customers really care that buildings don't fall down and wheels don't fall off cars, et cetera. So you can't just say, yes, let's give it a go and try something. It has to work. So that takes -- means to build something that works takes time. And they're not just going to throw stuff out because they've got a whole bunch of processes to make sure the buildings don't fall down and wheels don't fall off. So they're not just going to rip it out, put in stuff. It's going to be a workflow by workflow adoption to make sure that they have accuracy, which then ensures safety and a bunch of other stuff. So that's the sort of first thing.

The second thing in terms of adoption is that there's sort of 2 bits of value that you can extract from AI. One is around money, but the other is around data. And those are often -- it can be conflicting objectives because if you charge more money, then people use it less or you have less distribution, which means you get less data. So what we're trying to do is to sort of maximize both of those, which is, again, using the sort of task workflow systems automation that we used at Investor Day, task being a narrow scope of work, workflow being a broader scope of work and the system being the broadest scope of work.

So primarily focusing on task automations, which automate crap, which people don't want to do. But the other attribute of a task automation is small model, which means the compute can happen on the edge rather than in cloud, which means there isn't a lot of marginal cost attached to it. That means that we can deliver it as extra value to our existing products and capture value through price as we would with a typical subscription. So that's how we capture value today.

But what it also does is it makes the model available to all of our customers and they use it more. So why is that important using an example from AutoConstrain in Fusion? At the beginning of last year, when we launched it, it had an acceptance rate, which is demonstrated value of about 30% -- by the end of the year, because we were able to iterate with usage and data, the acceptance rate was north of 2/3, a massive improvement in the value that we were delivering as demonstrated by the usage of it. So that's the sort of second thing.

And then the sort of third thing because you mentioned Astra and to sort of talk about it. Again, so we talked a couple of weeks ago, as you know, on our earnings call that there is going to be no single model that does everything because no single model will have access to the right data in the right context. So the way to think about it, particularly in our world, which is very complex and has high stakes of things that go wrong, is that a decision a customer has taken at any given point will reflect the combination of needs around accuracy, speed and cost. And those 3 things are often competing constraints. So something that is very accurate is often slow and expensive to generate.

And so the choices you make between those 3 things will depend on the context in which you're taking that decision. And that context will then be contingent on a bunch of other things that are dependent upstream and downstream on them what happens once that decision is made. And so that context and the decision-making will be determined by the harness layer. And the harness, which is for us, Autodesk Assistant, then pull on the right resources, which will be a combination of our own AI, Neural CAD. It will be frontier models. It will be open models. It will be our customers' own intelligence. And also, it will build on a bunch of functionality to enable accuracy, speed and affordability to take the right decision within the flow of work.

So where Astra fits into this is that we talked to Investor Day, as I said, about task workflow and systems automation. And as you move along that spectrum, the lead on the work shifts from being a human being to being a machine. As we said at Investor Day, was exciting because machines generate significant new value in 2 ways. One is because they can make inference that human beings cannot because the human brain cannot conceive of it. And secondly, they generate new monetizable time because they work 24 hours a day, 365 days a year.

But you can only do that if the machines can intelligently take action. And so that is why Astra is important because it enables that shift to generate that new value using our tools and drive significantly new value and more value through our ecosystem that we're pretty excited about it.

Right. And staying on that theme, it might just be like slightly different definitions here, but one of the themes we were discussing yesterday with some of the private companies, heard this from some public is this idea of Agentic labor, which I think in your industry, you still need an agent can't build a building, right? Certainly, they can help with design, the automation of tasks. But ultimately, there is sort of like this human bottleneck is the contractor going to show up? Are they going to have the right materials, et cetera.

So how do you think about the sort of Agentic labor opportunity for Autodesk? Maybe it's more just Agentic workflow or Agentic system automation that you talked about? And like how much -- as you think about your customers, like how much can that really accelerate their business given that there are physical and true human constraints even if you did everything perfectly on the design inclination.

So this is where an economics degree is going to come be valuable again, make economics valuable again. So this is sort of [indiscernible] Jevons Paradox for those who want to sort of look it up, which is the AI is not about doing what you've always done with fewer people. It's about using the people you have to do a lot more and a lot more defined as more volume of work, so solving capacity constraints, which are endemic in our industries. And secondly, do stuff which is previously inconceivably hard to do. So if you're not trying to do more and harder stuff and they are only trying to do what you did before, you're going to die because we're going to take all of your business if you're one of our competitors, okay?

So that's the sort of first thing. This is about doing more and harder stuff. It's not about doing the same as we've always done with fewer people. But the second thing, and this is important, is the way that humans interact with machines is going to change quite significantly from a sort of human led with a sort of computer enabling the human to the computer doing a bunch of -- actually a lot of the heavy lifting with the human defining the goals and validating on the sort of back end. So the way that humans interact machines is going to change quite significantly. So you're already seeing this in R&D and in the software development role with things like spec-driven development and AI factory processes. That thinking is going to propagate across the entire economy.

So we're very optimistic that there's going to be a lot more done, a lot harder stuff and we're going to be able to solve a bunch of problems, not the things like climate change, which are big problems that need solving. There aren't enough resources to solve that problem. AI will enable that sort of stuff. But it is going to require people to work differently with machines.

You'll see people engaging with products differently instead of engaging with products, they'll engage with a conversational agent that will take them into their product workflows. And that's going to change.

And you can see that already in how we think -- if you look at what Forma is doing, that is already -- if you know what spectrum development is, that is already a sort of spectrum whereas the human is saying, okay, what do we want to try and achieve, Forma is doing a lot of the compute behind that.

Right. Right. And you touched on Forma, and so I wanted to hit on that sort of data modernization, and I'm sure we'll hear a lot of updates next week. But where are your customers at just in terms of modernizing the traditional kind of file-based models and migrating that data to the cloud...

I mean, let's just say it's a normal distribution curve. Some are sort of right at the cutting edge. Some have barely begun and then everyone else is sort of strung out in between.

I think the interesting thing about Autodesk is -- we had started that process pre-COVID. COVID actually caused customers to move faster to the cloud. And so we saw significant adoption. They didn't go backwards. They moved to the cloud and they stayed in the cloud. And that allows flexibility in their workforce, flexibility in where their people work, whether it's home, office, remote offices, engaging workforces in different parts of the world where labor is cheaper. I think that has helped our customers a lot. And so we were early in that process. And so customers are not going backward. They're going forward.

And I think one of the underappreciated things about Autodesk is that the work that we've been doing over the last 10 years has set us up really well for the next -- for the coming decades. And a lot of our competitors have not done that hard work. There's a bunch of stuff around sort of business model transitions, around our platform, around the investments we've been making in AI for a decade, et cetera, that set us up really well for the future. I know they've been quite painful some of them integrating more directly with our customers is another example. But all of that stuff and that hard work that we've done over the last decade has set us up really well.

Got it. And as you think about just the broader product portfolio strategy and M&A, I think certainly, you've overseen quite a lot of acquisitions in your tenure at Autodesk and Construction Cloud has started off with marquee acquisition of PlanGrid and you added BuildingConnected and Assemble, all those things. How do you kind of see the additional consolidation opportunity out there in terms of what categories you want to bring in to really have a dominant platform across the kind of the broader maintain operations market?

Yes. I mean I think the operations playbook is following the construction playbook, right? So MaintainX was that cornerstone acquisition for us. It was the PlanGrid. PlanGrid was the #2. MaintainX is #1 in the market. So we bought the #1 player first and foremost. And then what you'll see us do is continue to do tuck-in acquisitions to expand that portfolio. If you think about engineering and what we've done in engineering over the years, it's all about having data and having context. Operations is no different. So we want to build rich context in operations. That means having data in different workflows that really enrich our asset intelligence to help us basically build that life cycle end-to-end from planning to operations and close that loop.

We've been able to walk and chew gum as you see, which is we've been able to make acquisitions, but also continue our capital return program, spending roughly 30% of our free cash flow returning to reduce share count over time.

Yes. And Simon, I think you mentioned earlier the operations TAM, it's $40 billion or so. So clearly, massive opportunity. But I guess MaintainX is hundreds of millions, right? So how do you -- is that all sort of that TAM? Is it more kind of greenfield in terms of automating labor, manual systems? How do we kind of capture that? Where does that -- where do all those dollars sit?

Where MaintainX started was more lower end of the market. So basically digitizing paper processes. An amazing number of customers today still operate and do maintenance on tenant paper. I've seen major airports in the U.S. that still do maintenance programs on paper, [indiscernible]. But obviously, what Autodesk can bring to MaintainX is our enterprise business and our ability to tap into the enterprise. So there is tons of growth potential for us in MaintainX, both in terms of bringing them upmarket into the enterprise, but also globally into the market.

But it's not just the operations business, it will also help our design business and make business as well.

Right. Right. Got it. Maybe in the last few minutes, I know you don't want to front run a bunch of announcements next week, but what are some themes investors should be looking out for at AU? What are some things you're excited about, Bob?

There's just a ton of announcements around AI that I think you're going to see that are really exciting for us, pushing boundaries, helping customers do more with less, do more things and automate more tasks. That's been a big part of our focus and continues to be a big part of our focus, changing the way customers work and how they approach their projects, focusing on outcomes, another big thing that you'll see the whole operations announcement. Obviously, where I'm most excited because that's the world I live in.

And again, what we said at earnings will also -- we'll put more flesh on the bone of what we said on earnings as well.

A few things I can't say because -- we're holding those announcements.

Yes. I got to keep some surprises for the keynote. And maybe, Bob, just as we wrap up, let's talk about goals, like where -- what are your top 3 priorities over the next year? And then with this MaintainX and potentially other businesses, like how do you think about the vision where you want to see the broader MaintainX operations business a few years down the road?

Yes. I think for us, it's very much about building context around operations. So moving from system of intelligence, which we've been building organically with Tandem into system of action with MaintainX, taking all of that information and feeding it back upstream into our design and construction business so that people can basically design and build better in the future. And if we can close that loop over the next 5 years, I think that's a huge flywheel for us, expanding that operations business long term, but also just continuing to build our core businesses in architecture, engineering, construction, manufacturing.

Yes. Great. Cool. All right. Thank you, everyone, for attending the session. Bob, Simon, really appreciate you coming out for the conference. Thank you.

Thank you for standing by, and welcome to Autodesk's Second Quarter Fiscal Year 2027 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Simon Mays-Smith, Vice President, Investor Relations. Please go ahead.

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss Autodesk's fiscal '27 second quarter results. Andrew Anagnost, our CEO; and Janesh Moorjani, our CFO, are on the line with me.

During this call, we will make forward-looking statements, including outlook and related assumptions on products, artificial intelligence, sales and marketing optimization, go-to-market strategies and trends. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K filed with today's press release for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is replayed or viewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. We will quote several numeric or growth changes during this call as we discuss our financial performance. Unless otherwise noted, each such reference represents a year-on-year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release and supplemental materials available on our Investor Relations website.

And now I will turn the call over to Andrew.

Thank you, Simon, and welcome, everyone, to the call. We delivered another strong quarter with revenue and earnings per share above the high end of our guidance ranges. We've raised our full year billings and revenue outlook to reflect the second quarter outperformance and stronger expectations for the second half. Our guidance now also includes MaintainX, following completion of the acquisition on August 3, our strategy, strong execution and the compounding benefits from the business model changes we have made over the years continue to be reflected in the performance of the business.

Autodesk's strategy is to build project intelligence across the asset life cycle by converting design, make and operate through a continuous flow of data, context and experience. While owners have long invested in better design, manufacturing and construction, the opportunity lies in extending the value of that information into decades of operations and then bringing real-world performance back to inform the next generation of projects. This project intelligence across the life cycle enables smarter decisions, greater resilience and continuous optimization.

An enterprise deal we signed during the second quarter brings that strategy to life. With a vision of every project becoming a complete data-rich digital twin, one of the world's largest retailers selected Autodesk Forma as the common data environment connecting, planning, design, construction and operations across its portfolio in North America. Rather than optimizing individual phases, it is creating a connected digital thread that carries trusted project information from concept through construction and into operations. This strategy has led the customer to select Autodesk Tandem as its digital twin platform.

While deployment is still in its early stages, the customer is investing in improving the fidelity of its asset data by capturing and validating as-built conditions, ensuring every facility has the trusted digital foundation required to support long-term operational value. Forma helps create the continuous flow of project intelligence between design intent and operational reality. Combining design and construction data in Tandem creates a digital twin that evolves alongside the physical assets it represents.

Looking ahead, solutions like MaintainX extend that digital thread from systems of record to systems of action, connecting digital twins with day-to-day operational workflows and real-world performance. This is not an isolated deployment. It's a reflection of a broader shift we're seeing as owners move beyond digitizing projects to generating project intelligence across the entire asset life cycle. As design, manufacturing, construction and operations converge around a shared digital foundation, project intelligence doesn't stop at improving today's assets. It creates a continuous feedback loop that informs how the next generation of assets is designed, built and operated.

Before I hand over to Janesh to discuss our quarterly financial performance and guidance, I'd like to say a few words about Amy Bunszel, our EVP of Architecture, Engineering and Construction Solutions, who plans to retire after an extraordinary 23 years with Autodesk. Amy has helped shape Autodesk into the company we are today. Her vision, deep commitment to our customers and leadership through some of our most important transformations have built a world-class AEC business and enduring legacy. I've spent much of my career working alongside Amy, and I'm going to miss her as a colleague and as a collaborator in solving the built world's capacity challenges. She will remain with us as we search for her successor and through the transition, and she leaves behind an exceptional team and an AEC business in a position of strength. On behalf of all of us, I wish Amy the very best in her well-earned retirement.

Janesh, over to you to discuss our quarterly financial performance and guidance.

Thanks, Andrew. Q2 was another strong quarter. Overall, the underlying momentum of the business was consistent with prior quarters, with strength coming from similar industry segments in AECO, particularly in construction and emerging markets. Overall, the impact from our sales reorganization was in line with the rate of outcomes we had expected. The Americas, APAC, Eastern Europe and the Middle East are normalizing a little earlier than Western Europe.

The overall impact on new subscription growth was once again within the range of our expectations, while the linearity of billings during the quarter was better than we expected. Renewal rates remained strong. Total revenue in the second quarter grew 16% as reported and 14% in constant currency. As expected, the new transaction model provided a tailwind of roughly 2 percentage points to revenue growth in the second quarter. Please see the tables in our press release, earnings deck and Excel financials for details by product and region.

Billings increased 10% as reported and 12% in constant currency. The impact of the new transaction model on billings growth was not significant in the second quarter. During the second quarter, we sustained our program of reducing multiyear discounts established over the last few years including winding down multiyear renewals for the maintenance to subscription program. We continue to expect the reduction of discounting for multi-year contracts to benefit price realization over time while also temporarily weighing on unbilled deferred revenue and RPO growth.

Turning to margins. Second quarter GAAP and non-GAAP operating margins were 29% and 41%, respectively. GAAP operating margin increased approximately 4 percentage points, primarily due to underlying margin improvements and a further reduction in stock-based compensation as a percent of revenue. Non-GAAP operating margin was up approximately 2 percentage points. This primarily reflected operating leverage and the benefits from our sales optimization. Second quarter free cash flow was $561 million, reflecting the timing of billings and collections during the quarter.

Moving on to capital allocation. We repurchased approximately 2.1 million shares during the quarter for $453 million. We continue to expect our share buyback in fiscal '27 to be similar to fiscal '26 in total dollars. We expect to maintain a healthy buyback program that continues to apply approximately 50% of free cash flow to further reduce share count over time. Before I turn to guidance, a quick update on a few minor changes we are making to simplify our revenue presentation and reflect the acquisition of MaintainX.

There are no changes to our income statement revenue presentation. We are making some minor changes to our product family revenue presentation to reflect the acquisition of MaintainX. And going forward, we will stop disclosing Design and Make revenue consistent with our strategy of converging workflows end-to-end and expanding our business and operations. We will continue to provide regular commentary on Construction, Fusion and operations and will also disclose MaintainX's revenue for 4 quarters to help you track the performance of those businesses. The slide deck on our website summarizes these changes.

Let me finish with guidance. Our guidance philosophy is unchanged. Our guidance continues to be based on the range of possible outcomes in our bottom-up sales forecast, which is grounded in the momentum of the business and embed some prudence against our expectations of sales productivity normalization. We've assumed the macroeconomic environment will remain broadly stable through the year. Our guidance now includes the billings, revenue and operating and net financing costs for MaintainX for approximately 6 months of fiscal '27. We expect MaintainX to contribute approximately $60 million to second half fiscal '27 revenue and approximately $70 million to second half fiscal '27 billings, both weighted slightly towards the fourth quarter given the growth profile of the business.

As we have now largely concluded the new transaction model implementation, we will focus our commentary on as-reported numbers in future earnings calls. As a reminder, the tailwind to revenue growth from the new transaction model in the first half of the year translates to approximately a 1.5 percentage point into revenue growth for the full year. For billings, we've raised our fiscal '27 billings guidance to a range of $8.575 billion to $8.65 billion to reflect the contribution from MaintainX and an underlying improvement in our expectations, partly offset by mix assumption on the contribution from the new transaction model and foreign exchange.

For revenue, we've raised our fiscal '27 revenue guidance to a range of $8.295 billion to $8.345 billion to reflect the contribution from MaintainX, our strong results in the second quarter and an underlying improvement in our expectations. For GAAP operating margin, we revised our fiscal '27 guidance to a range of 25% to 27%, primarily to reflect the GAAP accounting effects of the MaintainX acquisition. For non-GAAP operating margin, our fiscal '27 guidance is unchanged, reflecting higher underlying margins from operating leverage and benefits from our go-to-market optimization, offset by the margin dilution from the MaintainX acquisition.

We expect fiscal '28 non-GAAP margins to improve modestly from 39% in fiscal '27 with underlying improvement partly offset by the annualization of MaintainX operating costs. We remain on track to achieve 41% non-GAAP operating margin in fiscal '29. And for free cash flow, we've narrowed our fiscal '27 expectation to a range of $2.725 billion to $2.75 billion, reflecting strong underlying expectations offset by the operating and net financing costs for MaintainX and approximately $45 million of transaction expenses related to the acquisition of MaintainX.

We continue to manage our stock-based compensation with discipline. We expect stock-based compensation as a percent of revenue to be about 9% in fiscal '27, which was within our targeted range and down from about 11% in fiscal '26. In summary, we remain disciplined and focused on the controllable factors that drive our revenue, operating margin, earnings per share and capital allocation, which are the key building blocks of free cash flow per share. The slide deck on our website has modeling assumptions for the third quarter and full year fiscal '27.

Andrew, back to you.

Thank you, Janesh. Autodesk is focused on creating project intelligence powered by the convergence of our platform, industry clouds and AI. For our customers, convergence increases efficiency and resilience and reduces risk and downtime so they can deploy fewer resources to every project and bid on and win more projects with the resources they have.

Let me give you some examples of our progress in the quarter that demonstrate how this differentiated strategy works. And ENR top 400 U.S. general contractor selected Forma for Construction over a competitive solution for cost management, preconstruction and model coordination, driven by our differentiated platform value. Similarly, Rudolph Libbe Group, another ENR top 400 general contractor selected the Forma operations bundle in a competitive new logo win to standardize workflows from preconstruction through project delivery supported by an ERP integration.

In Europe, a leading infrastructure and Construction company renewed and expanded its enterprise agreement with Autodesk to accelerate digital transformation and low carbon and energy efficient delivery, including using Autodesk platform services to build custom applications for a major transit infrastructure program. In India, a large municipal corporation replaced disconnected solutions with Autodesk AEC, water infrastructure and former offerings to connect civil design, hydraulic modeling and project delivery for a new water treatment plant.

These stories have a common theme: creating project intelligence by converging people, processes and data across the project life cycle to increase efficiency and resilience, decrease risk and prepare for an agentic AI world. It also extends Autodesk's growth potential as the continued strong performance of our Construction business demonstrates. We see even greater potential in operations. In manufacturing, customers demanding convergence as they invest in their digital transformation to leverage granular and unified data and embrace the AI-driven automation capable of industry transformation.

By consolidating on our platform, customers have the flexibility and connectivity across workflows to increase agility, innovation and resilience. For example, a leading German manufacturer standardized on the product design manufacturing collection in Vault to unify fragmented engineering data and streamline proposal and project delivery. U.S.-based central state industrial expanded its use of Autodesk Vault infusion to connect critical data and workflows, improving access to project information, streamlining operations and creating a scalable foundation to manage rapidly growing job volumes and support continued growth.

Another German manufacturer selected Fusion to replace a legacy CAD, CAM solution with an integrated design and manufacturing environment, including 5-access machining. And the Williams company, an American precision machine shop is using nearly the full breadth of Fusion's manufacturing capabilities from cloud tool libraries to simultaneous multiaccess machining and automated probing to modernize and standardize GNC programming across its shop floor. As you can see from these examples, our customers are using more of Fusion's functional breadth with larger installations and designs to make convergence to drive strong growth.

Let me finish by talking about AI. AI is what increasingly turns this connected data and context into actionable project intelligence. It promises to ease endemic capacity constraints, raise the bar on what's possible in the physical world and help our customers do more with scarce resources. To realize that promise, our customers need AI that becomes an active participant in their workflows. They don't want AI that is merely impressive. They want AI that is accurate, fast enough to stay in the flow of work and affordable enough to use every day.

Delivering all 3 at enterprise scale is hard. Accuracy, speed and affordability are often competing constraints. We believe trust is earned by how those trade-offs are managed. The future of AI won't belong to the company with the best single model. It will belong to the platform that combines the richest context with the right models to deliver the best outcomes for customers. That's where Autodesk is uniquely positioned. We bring together decades of industry experience, rich life cycle data spanning design, make and operate and context that connects that information into a shared understanding of our customers' workflows.

We combine probabilistic AI with deterministic engineering, grounding intelligence in the realities of the physical world. We complement those advantages with a common AI platform that can leverage the right model for the right task from trusted third-party and frontier models to Autodesk built models like NeuralCAD, purpose built to reason directly about geometry and design data. And we're building that platform to be open, allowing customers and partners to bring their own intelligence into Autodesk's workflow. We complement all of this with commercial innovations that make AI practical and affordable for customers of every size.

Those capabilities reinforce one another. Richer contacts improves accuracy, intelligent model orchestration improves speed, platform scale and vertical-specific models improve affordability. Together, they earn the trust our customers place in us to deploy AI in their most critical workflows. As more of that intelligence, ours, our customers and our partners connect to the platform, those advantages continue to compound. Every project now leverages historical project data and creates more knowledge. Every asset generates more operational intelligence. Every operational insight improves the next generation of design, engineering and operations.

That continuous feedback loop of project intelligence is creating a durable competitive advantage for Autodesk. And more importantly, an enduring advantage for our customers. That's why we believe AI is more than a feature or a product cycle. It's a fundamental transformation in how the world's infrastructure, buildings, products, and factories will be imagined, built, operated and continuously improved. And because auditor sits at the intersection of these workflows, with the data, context and experience to bring them together, we believe we're building the platform and ecosystem that will define the next generation of AI for the built world.

Autodesk advantage is that we can create product intelligence across the asset life cycle by converging design, make and operate through a continuous flow of data, context and experience. We're excited to tell you more about our plans at Autodesk University a few weeks' time.

Operator, we would like to open the call up for questions.

[Operator Instructions] Our first question comes from the line of Saket Kalia of Barclays.

Andrew, I want to pick up on your last line of commentary there at the end, which I thought was interesting. And really through your prepared remarks, you talked about project intelligence a bit. And I want to loop that into some of your product families a bit. And maybe the specific question is, how does the operational data for MaintainX create -- what kind of seems like a data advantage for Autodesk AI when you combine it with the design, the build data that you have. Sorry, there's a lot there, but does that make sense?

Yes. I think that makes a lot of sense. So first off, let me kind of just elaborate on project intelligence a little bit. There's a lot of decisions that happen in context of a project from Design into Make and Construction or into manufacturing. All of these decisions have reasons. They have 10 associated with them. Project intelligence captures all this in a continuous way.

And what we're doing with MaintainX is we're actually extending that intelligence into the asset's life cycle, which means we're going to be able to capture information and data about how the asset functions in the real world. That is incredibly valuable data because the assets that we're talking about here, buildings, airports, conveyor belts, machines, they're all built by our customers. So that actually closes the loop on the asset cycle and on the context associated with that.

So that's going to allow us to not only train on data about design processes and building processes and manufacturing processes, but also how assets are used and feed that back into the larger cycle, it just increases the value of the cycle overall for our customers.

Got it. Very helpful. Janesh, maybe for my follow-up for you. You talked a little bit about guidance philosophy in your prepared remarks. I was just wondering if you could talk a little bit about maybe how we should think about the levels of prudence built into the Q3 and full year guide?

Saket, I'm happy to do that. So broadly speaking, our guidance philosophy remains unchanged. And just to recap that briefly, the guidance is grounded in the momentum of the business and what we know today. we reflect the opportunities we see, and then we incorporate some level of prudence around the areas where there may still be some variability.

So at the start of the year, our guidance had to contemplate a much wider range of outcomes, particularly around the impact of the sales reorganization on new business productivity. And 6 months into the year, the impact from the reorg has largely remained within the range we expected. Renewals have been very strong. The business has performed much better than our initial assumptions in many areas. And so we've reflected all of that in the outlook. We flowed through the first half revenue outperformance, and we've also raised our expectations for the back half in both billings and revenue based on what we've seen so far.

There is naturally less uncertainty today compared to the past because we're only forecasting the remaining 6 months of the year. But at the same time, we've also got work ahead of us in the second half. We have our largest EBA renewal cohort, as you know, with the concentration in Q4. And we're also focused on the pace of new business productivity normalization, particularly in Western Europe. So the guide reflects that. It reflects the better visibility we have and the remaining work in the back half. But importantly, we had a terrific first half. We are very pleased with the progress we've made so far, and we are very confident in our fiscal '27 outlook.

Our next question comes from the line of Joshua Tilton of Wolfe Research.

Maybe I'll stick with Janesh since he was on the line prior. First one is, just give us a little bit of clarification. I think we're getting some inbounds on how much exactly was the revenue and the billings raised for the full year inorganically versus the organic contribution. I know that you gave us the inorganic contribution dollars in investor release, but can you just help us fully clarify the math on just like how much organically you raised revenue and billings for the full year?

Yes, I'm happy to, Josh. So maybe I would just start with billings. The underlying billings outlook improved by about 2 percentage points, 1 point of that comes from MaintainX, which was approximately $70 million, and roughly 1 point comes from just stronger underlying performance that we had in the business. There's an offset on that, which is we had a little bit of headwind from currency and transactional model mix. And so that offsets about 1 point. So I think those 2 translates to about a 1 percentage point improvement.

So said another way, when you think about our prior guidance, excluding the new transaction model and excluding currency, that prior guide was 8% to 9% year-over-year growth. Now that has increased to 9% to 10% year-over-year growth on an organic basis and tack on a point for MaintainX, so that's 10% to 11% year-over-year growth. So that's the underlying increase in terms of the billings. And then in terms of the revenue, we -- you saw that we had a pretty healthy outperformance in Q2, which we then flowed through to the rest of the year. And the specific contribution from MaintainX on billings is only $60 million, and we've raised our organic revenue number by much more than that, as you can see from the direct math there.

Super helpful. And then maybe one for Andrew, and perhaps it's a question with -- you can't answer along the lines as we can't pick between our favorite children type answers. But I couldn't help but notice that M&E is getting put into a bucket called other and all the other segments seem to have a very nice representative name. Is there any reason investors should take that as a signal of maybe less strategic focus on that area of the business than you might have previously had?

No, you shouldn't. Look, the M&E business is definitely going under a lot of changes. It's going through a lot of transformations here. But the structure of the M&E business, the high-end studio is what they need from us. That work is continuing. We've actually extended our product portfolio in very interesting ways for this segment. They are embracing flow capture, ,some of the tool, flow studio. So our higher-end business is definitely embracing the new technologies we're going.

And we're also expanding the business to grab the new creator economy that's kind of building around that. That's where Flow Studio leads. So there's nothing you should read into that other than it's just a smaller business, and it's easier to capture it in another bucket with the operation solution. That's all you should read.

Next question comes from the line of Adam Borg of Stifel.

Maybe the first question, Andrew, just on MaintainX, obviously, the deal has closed. Kind of what's been the early customer feedback on your move to go deeper into operations? And maybe talk about the top R&D and sales and marketing priorities now that it is closed. And then I have a follow-up back there.

Yes. So let me talk about customer reaction in general. When you look at a lot of our customers, especially in the general contracting space, even in the architecture space and certainly in the manufacturing space, they're all very interested in either improving operations internally for themselves or extending their businesses into operations in some way. Having Autodesk help them do that and having audited us to do it in such a way that we've closed the loop around design, make and operate is very attractive to a certain segment of our customer base.

And they're looking into this and engaging with us on some of these things. We're also seeing lots of synergies with our enterprise accounts. And I think you'll continue to see that just like we did with Construction. In terms of where we're at with the integration, it's very early. We just closed the acquisition early in August. Our main focus right now is on integrating the back office and maintaining the momentum in the business. And that's where our goals are right now.

As you look forward, we're certainly going to have synergies in the business, like I said, around the enterprise accounts. We're going to be able to bring maintain X into those accounts very much like we did in Construction. Again, similar to Construction, we're going to be able to bring the MaintainX business to Europe, another thing that's also a significant opportunity here is MaintainX has been primarily focused on the manufacturing sector. We can bring them more robustly into the AEC sector. And all of that is on top of the new virtuous cycle we're going to be building around design, make and operate. So that gives you a sense for where we're at and some of the reactions.

That's really helpful. And at the end of your prepared remarks, when you talked about kind of an AI platform, the platform you're building and DI advantages. You did also talk about you're building your own AI models, which I'm sure we'll hear more about today in a couple of weeks. But I think you also talked about there are roles for frontier models as well. So I'd love to hear how you're thinking about -- and I'm sure this will evolve over time. But today, how are you thinking about the role of Autodesk built NeuralCaD models versus frontier models and both as you think about design to make?

Yes. So what our customers need, Adam, is they need fast answers that are accurate. By accurate, I mean precise, especially in our world, it's a built world. I've often said that probably right is wrong in our world, but they also need cost-effective solution. So what we're looking to do is we're looking to use the right model for the job. And that's going to include a full breadth of different types of models. We're not locked into any 1 type of model.

We'll use a frontier model where it's appropriate for particular type of answer the customer may need. We'll use one of our models when a precise kind of data-driven answer associated with direct context into what they're designing and making is appropriate. And we'll use other models where we see appropriate in order to drive the right kind of cost-effective behavior for our customers. And we'll do this in such a way that we're always leveraging the data we have, the context we have about the customer, and we're packaging it in an experience that actually makes sense for Design and Make.

When you bring all of those things together, you get a sense for what we're doing. We're going to bring the right tools to the right problem at the right time to the customer, but it's always, always about using our data, our context and the experience we deliver to our customer to get fast, accurate and cost-effective answers.

Our next question comes from the line of Jay Vleeschhouwer of Griffin Securities.

Andrew, for you first. Your comments about project intelligence for exactly what I had in mind to ask you about based on your recent article on LinkedIn. The question there is actually twofold. One part of that is it's a very AEC biased, oriented comment thus far. How do you see taking that technology or that concept into manufacturing? And does the fact that you have much lower market share in manufacturing than you do in AEC perhaps influence how you're thinking about that.

And then the other project intelligence part of that question before I turn to Janesh is, does this whole concept in any way have any implications for product packaging? You do very bundles and collections oriented to date? I mean, does that necessarily have to change?

First off, let me address the question around project intelligence and [ AV ]. Projects exist everywhere. Every manufactured product is a project inside of the company. They'll call it a project. They'll have a project code name, right? So project is a generic term for capturing the entire life cycle of information flow from design through either Construction or manufacturing all the way into the operations of the asset. So this is not something that is reserved to the AEC space nor is it intended to be reserved to the AEC space in our framing.

In fact, frankly, some of the deepest usage we're seeing with some of our AI is in our manufacturing product set, in Fusion, in particular. Fusion is continuing to enjoy robust growth, partly because we've closed the loop for an entire project from design to manufacturing and now engaging into operations, especially in the factory world. So this is not something targeted at AEC in any way, shape or form. And it certainly is relevant to what's going on in manufacturing.

On our product packaging, we've said many times over time that -- you're going to see us evolving from task-based automations to workflow-based automations, all the way up to system level automation for our customers. Ultimately, what you're seeing us move to is the industry cloud fusion form inflow is the main way we deliver capabilities to our customers. Subscriptions are still going to be highly relevant for those customers.

But over time, as we move into deeper workflow automations, deeper automations around systems, you're going to see us get involved in more and more consumptive efforts. That obviously changes the way people consume the functionality within Fusion, Forma and Flow in the future. And you should expect as this evolution progresses, customers are more exposed to the functionality and the capabilities from Autodesk, bring to bear what they need and what they need to accomplish to the table and bringing the right functionality there at the right time. You'll probably hear a little bit more about this at AU.

Okay. For Janesh, any meaningful update with regard to usage telemetry that is in terms of geos or verticals, collection versus stand-alone? Any sort of metrics around that set of data? .

Jay, I'd say, overall, we are seeing pretty healthy engagement across the board. That is very consistent with the strength that we delivered across the business. We see that across geos, verticals as well as the individual products. But I wouldn't be -- I would be a little bit careful not to overinterpret any 1 signal just because usage can be influenced by things like project timing and seasonality and mix and so forth. But the broad patterns that we are seeing are very consistent and similar to what we've seen earlier and the uplift dynamics suggest that continue -- that customers are continuing to deepen their adoption over time. So we're very pleased with that.

Our next question comes from the line of Joe Vruwink of Baird.

Congrats to Amy on a great career. I think by now, I've lost count of the fable one-shotting CAD videos I've watched. They're all fun. But I think most often, when I look at the CAD environment, it tends to be Fusion, which is the one actually doing the magic. So I guess my question is whether you've seen evidence of user growth accelerating for applications like Fusion that have MCP connections into an LLM environment?

What I'll say is the Fusion business is doing quite well. We're very happy with the results for Fusion. We're seeing not only continued growth in user acquisition, continued growth in ACV and revenue, but we're also seeing continued growth in multi-seat purchases, which is exactly what we want to see. The reasons for this are very clear. We've been very deliberate in leading with some of the new automations, leading with MCP connectors.

All of these things you're seeing in the ecosystem, people using various tools with Fusion are quite deliberate and quite intentional on our part in terms of driving the strategy. We've been very AI forward with Fusion and not only with regards to the ecosystem, but also with regards to the functionality we developed. And like I said earlier, our customers on the Fusion side are some of the most deeply engaged with our Assistant and the AI features inside the product. This is absolutely a tailwind to Fusion growth, and we expect that tailwind to continue.

All right. Great. And then hoping you can comment on your approach to API pricing and how thinking has evolved. I think there were some tweaks recently here in August where you listened to customer feedback and maybe change some of the timing. Just curious kind of what the feedback has been and you're thinking about this going forward?

Yes. I think that's a great question. Customers are very much aware that we're going to be charging for APIs and machine-based usage. We've actually already charged for some of that usage. We do listen to customers. We do adjust some of our time lines and our intent to make sure that we're matching with customer expectations and customer ramp-up times. But you continue to look for us to charge for access to machine-driven usage to our capabilities, our IP and our products. That's not going to change.

Our next question comes from the line of Brent Thill of Jefferies.

Many of your software peers are unveiling AI revenue. I don't know if it's important to you, maybe it's found in other ways. But how do you think about the impact? And is this something you expect that you want to talk about going forward?

Yes. I want to go back to the framework for AI monetization that we rolled out last year, all right, around cash-based automation, workflow automation and systems level automation. Right now, what we're doing is we're enabling lots of task-based automation in the product, lots of AI-driven automation. It's basically built into some of the subscription offerings we have. And like I've said, it's actually a tailwind to Fusion growth right now. People notice what we're doing and they like it, and it's a very active point of conversation in the Fusion community.

I think you should look at the task-based automation as not only a lubricant but an accelerant to some of the subscription-based businesses as we move forward and we'll treat it as such. But as time goes on and we move deeper into workflow automation, systems-level automation, you're going to see us start to express more consumptive revenue. That will show up through Flex business and other things that are also embedded in how we're reporting in our industries.

So look for us to evolve these things over time. We're not trying to do one-off presentations and some of these things, we're trying to drive real value in our business with our customers through our work on project intelligence.

Janesh, do you want to add anything?

No, I think that's a good summary.

And for Janesh, I know you're calling for gross margins to be flat. Many of the other companies we all follow are seeing some compression because of AI. I guess what you're saying is you can embrace some of these tasks and still keep GM flat?

We can this year, Brent, and that's what we've factored into the model. Over time, as the AI-based workloads and offerings continue to grow, those will be gross profit dollar accretive, but they will put a little bit of compression on gross margin. But that's one of the things that we had also factored into our long-term operating margin target when we roll that out. So that is embedded in the 41% margin target for FY '29.

Our next question comes from the line of Elizabeth Porter of Morgan Stanley.

So first, I wanted to continue on the line of some of the pricing dynamics. And I believe in early June, you lowered the Flex and minimum purchase from [ $300 ] to [ $99 ] to make it more accessible for SMBs. So while it's still early, I'd love to better understand what you're seeing thus far, whether any changes in new logo activation, repeat token purchases or lower checkout abandonment? How the change can be economically accretive?

Yes. So we are actually seeing down market changes in adoption based on those Flex changes. The customers really wanted -- that was a customer-driven change. Customers wanted access to tokens in smaller bundles that matched how they were going to work. We view this as part of the long-term strategy around Flex. Integrating Flex deeper into our business, allowing customers to access all the capabilities in the portfolio and also allowing them to mix and match how they drive occasional use of one product versus deep usage of their other products.

So yes, we have seen some acceleration in adoption of Flex, and it has been net accretive to the business, which is great. That will be something we continue to do on -- in an ongoing basis. So watch that space over time.

Great. And then just as a follow-up, on this sales reorganization, what are some of the leading indicators that you're seeing now in terms of [indiscernible] productivity pipeline creation or some of the time to ramp that improved in Q2? And maybe what are some of the ones that you're still looking to turn the corner? And how are you looking at signs just to confirm that the disruption has and more of that risk is actually behind us now?

Yes. So Elizabeth, I'll kind of echo what Janesh said in his opening commentary. But one of the places we've seen actual real productivity increases, and it was one of the places we were targeting is in renewal business. Our renewals are much more productive now, both internally and through the channel partners. And that was a major goal of what we were trying to do is move -- increased productivity of the renewal business, shift more effort into expansion business, new business generation in both the channel and internally inside the company.

We've also seen all the green shoots associated with the expansion business internally and with the channel. The one area that Janesh highlighted is, and this is because of consultation periods and all the things associated with mature Europe, it's been a little slower to ramp up on the expansion business. We're seeing the signs. We're seeing continued growth in pipeline associated with kind of forward-looking indicators that tell us we're moving in the right direction. But that's the dynamics right now. We're seeing exactly what we expected with a slower buildup in mature Europe.

And maybe, Elizabeth, the one thing I would add to that is, in terms of the specific measures that you look for with respect to new business productivity, it's our seller is able to make their plan and how are they ramping against their plan. And we saw strengthen that in Q2 in most of the areas around the world where they were much closer to plan, and it's a lot better than it was in Q1.

Our next question comes from the line of Jason Celino of KeyBanc Capital Markets.

I just wanted to ask about your EBA visibility. I think in the prepared remarks, Janesh, you said that this was kind of a factor of maybe marrying scenarios of what you can see this year. I'm curious like as we approach the second half, what types of renewal activity or expansion activity you're seeing with some of your cohorts?

Jason, fiscal '27 includes our largest EBA renewal cohort, and there's a big concentration of those EBAs in Q4. And if I think about that in terms of just cohort dynamics, you'll recall that last year, we had the biggest product subscription renewal cohort, and we also had our second largest EBA cohort. So there are some -- it does create a little bit of a tough year-on-year comp in terms of the size of the renewal cohorts in the back half of the year.

What I'd say is the prior full year outlook already reflected all of these cohort dynamics, and we've executed really well so far in terms of business that we closed in Q2 and preparation for the back half, and that gave us the confidence to raise the outlook for the year on billings even on an underlying basis.

I see. Okay. And then maybe it's more of a relevant point. I know you reiterated your operating margin guide. But now that MaintainX is closed, curious what might be the operating margin impact in the quarter of the year or maybe historically what the margin profile looks like before you acquired it?

MaintainX was a high-growth business when we acquired it and still is. And consistent with many high-growth businesses, as you might imagine, the business was not profitable. And so as we bring MaintainX into Autodesk, our main focus is to ensure that we do everything that we can to continue to preserve the strong growth rate and continue to fuel the engine.

So MaintainX does present a drag on operating margin in fiscal '27. And then next year, we'll have the full year annual cost of MaintainX from an operating perspective and also in terms of the net financing costs. But despite that, as I mentioned in my prepared remarks, as I think about next year, we do expect that we will increase the operating margin next year from the 39% that we have this year.

Our next question comes from the line of Taylor McGinnis of UBS.

So you've done a nice job sustaining a consistent level of growth. But as we look beyond FY '27, Autodesk is going to start to lap a few tailwinds related to the model change and the transition to annual billings and a couple of the larger renewal cohorts that you talked about, which have all been beneficial to underlying growth. So as we think about that, is it possible that, that at some point, starts to become a headwind to billings growth? And if not, maybe you could just talk about the incremental growth drivers that you're excited about that could help support the growth durability that we've seen?

Taylor, this is Janesh. Maybe I'll take that question. So as we think about fiscal '28, there's a number of different moving parts, as you mentioned. And it's a little bit early to talk about '28, but I'll at least just highlight some of those moving parts for you. First off, as you know, fiscal '27 has some benefit from the new transaction model that will not recur in fiscal '28. So that's one factor to consider. And '28 will also include the full year contribution from MaintainX, as I just mentioned, both in terms of top line as well as the expenses.

We'll also have the continued normalization of new business productivity where as we continue to get better in Western Europe and the rest of the world, that will ultimately be a driver of the business for us. But underneath all of those moving pieces, the core drivers of the business remain strong. Renewals are strong. EBAs are strong. We are seeing sustained demand across areas like construction and infrastructure and industrial. We're excited about the opportunities in operations, both in terms of organic as well as continuing to build on the MaintainX acquisition.

So all of those factors, the consistent execution that we've had as a company for a while now for the past few years and that we're delivering here in fiscal '27, I think all of those underlying drivers will help us continue to sustain strength into '28 as well. We'll obviously give you a more full picture of all of the moving parts and timing and mix impacts and so forth when we get to that point. But the important piece for now is that fiscal '27 is playing out nicely. We've raised our guidance on both billings and on revenue, and we feel very good about the underlying momentum of the business.

Our next question comes from the line of Ken Wong of Oppenheimer & Company.

Andrew, I wanted to circle back to maintain now that you guys are integrating it into the business, how should we think about some of the go-to-market motions that might need to be tweaked? How much of the direct sales force will be impacted? Is this something that you guys will be able to push through to your partner network? Any color there and the possibility of any disruption from the integration that you guys are baking into the guidance?

Yes. We certainly take lots of things into the guidance to make sure that we're prudent in terms of what we tell you. At a high level, there's going -- we're going to -- short-term goal is maintain the momentum of the business. Very clear, okay? We want to make sure that we maintain the momentum in the business, is a good business. It's adding customers at a nice clip. We want to maintain some of that.

Like I said earlier, just like what we did in Construction, the enterprise account business is an immediate opportunity for synergies with regards to engaging deeper with some of those customers and getting MaintainX into some of those accounts. Frankly, they're not in those accounts. So I think there's a big opportunity there, and we want MaintainX to be able to exploit that avenue in terms of getting to our customers.

They've also built a great product-led machine that's targeting customers and new account acquisition. We want to maintain and leverage that machine or Autodesk, not only for MaintainX, but broadly across the Autodesk portfolio and look for us to do that because that expertise is valuable, and their product-led growth motion works incredibly well. Partners are absolutely going to be an opportunity here. Partners are going to be interested in this, especially as we start expanding the business into Europe, we'll probably be looking at motions with regards to engaging our partners.

Again, very similar to what we did with Construction. So look for us to basically copy some of the motions we did in the early days of Construction when we bought PlanGrid, and we bought BuildingConnected, but also learn from some of those motions and actually accelerate them faster than we did back in the days of Construction.

Got it. Super helpful. Janesh, I wanted to touch on that prior point you made about slight margin improvement in fiscal '28. I recall you guys had embedded kind of not necessarily MaintainX specifically, but the possibility of M&A into the guidance kind of this year and longer term. Should we think something similar for '28 that should you guys kind of bundle on something on top of MaintainX after the fact that, that slight margin improvement has some cushion?

Ken, the way I would think about future acquisitions and the impact of those is just to go back to our overall approach in terms of operations. We're following the same playbook as we did in Construction where we laid down a cornerstone acquisition and then built around that with smaller tuck-in acquisitions. And for us, in operations, MaintainX was that cornerstone acquisition and future acquisitions will probably be smaller in size, and we'll just build around that. So I would look at the fiscal '28 guidance on operating margin more specifically when we get to that point. But I would expect at this point that it will be an improvement over the 39% that we've laid out here for you today.

Our next question comes from the line of Matt Martino of Goldman Sachs.

Andrew, maybe to start with you. As Autodesk moves from task level AI towards broader workflow automation, what in your mind are the key technology and data unlocks still required? And where do you believe the platform is furthest along today?

Yes. The key thing that drives the workflow automation is what we're building into the Assistant. The Assistant is kind of the integration layer that allows us to bring the context we have about what the customer is doing at each spot and also bring the right models to bear. So the more the users engage with the Assistant, the deeper they engage with Assistant, the more workflow-driven automations we introduce in. You'll see some indications of that at AU, but the front door for these things is the Assistant and its agentic layers that we've built out there. The deeper the usage there, the more you're going to see us extending into the workflow side of the expansion there.

And what was the second part of your question? I'm sorry, could you repeat that, Matt?

Yes, where the platform is furthest along today?

Okay. Fusion is definitely one of the areas where we've invested quite a bit of effort to get the platform integrating various capabilities. The Assistant obviously, as part of the core platform that's built across horizontally, across Autodesk, but Fusion has definitely moved aggressively to deliver value through the Assistant so that the customers can start to look at workflow-type automations and actually engage in workflow type transactions. I think you'll see some of those showing up first in Fusion.

Great. And if I could just slip in a quick one on the macro, Andrew. The broader Construction backdrop has been fairly uneven, but Forma for Construction seems to be showing pretty good momentum here. So maybe just unpack sort of what's driving that resilience and where you're beginning to see maybe even early signs of improvement across some of these pockets of the end market.

So we're super happy with our Construction business. It's growing north of 20%. We like what we see. I want to be super clear about a few things here. we're very diversified. We're diversified globally. We're diversified across all the segments of Construction. That diversification is an absolute strength. The other thing is Construction is kind of reverting back to the mean in terms of backlogs. We're completely fine with that because the real underlying driver of growth is not the oscillations and the various metrics you're seeing. It's the fact that the penetration of technology in construction is so low right now.

What's driving our business right now is people like what we're doing. They like what they're getting from Design and Make integration. They like what we're doing with preconstruction. They're adopting technology at higher rates because technology allows them to deal with their backlog, to unlock their capacity and be able to build things more sustainably across the whole spectrum of customer types that we serve. That's the underlying thing here is the technology adoption cycle. It's not the ups and downs of what you see with various metrics in the Construction space.

Our next question comes from the line of Tyler Radke of Citi.

Maybe just at a high level, like with these disclosure changes, Janesh, I guess, why now? Why sort of midway through the year? And I think there's a lot of good momentum in the construction business. You talked about a leading organization choosing Autodesk Construction this quarter. So can you just be a little bit more specific on how you'll be updating us on the progress of that and the metrics that you'll share?

Tyler, I'm happy to. In terms of the why now, it's really got to do with the launch of the operations business, right? With closing of MaintainX, we needed to revisit our product family reporting. So that's the short answer on the why now. But as I think about that Design and Make, ultimately, our focus is on driving convergence across design, make and operate. And the more successful we are with that strategy, the less sense it makes to have discrete buckets on Design and Make or anything else.

So Construction is reported today under the Make business, but even that doesn't entirely capture all the Construction business. And so it's really important for us to make sure that as we move forward, we are providing you with a view on how the underlying businesses are performing. So we will provide you with regular updates on that business. It will be a regular commentary just like we have today, we will tell you how the business has been growing. It's growing north of 20% and has done for some time.

And then specific to Fusion and operations, we'll also provide you with regular commentary on those. And then as I said, we will provide MaintainX revenue for 4 quarters to give you visibility into how that business is doing.

Great. And on the MaintainX front, just sort of thinking about your goals from a financial perspective in synergies, I think the time of the acquisition, you talked about 50% plus growth, $135 million or so of ARR, if I'm not mistaken. Like is your goal to meaningfully reaccelerate that? Obviously, you don't want to disrupt a lot of the momentum they have, but at the same time, you have massive distribution and probably a lot of customers that are -- could get value by deploying MaintainX. So how should we just think about those revenue synergy goals over the next couple of years?

Yes. MaintainX already has very strong stand-alone growth momentum, Tyler. And for us, the strategic value that it gives us is the new operational entry point into teams that are responsible for maintaining and operating assets every day. I think there's multiple vectors in terms of revenue synergy opportunities.

The first is extending MaintainX through our global reach across customers of all sizes. So there's significant geographic opportunities in terms of expansion. But there's also opportunity with many of our larger enterprise customers and elevating MaintainX presence in those accounts. We also see the ability to extend across different industries. A lot of MaintainX customers today are more manufacturing centric, but there's a massive opportunity across AEC as well.

And then ultimately, connecting operations workflows through the Design and Make platform into operate and closing that full life cycle. So customers can manage across the entire life cycle. And all of those things help us. In addition to that, we talked about the benefits in terms of how that accelerates our overall AI strategy as well. So there's all of those revenue synergy vectors.

But as you mentioned, I think the most important piece for us is to make sure that we first preserve the existing growth rate and that we very thoughtfully and deliberately expand over time across these vectors to continue to deliver greater growth in that business.

Thank you. That is all the time we have for Q&A today. I would now like to turn the [indiscernible]

Thanks, Latif, and thanks, everyone, for joining us. We'll look forward to seeing many of you on the road or at conferences over the coming weeks. If you have any questions in the meantime, please contact me or my team. Thanks very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Doesn't that just make you so excited to be here and to listen to Autodesk. I'm Joe Vruwink. I cover vertical software at Baird. Very happy to have Autodesk. This is software for the built world and what architects and engineers, manufacturers, operators. They use it all.

Sid Haksar leads the construction strategy. Simon Mays-Smith, Investor Relations. This is going to be a fireside chat format. If you have questions, you can e-mail Session 2 at RW Baird. But let me turn it over to Simon and Sid for an intro first.

Yes. So just sort of briefly, for those of you who don't know Autodesk, what we're trying to do is connect workflows end-to-end in the cloud with a layer of AI on top of it, something we've been working on for almost a decade and years ahead of our competitors, not just in the hard stuff, the frontier model building, but also the technology stack that sits underneath it and how we ingest and process data.

We're operating, as Joe said, in AEC, in manufacturing, and media and entertainment. And we're pretty excited about the future. We've also made an acquisition last week in operations. So we've had design and make and now extending into operations to complete the data across the asset life cycle. So we're pretty excited about that, too, but I'm sure we're going to talk about it.

Why don't we talk about that? So if I can channel all the questions I've gotten on this, I think, one, strategic rationale and why something like this now; two, price paid and whether that's a fair or unfair valuation and then; three, I think a lot of investors associate Autodesk upstream with project delivery, not downstream with how these different disciplines operate after the design. Is this a totally new undertaking for you? Or is this more of a gap fill around things you've already been closing in on?

So I'll start with the last one because it also answers the first one, which is that the ultimate customer for our entire business is the owner, the asset owner. So right at the front end of the process, it's the owner that is trying to make something in manufacturing, or is trying to build a building to generate a yield from it. And that owner then commissions a construction company, a design company and a construction company to build it and then somebody to operate it. And so what owners want is to understand how their asset is performing across the asset life cycle. But to do that, they need data.

And today, data is stuck in silos, thousands of different silos and not brought together. So in simple terms, what we're trying to do is to create a single model from right at the beginning of the process in conceptual design through to the end where you tear down the building and hopefully recycle and put up a new building. And so what we've been doing for the last, what, 15 years is building out a connected data, common data environment as it would be called in AEC, starting in our traditional business in design, building into construction, which Sid has been responsible for, and we can talk about a bit. And then the latest step is then the final stage, which is in the operations phase, which is the post construction phase.

The reason that phase is important, and the reason now, is because we've built our construction business now to a sufficient size and sufficient momentum where we're beginning to tear down the leaders in that field and take leadership in that field that we now have bandwidth and capacity to then focus on operations.

So in terms of operations, we bought a business called MaintainX. And the reason we did is that, that operates in one of the core functionality bits within the operations phase, the sort of the maintenance part. And the reason that's important is that, that is a core piece of functionality across all operations assets. So whether it's a factory or a commercial building or a piece of infrastructure, every single one of them will need a piece of software to enable people to maintain it and keep it up and running. And so if you look at the sort of $40 billion TAM for operations, the biggest single chunk of it is in what's called the CMMS market.

So that's the key piece of software. So that's why MaintainX, that is why we call it our cornerstone acquisition. It's the big chunk because it sits a central role. And it sits on top of the piece of software that we already have, which is the digital twin, which is the final as-built version of a building, which you then plug into sensors, which allows you to monitor and over time with AI, predict faults in the building. And then what MaintainX does is when something goes wrong, it allows you to then take action and fix it basically. So that's what it is.

In terms of sort of the multiple paid, a few things to think about. Firstly, as we've said is we're following our construction playbook. So the construction playbook, as you said, is we spent about $1.8 billion in our construction business. We built a business that over the last 12 months has generated about $600 million of revenue. So that's 3x revenue, as you can see, a pretty good multiple. It's growing more than 20%. So if you look at the multiple that we paid for MaintainX, just think about a path as we build it up as it grows rapidly, and that multiple will come down pretty quickly.

In terms of the opportunity and how we do that, there's a few things. Firstly, if you look at the construction TAM, it's about $11 billion TAM. The operations TAM is a $40 billion TAM. So a much bigger market opportunity for us is the first thing. And the second thing is the duration of that TAM is that our design and make business is a year's business in terms of our interaction with an asset. The operations business is a decades-long business. So once you build the building, 80% of the cost of a building is post construction. And so managing the efficiency of that is, for the owner, of critical importance. So that's what we're trying to do. So at the moment, we can only address in terms of efficiency, 20% of the cost of a building, it's the other 80% that we're now seeking to address with the acquisition of MaintainX building on top of Tandem, which we bought -- built in organically ourselves.

And then the sort of final thing is data, is that the MaintainX business is a cloud-native business, mobile-first business. The vast majority of the traditional incumbents in this field are on-premise software customer integration is very expensive. But the key thing is that getting access to the data with on-premise software is very hard. So what MaintainX does is it has 8 years of data, which is useful and which we can apply our AI to not just in the operations phase, but we can then, with inference use that operations data then start making inference upstream in the conceptual design phase. So when you're doing conceptual design right at the beginning of the process, if you can have something saying, go and install the HVAC system because 2 years after construction, you're going to have a problem. That is immensely valuable information for our customers with Leona. So that's what we're doing. I should probably stop there and we get on to the next.

Yes. No, that's great. And you kind of hinted it's growing 50% right now, but 50% also not unreasonable to think about next year as well. So there's some work...

I'm not going to give you a revenue forecast because -- or an ARR forecast because we haven't done it, but I'm not allowed to. In terms of the opportunity, MaintainX has focused primarily on factories to start with and is just beginning to think about a few other things where we can be quite helpful to them. The first one being AEC. As you know, we have a very, very large AEC business. And as I said, the assets -- the commonality of the maintenance system is transferable across into AEC as well. So that's something we can help them with a lot.

Secondly, we can help them with enterprise is that they've -- because they're a small startup company, been focusing on single assets and single sites, what we can do is help them up-level those conversations to all of the assets owned by the owner across the country or across the globe.

And then the third one is international is that they are primarily a U.S. company today and we can help them expand internationally both with our sales teams and our eStore, but also with our channel partners, too.

I think just one thing worth adding is that while the MaintainX acquisition showed up, I think last week, we've been looking at the operations space for over 4-plus years. It has been a natural progression because as we serve the needs of owners on the construction side, the next foray for them, you're targeting capital projects teams, but then their facilities teams. So it's a very nice adjacency for our owner base.

We also made an investment, I believe, I think it was about 4 years ago in a company called Eptura that's owned by Thoma Bravo. So while we've been investors in the company, we've also been learning this space very closely and understanding what's working and what's not. So in a way, we've also derisked a lot of how we think about the space going into this acquisition.

So to give you an example, which Sid's been working on with the New England Patriots is that we're sort of helping them build their stadium. But one of the required output of that project is a digital twin because they're already thinking in the construction phase is how they're going to manage the asset once it's been built. So owners are thinking about this and so are we.

Okay. Maybe let's go back to the construction piece, and you talked about that $11 billion TAM. I'm going to ask 2 questions. One, if you look at that TAM, Autodesk has done very well accelerated growth into the 20s, but all of your peers have also accelerated their growth over the last few years. So there's something happening in the category itself that is allowing for more success. Maybe we can talk about what you're seeing at kind of an aggregate or macro level and then we'll get into how Autodesk is different therein.

Well, there's one that's notably decelerating in construction, but do you want to take the question?

Yes. So just generally, while there are different pockets of the industry, there's some puts and takes, right? For example, right now, data centers are on fire. There's power grid upgrades that are happening as a result of the data center or the AI infrastructure that's coming up. So there's a lot of growth there. We're seeing health care growing really rapidly. We're seeing also stadiums, believe it or not, at least in the U.S., are seeing a really nice ramp as people are doing big CapEx upgrade cycles. That said, the industry itself is still not as digitized as you would think. It's a very big industry. And so there's just this push.

If you just look at within the United States still, there's plenty of opportunity of getting companies that are still sitting on either Excel or using very low-grade ERPs to manage projects. If you take a step out of just the U.S., then you start to look at, say, for example, countries like India, which is the third largest construction market now globally, it's caught up in a very short period of time, fueled by the infrastructure boom as well.

If you go and travel to India, you'll see construction really has been done using paper and Excel, surprising, but it is. And so now those companies that operate there are seeing that in order to do a good job, you have to use technology. And so there's just a secular trend of people using tech and our solutions to manage these projects. And then when you talk about labor shortages that are impacting the industry, schedules are compressing, projects are becoming more complex, you really need to be building right the first time. So we don't see that stopping. People have to invest in tech to become more efficient and deal with it.

Talk a bit about why having the design and construction tools together is that important.

Well, so for us, the differentiation coming out of -- so that's kind of the general theme as to why not only us but our peers as well have all benefited and grown with it. So there's plenty of opportunity out there. But when you bring it back to what's different from Autodesk relative to our peer group, obviously, this is one thing that we don't talk too much about, but Simon said $600 million, that's cloud. You think about how much are we generating from just the construction industry, selling them not only our cloud tools but also our modeling desktop tools that's in excess of $1 billion. So I say that because we've already got a very strong installed base of contractors upstream using design.

So that's one of our key differentiators. Historically, [indiscernible] construction wasn't as robust/mature. So there was a need for contractors to go use what was best-in-class at the time, given where we've reached now, the story of being on one platform starts to resonate tremendously. Obviously, when you layer in opportunities with artificial intelligence, having access to your information, across the project life cycle becomes that much more critical. So upstream, we've got a very strong foothold. We've matured our platform to be end-to-end.

The third thing I'll add is flexibility when it comes to our business model. So we are not just wedded to one particular type of model. We can be user-based pricing. We can be a percentage of construction volume. We are consumption when you look at some of our enterprise customers. So that's the third piece, I said. And then the fourth piece for us is really our geo footprint, and that is enabled really by our channel partners. So we already have a very strong network across multiple countries. So that allows us to go to market at scale.

Just to sort of piggyback on the back of that, that connection between design and make as a competitive advantage, that same thing is true in operations because the final version of the building is the digital twin and then extending that with things like MaintainX into operations, it's exactly the same strategy.

Yes. Let's talk about AI and maybe to start a bit of a thought exercise. So if you think about being a protein scientists or like a coder, AI has changed what you do forever. So let's rate that at 10 out of 10. When you think about construction professionals or even going into design just the work that architects do, like where would you peg them on the same 10-point scale?

So for us, I'll talk about construction. I think it's very early right now. 1, I'd probably say between 1 to 2 is kind of where it is. And the reasons for that obviously, adoption of technology, new technology takes a little while as we've seen. When you -- especially when you think about where you can see a lot of the impact, I think a lot of the impact you're going to see in the field. I think people that are working out of the offices, it makes a lot of sense. Just to give you -- you don't need to have some really complicated use cases to get value. There are some very basic use cases.

So one thing that we have today, just imagine for a second, you're a superintendent on a job site and you're looking and making sure that everything is working in order and you find a pipe that has a crack. So now you need to create an issue of that and let people know that, hey, there's this pipe that's cracked so we need to fix it. Typically, when you create that issue, you have to document that issue. You take a photo of the crack and then you document it. And imagine a big job, you end up spending a lot of time documenting issues. With AI, and today we have that in our product, you can take a photo and when you take that photo, the AI will tell you what that is using our computer vision and it will auto populate the description of that issue.

So what would probably take about 2 minutes now gets compressed to maybe 15 to 20 seconds at the most. The individual just looks at and make sure from a quality control standpoint, it's right and then it gets sent out. That, again, is something -- it's not very complicated, but it saves a ton of time for people on the field when right now, there's massive labor shortages. And you need that superintendent working on more impactful things than actually documenting stuff and spending time doing manual work.

So we do believe, just given where labor shortages are going to show up, we do expect in the field, you're going to see some outsized productivity gains with the use of AI. On the flip side, in the office, we're starting to see that take off more just because the user base is more attuned to using technology and some manual tasks that can be automated, they are embracing that. But the field is where, I think, you'll be able to get a lot of productivity gains right off the bat once this gets more mainstream.

So I wanted to ask on that because the use case you shared is super important, very valuable. I would say, I actually see more kind of AI in preconstruction and then in like the scheduling aspect where the field matters the most. So what's kind of the disconnect where people are focused on kind of the edges versus what we're talking about doing in the field as most consequential. Why the focus on pretty...

Why [indiscernible] construction?

Yes, why has that been the initial focus, it seems?

So first of all, it's people that are in the office are more receptive to technology. And also, the other piece I will say is projects are made or lost in preconstruction. So if you end up scoping a bid inaccurately, then the margins are going to fade once you get out there on the job side. If you don't capture the right -- if your scopes of work don't match what are the specifications articulated by the architect, you may install work that then has to have a significant component of rework. So you need to remove what you put in place. Again, it has an impact on margins.

So getting all of that right happens in preconstruction. So that's why you're seeing a lot of companies come in or AI technologies try to make that as robust so as a risk mitigation tool. So that's what you're seeing is risk mitigation in precon. I think you want to see productivity really manifest in the field.

The challenge, and maybe we can talk about this is most folks, companies lack data in context and they also lack 3D engineering capabilities, too. And that's something Autodesk has inspected. I'll wait and see if you want to talk about that a bit.

No, I think you run a survey every year around like AI acceptance and where the interest is, where the pain points are. And I think the biggest pain point in the most recent survey was just system integration like you don't have anything connected and so the data might be out there, but you have no idea how to actually use it exactly.

So this is why what Sid was saying in the connecting the design and make and then what I was saying about operations then connecting the design and make into operations. That's why that's important.

What we are also starting to see increasingly within our customer base, historically, companies have had a [ whole host ] of point solutions. That's going to start to go away as they continue to consolidate their spend in specific platforms. So that's another thing. And partly is what you just raised because of data sitting in so many different silos and not -- systems not talking to each other.

One thing I've always appreciated about Autodesk is you're making these investments before anyone is asking you to do it. So like cloud was 2010, give or take, and then Forge, which became the platform services strategy a few years later and then you were kind of getting data ready for training before GenAI was a thing.

I want to focus on Autodesk platform services so that began as an API strategy and I kind of think that's morphing into the MCP server strategy to the point where when Claude is looking to embrace creative companies, Autodesk is part of that announcement with MCP servers, you've built out kind of the important, it gets to what we're talking about of making it easier for customers to move data around, but the importance of the strategy in AI investments that are now happening.

Yes. So let me talk about that a subject close to my heart. So just quick detail. And by the way, everything I'm about to say, if you look at our Q4, the last 4 pages of our Q4 opening commentary and the last 4 pages of our Q1 opening commentary, I strongly encourage you to read them if you're interested in AI. What I'm about to say is in there. So not related to that question, you need data context to build a foundation model, to build a knowledge graph on which you can build a foundation model.

Data is scarce in our industry because it's not available on the public web. It's locked up in [ 1.1 million ] different company systems and so if you have access to it through the cloud, which we do, most of our competitors don't, because they only have on-premise software, then you can build, have enough data to build foundation models. You also need context because the assets that we're building are constantly changing. The building site on day 20 is different from the one on day 30, is different from the one on day 40. You have to know the -- what's leading up to a particular point in a decision and what happens after it. You have to understand the sequencing of how everything is put together.

So there's a bunch of context you need and data to build a knowledge graph and those are very hard to come by in our industry. And then once you've done that, you also need 3D engineering. Just to be clear, LLMs are 2D. They're sort of words and coding. They don't reason in 3D like our models do. And 3D inference is really hard to do. And we know that because we've been trying to do it for almost a decade. Again, years ahead of, as Joe said, of need, so to speak. So we're years ahead of our competitors on that. So doing all that stuff is hard. We've been doing it for almost a decade and we're years ahead of our competitors. But then once you're doing that, you're launching foundation models, that's when the technology stack becomes important.

So just to give you sort of 2 examples, one of which is everyone worrying about token maxing and gross margins, something we've been talking about. Gross margin pressure is something you cannot escape as you put more workflows and high compute workflows into the cloud. So what you're trying to do is to figure out how to bend the curve. But critical to that is how you ingest and process data. So that's something and the reason why Autodesk platform services is so important is we've done a bunch of work over the efficiency with which we can ingest data and then how we process data. So to give you 2 examples.

None of this sounds very sexy, but it's critically important. One is around the data model is that if you go into our customer systems and look at all the models, what you'll find is that the data is fragmented, so they have an HVAC system in one file. They've got the structural building in another. So if you turn up and scan it, you don't have a whole building to make inference on. And so the reason the data model is important is it brings all of that disparate data back together again and allows you to extract meaning from it. We've done that work. It's really hard math to do that. And what it means is that for any given data set, we can extract more value and more meaning from it in a scalable and efficient way than anybody else.

At the other end of the spectrum, when you're doing inference, if you try and put 3D inference through a stack that's built for 2D, it's very cost inefficient. It uses much more capacity and costing more money than it needs to. So what we've done is we've built our own inference stack on top of AWS, which is massively more efficient at 3D inference, a cost-efficient than doing the equivalent inference on 2D stacks. And virtually all of the other stacks are built for 2D inference because nobody is trying to solve a problem or very few people are trying to solve a 3D inference problem. So that's why the technology stack is so important in terms of AI. But it's also important to Joe's point, is around how you develop your offering.

So what we've been doing, and this is a sort of technical [ debt ] problem is we built a bunch of stuff over the last 40 years and essentially building the same functionality across the organization. And what we've been doing over the last 3 or 4 years is creating more common components so that when you update something, it propagates across the entire product suite rather than having to go in and update everything at once.

What it also enables us to do with the help of AI is to start creating new value. So one of the underrated things that we were talking about last week is we have probabilistic AI models, and we're using our deterministic parametric models, which we've been using for the last 40 years to validate our AI models. And that loop, so we create a probabilistic outcome, [indiscernible], don't walk into a building that's been created by a probabilistic model because it might fall down. And we validate it with a deterministic model which we've had for 40 years and that loop allows us then to improve our AI models in that loop, again, sort of massively improvement. But what we've done is we've -- those parametric models sit within our traditional products, so Revit and Fusion, et cetera. And what we've been able to do is to extract just the parametric model and then plug it into our AI models to make them more efficient.

Doing that a year ago would have been inconceivably hard to think about doing. But with AI and new engineering techniques, we were able to do that [indiscernible] parametric model from our engineering. So one of our core beliefs is that AI is about doing more with the same number of people. It's not about doing the same with fewer people. But what you have to do is to be able to conceive of hard stuff and hard problems to solve. And I think that's going to be a key challenge for most organizations. Fortunately, one thing Autodesk loves doing is solving hard problems. That's why we started trying to solve AI 10 years ago. It's why we started trying to solve the cloud 20 years ago. We always try and solve hard problems that it plays to our strength.

How does that all get monetized? I've heard that the Autodesk direct sales team is trying to encourage their customers to token max because increasingly, you can kind of get tied into that. What's the strategy there?

We're not encouraging to token max. And actually, and this is again another -- which I'll discuss with the bottle of whiskey if anybody wants to. But it's not about maximizing tokens because if you're doing that, you're going to find soon that your AI agent cost you more than a human being does. It's actually about sipping, not sucking the tokens and building the software that enables you to do that. Otherwise, you're going to have products that are too expensive and not doing the job that you need them to do to drive efficiency in the industries.

What we are trying to do is to enable our customers to try stuff and to build stuff and try stuff, partly because that's for their benefit. But what also it does for us is it generates data exhausts, which are useful for us as they do that. So yes, we're trying to encourage them to do it. What we're not trying to do is consume bad calories from it. We want them actually to become more match fit as a result of it.

And that's bringing customers into kind of a new subscription, different subscription than a seat tied to a model. These are bundles of API uses that you can monetize.

So exactly that. And I think this is -- I don't know whether it's a consensus, but emerging consensus is that the subscription is going to be around for a very, very long time. And included in the subscription will be a core level of functionality and a core level of capacity will be included in your base subscription. And then if you need additional capacity for high compute workloads and high-value workloads like AI, you will essentially buy additional capacity. So very similar.

So a little known fact, 17% of our business is already consumption, which is a type of capacity model. There are others. But it behaves like -- financially like a subscription because essentially, people buy capacity ahead of time and then consume against that capacity on a use it or lose it basis. So consumption doesn't have to be volatile. So you can give the customer the benefit of flexibility and certainty whilst also enabling us to have predictable and ratable revenue streams.

Maybe with the little time we have left to talk about something more recent, and you've taken control of your sales channel. You used to have a 2-tier distribution model. Now you're direct. What's been kind of the biggest learnings from that and benefits that you originally thought you would get are the benefits coming through?

Yes. So I said earlier, [ Auto superpowers ] is we try -- we do hard stuff. And so this is a good example. But it's sort of a function of -- and you should be asking all of our competitors this is there's a bunch of stuff you have to do just to get on to the starting grid of AI. You have to sort out your technology stack for the reasons I talked about. You have to have cloud-based software. You have to have more direct integration with your customers, which I'm going to talk about in a second. That's why I'm mentioning it. You have to have a bunch of different business models. So you can't just be subscription, you also have to have metered access models like consumption, et cetera, as well.

All of these things are really hard to do, but Autodesk has been doing them over the last 5 to 10 years, which means -- which is why -- and also you have to invest in AI and the engineering capabilities to build foundation models. They're all really hard to do. They all mess up your P&L, balance sheet, cash flows and margins while you're doing them. And we've been doing that for the last 10 years, 15 years in the case of the cloud, in a way that most of our competitors have not been doing. They have to do it and the time they have available to do it is getting shorter at a faster rate because of AI. So the risk of getting it wrong is greater.

So the most recent one we've done is our sales reorganization, but the intent is essentially to have ourselves more directly integrated with our customers, enabling that with more things like more self-service, more auto renew and more co-terming, et cetera so that you have more automation essentially in the process and then using that then to help our customers build on top of us to drive more new applications and more for them and more revenue opportunities for us as well over time.

In terms of the -- it is hard to do. So we had a significant restructuring earlier on this year. We also, at the same time, ripped all of the custom stuff we've built on top of Salesforce, put ourselves onto the base Salesforce platform and then have added a lot of the AI functionality that Salesforce have introduced to enable sales productivity, et cetera, which we weren't able to do because of the customization we had on the platform.

So all of that stuff is hard. It creates disruption, which we've talked about, but well within the expectations that we've set out in February.

Great. With that, we're out of time. There will be a breakout session, but please join me in thanking Autodesk.

Thank you.

Good afternoon, everyone. My name is Tomer Zilberman, and I lead coverage of the vertical software and back office applications sector here at Bank of America. I'm very excited to be closing out day 2 of our conference with Janesh Moorjani, CFO of Autodesk. Janesh, first of all, thank you for being with us. And I know you want to read a safe harbor statement and say some other words before we start.

This is the most important announcement of the day. may forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements. So now that we're all a little bit safer. But thank you for having us, Tom. We appreciate it. And thank you for picking up coverage. I want to thank Koji as well. I see him in the audience there. Terrific working with him. And we appreciate the partnership with BofA.

So big shoes to fill after Koji. Maybe to start with a high-level question, Janesh. For the investors that are newer to the story, Autodesk has went through several business model transitions over the last few years. So if you could just kind of remind us what they are -- what the impact was for the business over the last few years? And really how does it position you appropriately for AI and Agentic?

Yes, it's a great question, Tomer. It's a good thing to set that context because all of these transitions that we've been through really are done with the intent of having a technology platform and a business model that was designed for what the future will hold. And they say successes when opportunity meets preparation, and I feel like that's where we are. So over the years, we've made a number of changes in the business. We changed from perpetual to subscription like many other companies did. Some years ago, we shifted from billing our customers for the entire TCV upfront to billing annually on multiyear contracts. We just completed that transition here in this past quarter. So that's behind us.

We also changed our customer buying experience in many markets around the world, where traditionally, a customer would buy from a reseller in those markets, and we shifted that to more of a direct buying relationship. The reseller still plays a very important role in terms of engaging with the customer and creating demand as well as getting quotes from Autodesk and so forth, but the transaction flows through directly with Autodesk, which gives us much richer information about what customers are doing with the products, how they're using our products, what they actually have. And all of that sets us up very nicely for the future, particularly when you pair that with the investments we've made on the technology side, investing in our platform and investing in our industry clouds. So these investments on the technology side and on the business model transitions have set us up very nicely for the future.

On that last business model transition that I talked about where just about seeing the effects of that work through the financial model. So I realize it's been a little bit hard for people to pass through some of that in the last couple of years. But we are starting to see the effects of that finally were off, and we should largely be done with that this fiscal year.

Right. I certainly want to go into maybe some of the nuances of what you were discussing. But before we go into that, I think the topic du jour is your announcement last week of the acquisition of Maintain X.

Very exciting.

Yes, right. $3.6 billion sticker price. I think it's the largest acquisition you guys have made to date. So I just want to give you the platform first to talk about it is, what it adds to your portfolio? And really why now?

Yes. It's -- Maintenex is a very exciting acquisition for us. For us, -- when we think about our -- how we play across the entire life cycle and maybe to just provide a little bit of longer-term context, Autodesk historically started off as a plan and design company. And for decades, we were a plan and design company. And we extended across the life cycle into make, whether you think about construction, whether you think about areas like Fusion, and we started to extend into that good 7, 8 years ago. And extending further into operate now allows us to close the loop on that entire life cycle across all of plan design, make and operate. So assets that you plan and design -- you have them built, and then you can see how they now perform in the real world. So closing that loop is really important for us for a couple of reasons. One is it significantly expands our addressable market. Operations by itself is roughly a $40 billion TAM. And if I draw an analogy to construction, it's significantly larger in terms of a market opportunity than construction was.

In the area of construction, we entered the construction market with Cornerstone acquisition, and then we built around that with organic investments as well as smaller bolt-on acquisitions. And in operations, we intend to follow the same playbook. So in construction, we expended about $1.8 billion of acquisition capital, and we built a business that's about $600 million in size today, growing north of 20%. So that's a really exciting business that we built in construction, and we're largely looking to replicate that in operations. And operations ultimately will be an even bigger business just given the sheer size of the market opportunity that we have in that space. So that's a really exciting piece on why operations, and it's a logical extension from plan design and make into operations.

What that also does is it allows us to further strengthen our AI capabilities. We've invested for many years in AI, and we've talked about how data context and expertise are the 3 core differentiators for us with respect to our AI strategy. The complexity of the models that we've built, training them on real-world projects and that data doesn't exist in the public domain for others to necessarily train on, and the context that we have and the richness of the context that we have around how those assets are -- how that design process comes together, how those assets are actually constructed, everything from workflows to information about the buildability, the auditability, all of those things.

So you then extend that to operations where maintenance has about 14,000 customers, about 10 million assets under management. And over the years, they've collected very rich data around the operational aspects of that data in terms of how those assets are behaving in the real world. They've collected very rich workflow context on the performance of those assets. When you pair that up with the data and the context that we have on the plan, design and make space, that allows us to close the full loop, which then allows us to deliver much more sophisticated outcomes to all of our customers. If you think about owners who have owner operators who have interest in everything from plan all the way to the operate phase, it allows us to create much richer outcomes for them and ultimately leads to workflows much higher-value AI workflows leading all the way up to autonomous operations.

So it's a super exciting space, both as a stand-alone space and Maintenance X as a stand-alone business But also the complementarity and the synergies that it gives us with respect to our own existing business, those were really important factors as we thought about the acquisition.

Right. Maybe going back to the first part of compare to the construction opportunity, right? If we contextualize the opportunity set in both. I think you said $600 million trailing 12 months for construction going 20%. If we take the operate asset, it's growing nicely 50%, like you disclosed, and it's about 2% of the business, right? Construction, I think, is closer to a little shy of 10 right? How long do you think the time line is to scale to something like 10%? Is it going to take you the same amount of time that it did to scale out the construction piece? Or because you've already had such experience, you can do in a shorter time frame.

I think that time frame will largely be determined by both how fast the construction business itself grows and we've not run out of any runway on growth over there. We still see that growing for many years to come. As well as on the operate side, we'll grow organically. Maintenance X will continue to grow, but we might also have bolt-on acquisitions in the future. So the intent of describing it in that framework was to help people understand that this is really a long-term opportunity that we see. And what operate or what Maintenance X does for us in terms of operations, it adds 1 more revenue-accretive growth stream for us on top of a base business that is already performing really well, and that we think is set up quite nicely for the future.

Got it. Maybe to ask you a little bit more on the base business. How do you see the growth trajectory of the core business over the next 2, 3 years? -- for design and make. Is there a concern that there could be a slowdown in this market that kind of prompted you guys to go out and make an acquisition of the size?

I don't think that's -- I don't think these things are related. We actually have a deep belief in the strength of the underlying business. If you look at our performance over the last several years, fiscal '24, '25, '26, we've been a consistent and very resilient grower. The underlying markets in which we operate, the demand for those -- the demand drivers there are secular demand drivers. They've continued to be there. You see that during different periods of economic growth or variation. So we feel very good about that. And we laid out a lot of those at our Investor Day last year where we talked about not just our existing core businesses, but opportunity that we see in areas like construction continuing to grow, Fusion continuing to grow, opportunities in infrastructure and transportation. Those are all key growth drivers for us. So nothing has really changed in terms of our long-term thesis on the business.

In operate, we actually declared our intention in that space also about 8 months ago. So this is nothing new that we've done trying to react to anything of that sort, but it's really a logical extension. Our core belief is that you should extend into adjacencies when you are playing from a position of strength. And our underlying business has remained strong. In AI, we are doing very well compared to many of the others in the industry. And so we feel like we're operating from a position of strength. And nothing here really changes our view of the underlying business, so looking out over the next few years.

Right. Maybe I'll ask you to dig maybe 1 layer deeper into the differentiation of Maintain X. And kind of talk about the competitive landscape right now is. When we think about your operate business and what you have now with MaintainX, is it more about competing with other, call it, platform vendors that are offering the gamut of design to make to operate? Or is it more about the next-gen mobile-first point product solutions.

I don't see others really competing with us across the entire landscape the way we envision it. And our core differentiators there continue to be great strength for us. I think there's a lot of point players in different parts of that ecosystem that entire life cycle that you compete with from a more narrow perspective. But on plan, design and make, I think we feel very well positioned as a broad platform provider.

With respect to operations and how that factors in, Operations is a highly fragmented space. There are many, many different providers in that space. There are some legacy technology providers. There are some slower moving providers that were built on traditional stacks, desktop software. They don't have great access to data. So in many instances, those are the ones that are being replaced. There's a large white space opportunity as well. So we see significant growth opportunity in all of that in a way that complements what we've been doing with plan and design and make.

The Maintenance X is the leader among what I would call the next generation of operations software companies and intelligence maintenance and asset management. And there's a number of younger companies in that space. Maintenance X is 1 of the faster growing ones, and it's 1 of the larger ones as well. So we feel it gives us good early momentum in that space.

Right. And when you think about acquisition, right, because I think you did say that MAX is the biggest player in the next-gen space. How do you think about the mind share and the market share versus acquiring the best technology, especially as we talk about AI native companies?

Yes. I don't think it's a compromise in this case. When we started out about almost a year ago, scanning the operations landscape for things that we might be interested in, we wanted to repeat the construction playbook that we had with the Cornerstone acquisition and building around it. And so when we started scanning the landscape, what we were fundamentally looking for is technology that is future-oriented, so built on a modern stack, cloud native, mobile-first ease of use that is easily adopted by customers has prebuilt integrations and things that fundamentally, it's delightful to use the software.

In addition to that, we wanted to look for an asset that complements our AI capabilities around the differentiating data and context that it could bring to us from an operations perspective. And ideally looking for a company that actually has strong go-to-market traction so that you have proven product market fit and a good strong go-to-market motion where the company is prosecuting that and driving a successful growth rate.

In Maintenance, we found all of those, and that's what pursue appealing to us.

Got it. Maybe 1 last question on the position is you announced raising $2 billion of new debt to fund the acquisition. How should we think about long-term capital allocation framework, share repurchases, further M&A from here?

Yes, we were very focused on making sure that our long-term capital allocation framework stays unchanged. Again, we spelled this out at Investor Day. We've reiterated this for investors a couple of times. Our first and foremost focus is to invest organically in the business and secondarily to invest through acquisitions. And these are targeted and tuck-in acquisitions as the expression we've used that continues to be the case here. But at the same time, that's all against the backdrop of continuing a healthy capital return program. We've said we would return approximately 50% of our free cash flow subject to acquisitions to investors. We did that last year, a little bit more than half last year. In fact, we're on track to do that again this year. And that underlying capital allocation framework will continue.

Got it. And is there any risk to the 49% margin level? -- that you're guiding to the next...

I would love to be at 49% margin levels, but we're not going to be quite there. What we committed to was 41%. By fiscal 2019. Important correction. But no, we fundamentally said that we are going to continue to stay true to that as well. So the maintenance acquisition is going to be operating margin dilutive by its nature because -- it's a high-growth company, and it's an investment mode, but we're going to absorb that dilution and our fiscal '27 and fiscal '29 operating margin goals will stay unchanged post close.

Got it. If we now turn to the recent quarter performance, on a reported basis, the numbers were quite strong. If I look at billings and free cash flow, I think you beat each of those versus Street expectations by $150 million plus each. But if we normalize it, I think you still said that there was some impact of the business model transitions that kind of mechanically bolstered some of the growth. So if we neutralize that and we just look at the normalized growth rate, how did that compare to your initial expectations for the quarter? And how is that informing your guidance for the rest of the year? Is everything on track? Are we performing better? Or where are we exactly?

The quarter played out -- it played out quite nicely for us. We are very pleased with our overall performance in the quarter. When I think about the underlying business itself, you are navigating the effects of the sales reorganization. That largely played out as we expected with respect to new subscriptions. Renewals were strong. So that gave us some strength in the quarter.

We also saw outperformance on upfront revenue, which is the license revenue component under 606. That came in a lot stronger than we expected. That's largely a function of product mix and that contributed to about half of the revenue outperformance in Q1. So we took the entire outperformance for Q1 and rolled that through and raised our guidance for the full year by more than that. So there's an implied raise for Q2 to Q4 as well. So all of that reflects the strength that we saw in the business that upfront revenue is not necessarily something I would extrapolate to future periods. But the underlying strength of the business is what we extrapolated to the future periods. And that's what you see reflected in the guidance for Q2 to Q4. So overall, it played out quite nicely.

Right. I'm going to ask you a conceptual question on probably a little bit crude, but bear with me. you talked about kind of your core beginnings being in more of the design and plan area. Right now, if I were to go into a Chat GPT or a Gemini or something, I can ask it create me a 2D schematic, a 3D schematic of a door window. And we'll do it maybe not super accurately, but it will create me something. We may not be in an area right now where these frontier models can handle something like that. And the difference between me asking for a door and someone asking create me this commercial building is way different. But is there any conceptual risk that the Frontier models can disrupt and maybe be like more CAD side area of the business?

Let me answer the question this way. If there's 100 people that gave the model, the exact same instructions that you give the model, you'd get 100 different answers. That doesn't work in our world, right? You need highly deterministic outcomes in our world. These are things that need millimeter level precision and that people are standing behind and taking large liability risks behind. So probabilistic is good to get you started and to get you thinking about things, but ultimately, probabilistic is not good enough. You actually need deterministic -- and as long as these models are all based on probabilistic methodologies, I think that continues to be a core differentiator for us.

So we described this a little bit more on our earnings call as well for some of you that may not have seen that. But what we described was our approach, we've talked about data and context and expertise as being the core differentiators, but it's not just the outcomes from our foundation models. We've trained our models on real-world data from real projects from actual customer projects that we've worked on, literally thousands of them over the years. And -- but it's not just about using the output directly from a model. That actually is then matched up against the deterministic algorithms that we've got that are built into the software, and that's been a core differentiator for because many of our flagship products like AutoCAD and Revit over the years. And so you get much more deterministic outcomes. I think that is a key differentiator as well.

The second thing I would say is many of the models would lack the context. For example, if you said, hey, just render me that's drawing it would render you are drawing, but what's behind the wall -- what is it actually made of? What's the load-bearing capacity? What can't you see? What's the drainage system. If you move a door 6 feet from 1 side to the other, does it conflict with the MEP system, all of those things are things that the model doesn't really have context on. It doesn't have context on workflow what's buildable, what's actually auditable. Tomer made a change 3 days ago and Janesh's going out to the site to build something, does he actually have the latest or is he going to go do something that is going to create rework later. The models don't have that. Rattles play a very valuable role in terms of how we think about the work that our customers perform. But it's much more comprehensive than that in our view.

Right. One of your peers on their last earnings call made a reference to saying something along the lines of let's say, you have a hypothetical example, $200,000 annually in engineering labor costs and 10,000 in design software costs. Even if you were to double the design software cost, but you were able to reduce 20% of the labor cost the incremental opportunity that an Autodesk can get from that compared to the cost savings from the customers is tremendous, right? Is that something that you're seeing from customers now?

The biggest problem that our customers face today is 1 of capacity and productivity, right? They don't have enough people to do all the work that needs to be done, and the people that they have are not as productive as they could be because there's a lot of more mundane things that are required of them in their day-to-day jobs. So that's the way we think about it. It's similar in concept to what you said around where they're investing and where do the savings accrue. But fundamentally, that is the problem that our customers are trying to solve in terms of how do I make my people more productive. That is my most scarce asset, and how do I get more capacity. And that's what we help them do. We do that through features in the product that we described the framework of task automation, workflow automation and system automation.

Task automation means making the user more productive. And if we can do that in a way that doesn't cause my cog meters to spin faster and we can still measure or meter the value that we're delivering to customers by way of a seat, then great, we will factor that into how we think about subscription pricing. But to the extent it either causes my fog meters to spin faster or if a seat is no longer the best way to meter that value we're giving the customer. We do that in the form of consumption-based pricing, which we've had for many years at Autodesk. A good chunk of our portion -- of our revenue comes from consumption-based pricing. So we feel like, again, going back to where you started with business model transitions, we've built not just the technology, but the commercial capabilities that we need for this world of the future as well.

Right. Maybe to go into the consumption-based model in just a second, but just to go on the last point. So are you hearing right now customers are preferring more productivity over cost savings?

Well, productivity can be reflected financially either through cost savings or driving higher revenue. And I think customers actually want both.

Got it. So consumption-based pricing, about 17% of your business, flex within that is about 2%...

Roughly.

Roughly 2%. First of all, take us through the various pricing mechanisms you have within the consumption business. And if you were to take a future outlook now with AI and genetic really starting to grow, where do you think it goes? Is it going to be more of this token-based approach?

Yes. So Flex is about 2%, and the rest of the lion's share of it roughly 15% is from EBAs, right? So EBAs are our enterprise business agreements and those customers are all on consumptive contracts. With the customer, it's structured as a token-based arrangement commercially. For revenue purposes, the revenue is still recognized ratably. So the revenue that fluctuates with usage is only on Flex, which is only about 2% of the business today. And so fluctuations in that 2% really don't have a meaningful outcome on the total revenue of the company just given our overall size.

Over time, as we think about this, I think we see growth opportunities in -- with enterprise customers, but also with Flex, particularly as we go further down market and we continue to expand our reach with many smaller customers and different personas, including personas, of users that may not need subscriptions all the time that they may be less frequent users or they may have burst capacity needs. So we do see that those consumptive models, particularly flex continuing to become a bigger portion of the business. But just given the sheer size of Autodesk as an $8 billion-plus company and Flex being only 2%, that growth in the mix of Flex will take a long time to play out. It's just the math behind it. So we don't see that creating volatility in the revenue model anytime in the near term.

Got it. You've talked about the last few quarters about MCP and API opportunity. Really how incremental can that opportunity become? And in early conversations with customers that are a little bit more AI forward, are you seeing a preference towards utilizing the Autodesk tool directly or going through a third-party agent that then goes into the Autodesk platform?

The way we think about it is we should be exposing capabilities to customers in whichever way the customer wants to consume those capabilities. So for example, we announced the partnership with OpenAI on Fusion, that still requires a user to have access to a fusion subscription. So we're still monetizing it. It's just a different mechanism. And if somebody wants to use it through open AI or through Chat GPT, that's great. They can also use it directly in our products. If they're using it directly in our products, they actually get access to our foundation models. They get access to -- they get -- when they use the features to the extent that it doesn't require us to use expensive compute to deliver the customers' request, but it can be done in a less expensive way. We would do that behind the scenes for them in a seamless way. So there's lots of benefits for them to do both, and either of them works fine for us.

Yes. Let's go back to financials and talk about margins for a second. 93% gross margin is our guidance for this year, kind of stable from last quarter trends. You talked before about as you're going to scale out your AI and cloud compute, there could be a drag to the gross margin dollars right? When would we start seeing that? And what are you doing to offset that?

Yes. Just to clarify, we don't expressly guide to gross margin percentage. But you're right, fundamentally, as cloud continues to grow in mix, the gross margin on cloud offerings will be lower than it is on desktop offerings. And so as that mix shifts, you do see an impact on the gross margin percentage. But from a gross profit dollars perspective, those are still accretive because the revenue size will correspondingly be bigger. So it's still actually is accretive to gross profit dollars, which ultimately drives free cash flow per share, which is the path to creating value. So we still feel pretty good about that.

But in terms of the percentage of gross margin, we did factor that in into the guide that we provided. Again, I think that plays out over a long time frame. And specific to fiscal '29 and the outlook of 41% for non-GAAP margins that we have out there. That's 1 of the several levers in terms of the puts and takes, but it is embedded in that 41% outlook.

Right. So you talked a little bit about AI tools that you're monetizing on different ways to monetize. But I want to talk about monetizing on AI from the perspective that you are also participating in the data center build-outs right? So maybe can you take us through there? What parts of the build-outs do you actually participate? And isn't it the data centers themselves? Or is it the associated infrastructure around waterways and electrical grids and everything else that's attached to the data center.

It's both. As you see, as data centers need surround infrastructure, Autodesk gets naturally used in those infrastructure projects as well. But the important thing for us is over the years, we've actually built a highly diversified business across segments and geographies and industries and verticals. And so every time you see demand shift from 1 area to another, that's fine from our perspective, we see the benefits of that by way of that diversification. So construction is a good example of that.

In construction, there's 8 to 9 months of backlog. And when demand shift, shifts towards data centers. It's moving away from somewhere else or capacity is shifting towards data in terms of our end user -- our customers' capacity to build is moving towards data centers. It's moving away from somewhere else, we're there in all parts of the market. So while on the 1 hand, it's great that it's providing a level of momentum to us. We are balanced in terms of how we approach it. And if for whatever reason, it shifts away from us in the future, there will be something else that in our minds will take up the slack.

So maybe continuing along that shifting perspective, do you now have an opportunity, even if it shifts away the actual construction portion into the kind of areas that maybe have been a little bit neglected over the last couple of months last year. with make and operate, can you stay in that life cycle for longer, specifically for data centers.

The fundamental thesis behind operate as it extends our engagement to the facets from years to decades. So absolutely, I mean, we would view -- so make is really construct. And if data center builds slow down for whatever reason, I don't see them slowing down. But for whatever reason, if they do slow down, we will still -- that demand will shift elsewhere. And again, if you think about plan, build -- plan, design, build and operate, the plan, design build capacity will move somewhere else. The industry is still capacity constrained. So whatever is being built, whether it's infrastructure, whether it's commercial housing, whether it's industrial buildings, whether it's other kinds of facilities. If it moves away from data center to something else, that's great. We'll be there for our customers wherever they are.

Right. But maybe to ask you it again in a different way. do you see real headway of opportunity for operate within the data centers?

There is significant opportunity for operate that will play out over the long term.

Got it. If we look at the -- I'm sure you all know this, we compare your performance to the architectural billings indices and some of the other construction momentum indices, and we're seeing stabilization of demand there following kind of a weaker back half of last year kind of going into this year, we're seeing stabilization. How was the demand backdrop right now?

It has been pretty stable. But what I will say is that even when you were seeing softness in some of those potential leading indicators, our business continued to perform well because those are not perfect leading indicators, and there's always some level of noise. And just given the diversification we've built into our business over the years, when you're looking at any 1 leading indicator for 1 particular market or 1 particular vertical, it's not going to be reflective of our business overall. So when those indicators were softening, we didn't see our business softening. And as we see those indicators stabilizing, that's a good thing on balance. I'm not dismissing those in any event or in any way. I would rather have those be stable than be declining. But them being stable, doesn't necessarily translate into anything that is a direct read-through for our business.

Right. I think the opposite side of the equation is even if there is a little bit of macro weakness or whatnot, we've seen that you have gained share, right, in CAD and BIM or PLM or whatever you want to call it, we see that you gained share over the last year, 1 now versus kind of some of your incumbent peers. And I wanted to ask you, what is the real reason for the share gains? Is it more about you provide the full platform that customers want? Is it more about a total cost of ownership savings? Is it better flexibility or pricing model? What attracts people to come to you?

We have been growing our business faster than the market overall in many of these markets. But I'd attribute that to more -- if you think about the markets in which we are growing really fast, construction, we're still behind the market leaders. In Fusion, we're still a small part of the overall market. So a lot of it is attributable to the underlying businesses measured on a point way that are continuing to do well relative to the competitors that they have in their particular spaces. And then, of course, the mix effects of the higher-growth businesses helping the overall growth rate of the company.

Got it. As we look towards the back half of the year is kind of progressed throughout the year, you talked about the largest EBA cohort in 4Q, but I think it's offset by your multiyear cohort, right? That is in the middle, I believe, over the last few years, right? So what are the puts and takes of the multiyear product cohort and the EBA cohort?

So the EBA cohort that's up for renewal this year is our largest EBA cohort with the bulk of that happening in Q4. But if I think about that compared to last year, we had -- last year, we had our largest product subscription cohort that was renewing last year. And we also had, I think, our second largest EBA cohort. So the issue with the cohort dynamics is this always going to be something that's bigger or smaller than the other. You can see last year's dynamics, by the way, in the billings growth rate for last year. On an as-reported basis, it was north of 30% billings growth. And so even when you strip out the effects of the business model transitions and so forth, it was actually very, very strong growth last year. So it will present a naturally tough comp in Q4. But that was what we factored in overall when we set our billings guide out for the year.

And Q1 played out nicely for us, which is what gave us the confidence to raise the underlying billings growth in dollar terms as we provided our revised guidance.

Now that we lapped kind of the remaining pieces of the transition in last quarter, should we expect that free cash flow growth tracks more closely with net income growth? And what do you think about free cash flow conversion over the next few years?

Yes. I think broadly speaking, free cash flow should track much more closely to operating or net income. There's a couple of things to keep in mind in fiscal '27, though, which is this year, which is that we're not really paying any U.S. federal cash taxes we say, because of the impacts of the One Big Beautiful Bill Act, and that benefit is largely offset by the cash outflows that we had associated with the restructuring that we implemented. Entering next fiscal year, fiscal 2018, we will start to become a U.S. federal cash tax payer again.

Got it. Same question about on NRR. Right now that we're past the mechanical tailwinds where do you expect the steady-state NRR levels to be within that, I think, 100%, 110% framework you gained.

Yes, they should be within that same range. It exceeded 110%, mainly because of the mechanical impacts of the new transaction model. The new transaction model affects a whole bunch of metrics, the net expansion -- the net retention rate of the NR3, as we call it, as well as a whole bunch of others. But once that noise abates, you should see it back in that 100% to 110% range.

Got it. A couple of quarters ago, you made a strategic investment in World Labs.

Yes, we're very excited about that one, too.

Is there any new update since our disclosure?

No. I think that's actually been going well for us in terms of the conversations we have with them. I think the company continues to perform well. So we're very pleased with that relationship is headed.

Got it. We're kind of 5, 6 minutes of time. I just wanted to pose open up the room and pose any questions for investors who want to ask a question.

I keep going here. Maybe to go back to the competitive landscape. When you take maybe a 5-year-plus look -- how does the market change in terms of -- I think we think of some of the other competitors that have an Operate segment that are more of the platform vendors. But as you mentioned, their legacy. Is there -- does it get more competitive, meaning are they going to also try to make some of the acquisitions of these next-gen products and then you are in a different type of competitive environment or competitive landscape than kind of how you describe it today?

Yes. I mean, potentially, but the way I think about the competitive landscape is we need to do what's best for our customers and give them the best product with the best user experience, and the best integrations to maintain an open ecosystem because what maintenance is fundamentally doing in the operations space is, it's not vendor specific or it's not system specific like some of these other folks are. It's actually a very open approach to manage as many assets as you can, regardless of who the vendors are, which the systems are. So the more we can do that, the more successful we will be. And there's plenty of new market opportunity by way of just traditional white space.

You walk into many of these facilities, you'll actually see there's things written on whiteboards with markers of what they should do by wafer maintenance schedule. There are things written on paper. You go to a complex manufacturing facility, and you'll see somebody's stuck a sticky note on a piece of equipment, saying, do not open this valve. And those are the kinds of things that scare us and should scare us. Those are the kinds of things that we're looking to automate. So if we do this right, we'll actually capture significant white space opportunity. And along the way, maybe there will be some legacy vendors from whom we can gain a little bit of share they might acquire companies. They might improve their products. Fundamentally, we look forward to a vibrant ecosystem out there, but all in service of what the customer wants to do.

And where are we in terms of market education beyond kind of all the go-to-market changes that you already made. Is there anything else you need to do in terms of getting in front of the customer that they should know that you don't only have design to make, but you also have operate in the value of the platform.

I mean I think our customers know and understand the whole life cycle and maintenance has built an independent go-to-market motion. For us, the most important thing is to continue to let them do what they've done well and take that strong product market fit and pair it with a go-to-market motion that continues to sustain growth for a period of time to come. There are a number of areas where working together with them, we can help them expand their presence, whether you think about leveraging the -- our global presence and having them be successful in markets outside of the U.S. thinking about ways in which they can work with our partner community, thinking about ways in which we can help represent the full portfolio of Autodesk and next to our enterprise customers. Thinking about just verticals in which we can help them expand even further. I think there's plenty of opportunity for white space expansion.

Right. Maybe last question here is, with May next, do you feel that you are finally participating in the full life cycle? Or is there other areas that you could eventually, at some point, go into, I think 1 of your peers recent spinoff also has a Protect category? Is that something that could be on the road map eventually?

Yes. I mean we think of this in terms of plan design, make and operate. We've -- there's a lot that we can do to make sure that we complete that. Again, I'll remind you about make we entered the make about 7 or 8 years ago. We're still driving growth even within make. So we have plenty of room with operations before we declare entrance into new markets.

Understood. Janesh, I'm all out of questions and we have 2 minutes left. So I'll see those back to you. Thank you so much.

All right. Thank you very much. We were efficient there.

Hello, and welcome to the Q1 Fiscal Year '27 Autodesk Earnings Conference Call. [Operator Instructions].

Please be advised that today's conference is being recorded. It is now my pleasure to introduce Vice President, Investor Relations, Simon Mays-Smith.

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss Autodesk's fiscal '27 first quarter results. Andrew Anagnost, our CEO; and Janesh Moorjani, our CFO, are on the line with me.

During this call, we will make forward-looking statements, including outlook and related assumptions on products, artificial intelligence, sales and marketing optimization, go-to-market strategies, trends and pending transactions. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-K and the Form 8-K filed with today's press release for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. We will quote several numerical growth changes during this call and as we discuss our financial performance. Unless otherwise noted, each such reference represents a year-on-year comparison.

All non-GAAP numbers referenced in today's call are reconciled in our press release and supplemental materials available on our Investor Relations website, where you will also find a presentation deck on the acquisition announced today.

And now I will turn the call over to Andrew.

Thank you, Simon, and welcome, everyone, to the call. We delivered strong Q1 fiscal '27 results today with revenue and earnings per share above the high end of guidance ranges and this outperformance flows through to our full year guidance. Today, we shared in a separate announcement that we have entered into a definitive agreement to acquire Maintain X, a leading modern maintenance and asset operation solutions used by organizations to manage and optimize day-to-day operations.

The acquisition reflects Autodesk's commitment to becoming a long-term leader in operations and builds upon Autodesk operations solutions, AOS, capabilities in digital twins and factor design. I'm going to devote my opening remarks to operations and will return to our other strategic initiatives after Janesh's discussion of our financial performance and guidance.

Autodesk's strategy is to converge design, make and operate data and context continuously through the full life cycle. This benefits owners, designers, builders, manufacturers and operators through increased efficiency and resilience and reduced risk and downtime. Operations is highly complementary to the design and make category, reflecting growing customer demand and more continuous data-driven workflows from concept through to operation and optimization.

With this expansion in operations, we plan to unlock higher value system-level AI, extend our duration with assets and systems from years to decades, and meaningfully expand our addressable market. Maintain X helps organizations manage maintenance, assets and frontline operations with a modern mobile-first platform with prebuilt integrations that serve as both a system of record and action for day-to-day operational workflows. It's led by a world-class engineering and AI talent and delivers a scalable go-to-market growth motion for operations and strong expansion potential across customer segments, geographies and adjacent use cases.

Its position as a key component of maintenance and operational activity gives Autodesk access to rich data on asset condition and history, inspections, maintenance patterns and real-world performance. bringing MaintainX into Autodesk begins to build the data and context loop that enables a new generation of more integrated, data-driven and AI-powered capabilities digital design and make with real-world performance to deliver predictive maintenance, intelligent automation and real-time decision support.

In short, we are excited to welcome the MaintainX team to Autodesk, and this acquisition will position us to help our customers increase efficiency and resilience and reduce risk and downtime through convergence.

Janesh, over to you to discuss our quarterly financial performance and guidance.

Thanks, Andrew. Q1 was another strong quarter. Overall, the underlying momentum of the business was consistent with prior quarters and a bit better than the assumptions we built into our guidance range with strength coming from similar industry segments in AECO, particularly in construction and emerging markets. Our sales reorganization is proceeding as planned.

The overall impact to new subscription growth was within the range of our expectations, while upfront revenue was less impacted than we expected. Renewal rates remained strong. Total revenue in the first quarter grew 18% as reported and 16% in constant currency. As expected, the new transaction model provided a tailwind of roughly 3.5 percentage points to revenue growth in the first quarter. Please see the tables in our press release, earnings deck and -- financials for details by product and region.

Billings increased 18% as reported and 15% in constant currency. The new transaction model provided a tailwind of roughly 1.5 percentage points to billings growth in the first quarter. We completed the transition to annual billings for most multiyear contracts during the quarter, -- so there will no longer be noise and billings from that transition. But with the ongoing reduction in the level of multiyear discounting, we expect shift from multiyear to annual contracts will continue to benefit price realization while also weighing on unbilled deferred revenue growth.

Turning to margins. First quarter GAAP and non-GAAP operating margins were 28% and 39%, respectively. GAAP operating margin increased approximately 14 percentage points, primarily due to the absence of onetime charges and underlying margin improvements. Non-GAAP operating margin was up approximately 2 percentage points. This primarily reflected operating leverage and the benefits from our sales optimization.

First quarter free cash flow of $876 million benefited from typical seasonal strength partly offset by cash restructuring costs. Moving on to capital allocation. We repurchased approximately 1.9 million shares during the quarter for $448 million. We continue to expect our share buyback in fiscal '27 to be similar to fiscal '26 in total dollars. We expect to maintain a healthy buyback program that continues to apply approximately 50% of free cash flow to further reduce share count over time.

Our capital allocation framework is unchanged. In addition to share repurchases, we still plan to deploy cash to the highest return opportunities, prioritizing organic investment in R&D, including cloud platform and AI and accelerating the realization of our strategy with targeted and tuck-in acquisitions. MaintainX is a good example of this and will be the cornerstone in scope and scale of our acquisition investment and operations.

Building on our successful expansion in construction, we're applying the same playbook to expand in operations. The foundation is the same, a cornerstone acquisition of an established and disruptive market leader with a strong go-to-market motion. We expect to fund the acquisition of MaintainX through a combination of cash on hand and debt financing. MaintainX expects to achieve an excess of $135 million of annualized recurring revenue this calendar year with growth in excess of 50%. We expect the transaction to close later this fiscal year, subject to regulatory approvals. We will include the impact of the acquisition and our guidance after the transaction closes.

We intend to absorb the margin dilution from MaintainX within our fiscal '27 and fiscal '29 margin goals. After close, MaintainX will be integrated into Autodesk Operation Solutions or AOS, under Steve Hooper, SVP of AOS. As many of you who have met him over the years now, Steve brings the product vision, go-to-market expertise and decades of operational experience at scale to turn AOS into our next major growth engine.

Let me finish with guidance. Our guidance philosophy is unchanged. Our guidance continues to be based on the range of possible outcomes in our bottom-up sales forecast which is grounded in the momentum of business and embeds prudent to reflect temporary risk to billings and revenue as we operationalize our sales optimization plan.

Full year guidance assumptions that we described last quarter remain largely unchanged. We assume the macroeconomic environment will remain broadly stable through the year. Billings and revenue guidance continue to reflect potential disruption from our sales restructuring, consistent with the plan we laid out in February and what we saw in the first quarter.

We continue to expect billings to be slightly more weighted to the second half in part reflecting that disruption and in part due to the weighting of our largest EBA cohort in the fourth quarter. Noise from the new transaction model will significantly diminish during the year, from an approximately 3.5 percentage point tailwind to revenue growth in Q1 to approximately 2 percentage points in Q2 and averaging out at approximately 1.5 percentage points for the full year. We will talk about it less as at noise fades.

Non-GAAP margins will continue to reflect ongoing operating leverage, savings from restructuring and sustained investments in our long-term strategic priorities. Free cash flow in fiscal '27 will continue to reflect discrete restructuring outflows and tax benefits. The net effect of these discrete cash movements is immaterial to free cash flow in fiscal '27. Our U.S. federal cash tax payments will begin to normalize in fiscal '28.

We continue to manage our stock-based compensation with discipline. We expect SBC to fall below 10% of revenue in fiscal '27 and continuing the trend of the last few years. Reflecting all this for fiscal '27, we've raised the bottom end of our prior billings guidance to a range of $8.505 billion to $8.58 billion reflecting the sustained momentum of the business. We've raised our revenue guidance to a range of $8.155 billion to $8.215 billion, reflecting our strong results in the first quarter.

Our GAAP operating margin guidance range is 26% to 28%. We've raised our non-GAAP operating margin guidance to approximately 39%, reflecting our increased revenue guidance. We've also raised the bottom end of our free cash flow guidance to a range of $2.725 billion to $2.8 billion. In summary, we remain disciplined and focused on the controllable factors that drive our revenue, operating margin, earnings per share and capital allocation, which are the key building blocks of free cash flow per share. The slide deck on our website has modeling assumptions for second quarter and full fiscal year '27. Andrew, back to you.

Thank you, Janesh. Autodesk is focused on convergence, powered by our platform, industry clouds and AI. Let me give you some examples of our progress in the quarter that demonstrate how this differentiated strategy works. For our customers and architecture, engineering, construction, manufacturing and operations, convergence increases efficiency and resilience and reduces risk and downtime. All of this is in service of deploying fewer resources to every project so they can bid on and win more projects with the resources they have.

As you can see in the performance of make, former for construction's revenue growth accelerated again and has strong momentum with owners, designers, GCs and subcontractors seeking to converge design and construction workflows. Once again, customers are choosing to consolidate fragmented legacy systems on to Autodesk platform.

For example, dome construction, an ENR top 400 general contractor selected former for construction to replace disconnected legacy point solutions and standardized workflows across preconstruction, VDC, project execution, cost management and turnover. In Europe, Essex Services Group, a leading U.K. building services contractor signed a multiyear enterprise agreement performer build to consolidate fragmented systems across complex data center and commercial projects. And Germany's largest municipal water utility, Berlin Mutter expanded its use Autodesk solutions, including former design collaboration to modernize collaboration across water infrastructure planning and delivery.

These stories have a common theme, converging people, processes and data across the project life cycle to increase efficiency and resilience, decrease risk and prepare for an agentic AI world. Our comprehensive end-to-end industry cloud and platform drive convergence and extend our footprint further into the larger growth segment. In manufacturing, customers are demanding convergence as they invest in their digital transformation to leverage granular and unified data and embrace AI-driven automation capable of industry transformation.

By consolidating on our platform, customers have the flexibility and connectivity across workflows to increase agility, innovation and resilience. For example, low services the shared services of the Friedhelm Lo Group, a German industrial technology conglomerate renewed and expanded its enterprise agreement with Autodesk to better connect CAD, product data management and enterprise systems. Reducing fragmentation and accelerating time to market.

In the U.S., a leading automotive manufacturer renewed its enterprise agreement with Autodesk to advance its Factory of the Future strategy, standardizing on Autodesk solutions across digital factory and AECO workflows to reduce vehicle lead times and scale factory design simulation across 14 factories from more proactive, data-driven production planning. In addition, a visual display and fabrication company relates to legacy design solution with Fusion after a multi-month evaluation, connecting design and manufacturing in the cloud to reduce handoffs and move projects through development faster.

And in Europe, Shytle, a leading manufacturer of Chimney systems implemented an integrated venture vault and fusion workflow to automate product configuration, generating thousands of modular component variants automatically to fast track assembly and drawing creation. All of this was reflected in Fusion's accelerating growth.

Let me finish by talking about AI. As I said last quarter, building a genic AI requires data, context and expertise. What differentiates Autodesk is that we have all 3 at scale, and each one is scarce. We have GM rich data from real time and make workflows that lets us build frontier 3D foundation models grounded in how the built world is actually designed and made. We have real-world workflow context, including design intent, constraints, constructability, coordination and trade-offs that enable industry-specific MCP and agentic-based workflows that work reliably across the life cycle. And we have deep domain and technical expertise that translates data in context into trusted products, defensible IP and knowledge graphs built for professional grade outcomes. That foundation matters because our customers do not just need AI that can generate. They need AI to produce these outputs that are correct in the real world.

That is a hard problem, and we are using a hybrid approach to solve it. We are combining probabilistic AI generation with deterministic engineering validation using parametric and physical-based engines designed to reason about the physical world in 3D. So AI generated outcomes can be validated against real-world constraints. Simply put, AI can generate and our engines can validate. Let me unpack that a bit. Fronter models are incredibly capable, but they are still fundamentally vision and language systems, simply generating drawings is very different from understanding how something performs, behaves or can actually be manufactured and constructed. For our customers that accuracy matters.

Through assistance and MCP infrastructure, Autodesk provides the harness layer that makes frontier models more controllable, context aware and useful across the life cycle. Artist assistant is a good example already in market, and there are even more powerful tools on the way.

But we are going much further than MCP and agent-based workflows. Autodesk 3D Foundation models use decades of engineering intelligence combined with trusted product engines to directly reason about geometry and physical relationships, enabling workflows like similarity search, drawing dimensions, constraints, building plans and geometry aware automation. Auto constrained infusion and more expansive features like our soon-to-be launched building layout Explorer Informa are good examples of our progress here.

When Autodesk AI generates a design revision, manufacturing tool path, routing layout or simulation setup, that output is validated to the same core parametric models from Autodesk that our customers have trusted for decades. These systems perform deterministic checks for geometric integrity, manufacturability, constructability, standards compliance and performance. Every validation loop also improves the platform itself, continuously strengthening our AI models, validation systems and quality thresholds over time.

With MaintainX, we intend to extend those capabilities to develop digital twins that move beyond descriptive and informative models to high-value predictive and autonomous workflows and systems. This combination of probabilistic AI generation and deterministic engineering validation is why we said last quarter that 3D agentic-AI requires high fidelity, geometry rich data deep industry context embedded in real-world design and make processes and specialized 3D AI expertise. Few companies have all these, Autodesk does. It's why we believe Autodesk will define the next generation of industrial AI.

Operator, we would now like to open the call up for questions.

[Operator Instructions]. Our first question comes from the line of Saket Kalia with Barclays.

Okay. Great. And congrats on MaintainX. Andrew, maybe that's a good place to start with you. Broadly speaking, could you just give us a bit more color on Maintain as a company and how it maybe helps further Autodesk's sort of strategic goals long term?

Yes. I think that's an excellent place to start, Saket. So let's start with the broader strategic context. In Autodesk, our goal is to converge the entire built-World life cycle from design, make, all the way through operating close that loop. You've already seen us make a lot of great progress in the design and make side of this. You've seen what we've done in manufacturing and construction.

Now we're moving more aggressively into operations. And this is going to unlock a deeper and broader data and context layer that makes our capabilities more powerful in the agentic world. It's going to unlock a $40 billion TAM for us. And it's also going to advance our digital twin strategy from static to dynamic and ultimately to predictive.

And let me tell you a little bit about the scope of our ambition and then how MaintainX plays into it. Our scope spans all the way from product manufacturing through to critical infrastructure like water and data centers through transportation, which is like airports into commercial buildings. And if you just look narrowly at the product manufacturing piece, today, we can build static twins with tandem, dynamic twin capabilities that help define how a factory works with Plex IM and ultimately look at the operations with fusion operations.

But what MaintainX brings us is the field execution and data piece, the actual asset data piece. They're the fastest-growing company in the space, they're rapidly consolidating a lot of the space onto their platform, and there's a reason for that. And what they're bringing to us is not only that expertise at the point of work where the assets are functioning, they're bringing to us a rich set of data about asset performance in the real world. This data is going to help us move along that spectrum from static to dynamic to predictive. And midsized and small manufacturers are going to be a big place where we're going to be testing this out. So it's an exciting growth opportunity and it has a lot of potential for Autodesk, and it kind of completes that whole vision of design, make, operate and closing that loop in that data and context layer.

That makes a ton of sense. Maybe for my follow-up, Janesh, I think you compared Autodesk's entrants into operations to your entrants into construction, which a lot of us on the call remember years ago, maybe the question is, how has that experience in construction maybe informed this expansion into our operations. Does that make sense?

Yes, it does. And maybe I'll ask Andrew to comment a little bit on the learnings from the construction experience a lot of that happened even before I arrived and then I can talk a little bit about how we translate that over to MaintainX.

Yes. All right. Thank you, Janesh. It's good -- it's another good question, Saket. Let me kind of start with this. When we started construction, we took a set of assets that we had in preconstruction planning and in collaboration with 3D models in the cloud and some early assets we had around punch list and field assets. And then we put a-brought in an experienced leader at Autodesk who knew how to scale a new business. Jim Lynch, in particular, he scaled the Revit business inside of Autodesk and was a critical part of that growth. We brought in people like Paul Bandini that were also part of that.

And then what we did is we engaged in a series of acquisitions that expanded us into places where we didn't have coverage. Field execution was a key area in that space. Look at what we're doing with MaintainX, its field execution, field data, where things are happening on the site. This enabled us to do a lot of automation and capabilities around request for information flows and all the things associated with construction.

We then went on to expand that and consolidate it into a group. We ran it independently inside the company. Look at the results, all right? 5 years ago, we spent about $1.8 billion on acquisitions. Today, if you look at this business today, going back 12 months, it's worth almost $600 million in revenue, and it's growing north of 20%. So pretty impressive results.

So how does this translate into what we're doing with operations? I think we can actually do a lot more in operations. Today, we're putting an experienced leader that scaled Fusion and it's early days. That's Steven Hooper. We're bringing back Paul Bandini into the operations team. He has a lot of the chops from that. We're bringing in a best-in-class field execution on-site maintenance and asset aware solution into our portfolio, maintain a great team that knows how to build this kind of technology, a great team that's already built AI-driven workflows based on some of that data. And then we're going to work to incrementally bring in some smaller acquisitions over time that round out the solution.

So follow the same playbook integrate the things that we need to integrate quickly, hold bathing the things that drive the health of the business, run the same playbook, and I think we're going to have even more impressive results than what you've seen with construction.

Our next question comes from the line of Jay Vleeschhouwer with Griffin Securities.

Andrew, among the critical technical ingredients of your growth strategy are, of course, platform services plus the AEC data model and the manufacturing data model. The question is, could you talk about production deployments of any or all of those among your customers in AEC and manufacturing and a proposed today's news, how do you see the MaintainX acquisition fitting technically into those architectural initiatives around data models. Then I'll ask my follow-up.

Yes. So as you know, the usage of our APIs and the AEC data model and the manufacturing data model by our customers continues to go up month after month after month. They're using it to provide rail solutions. We're actually monetizing some of that API usage today. We continue to create granular solutions of our -- for our data and granular capabilities.

All of these are tools that our customers will be able to plug into, but that we also plug into to create some of the agent workflows that we're doing for our customers. So it's really important to look at the progress we're doing there. When you look at MaintainX it brings another piece of granular data, asset performance data into the cycle. This is actually going to be valuable for some of our customers to actually build new businesses on from our stack.

So our goal is -- our customers should be doing more projects, bidding on more projects, winning more projects and getting a larger slice of the life cycle of the built world. This is another way we enable this. Our customers are going to be able to expand their offerings their customers through some of the new types of granular data we'll be able to offer through the asset layer as well. So it's another way of rounding things out, not only for our customers but for us as well. So it's going to be pretty exciting.

Okay. Another technology question. As you're aware, there was a very interesting AEC industry conference 2 weeks ago in London, which had many things relevant to the company, one of which I thought was quite interesting was the theme among many customers that presented of developing their own tools to either supplement commercially available tools potentially even just use their own tools for their design and engineering. Could you talk about that potential phenomenon of customers developing at least in AEC, some of the own homegrown tools.

We absolutely wanting to do this, Jay. We have a long history of enabling our customers to expand our offerings to build tools that fit for their solutions. Now when you look at the agentic world, Remember, though, that there's this important critical mass around data and context that extends beyond any single customer.

No single customer is going to have enough data to fully understand the scope and impact of a project nor will they have the entire context of the project. Remember, context for a project flows across companies and across silos within a particular project, it is an ecosystem problem. And we're well positioned to orchestrate the ecosystem at the data and context layer.

So we're going to add a lot of model capability that is really above and beyond what any of our customers can build on their own, but we encourage them and we want to enable them to build vertical capabilities on top of this that make their environments and their practices even more rich and more powerful. But they're going to need a strong platform to do that, and that strong platform is going to be built on the data content and expertise that we bring to play.

Our next question comes from the line of Adam Borg with Stifel.

Awesome. Maybe Andrew, for you, in our channel check conversations, we did hear about partners talking about a degree of disruption from the go-to-market changes you guys made? I know you talked about those changes really being in line with expectations. So I was hoping maybe you could go a step deeper about how those changes have played out and any future risk of further disruptions and how that's -- and maybe for Janesh to remind us how that's -- in the guide.

Yes. So remember, let's talk about the goals of these changes, right? The goal is to focus the entire ecosystem on new business generation, capturing and growing new businesses. So we shifted away from renewal is a big part of the partner business to new businesses as an emerging bigger part of the partners business. And we also moved to automating some of the processes around renewal so that we could get better renewal performance and more focus on the new business.

Actually, we saw that in the quarter. We saw strong renewal performance. And we saw exactly the kind of weak new performance we expected as people shift over to this. We expect this to all work its way out over time as the channel partners kind of get their hands around how their teams are reconfigured to build out new business. And we're looking forward to seeing the results. Janesh, do you want to comment on anything?

Yes. I'll just add that Q1 played out in line with the assumptions that we had baked into the guidance for the new subscriptions that we saw strength everywhere else that contributed to the strong outperformance that we had here in the quarter. And then looking ahead, we have assumed just the gradual normalization, not a step function improvement looking out to Q2 to Q4.

Ultimately, the objective is to emerge with an organization that is much more effective at driving new business growth over the long term, and that sets us up nicely for the future.

That's great. And maybe just as a quick follow-up. It's really nice to see the consistent year-on-year growth by geography in Americas and in APAC, all sticking to 17%. Maybe just drilling deeper into EMEA, just given a lot of noise in that market more broadly. Anything to call out there in terms of headwinds and opportunities.

Yes. I think the biggest drivers for EMEA were really some of the timing and comparison dynamics that you see. EMEA had strong upfront revenue last quarter, and last quarter was also the peak of the new transaction model tailwind in EMEA. And if you recall, EMEA lagged the Americas by 1 quarter. So that's what you're really seeing play out here in the numbers -- the other thing I would just touch on also is that we knew going into the year that the sales reorganization would just take longer to operationalize in certain parts of EMEA just given local labor laws and consultation requirements. And that timing was contemplated in the guidance, but you also see that reflected in the EMEA performance overall. But broadly, EMEA is a very important region for us, and we continue to see great long-term opportunity across both mature and emerging markets there.

Our next question comes from the line of Brent Dill with Jefferies.

Just on the acquisition, if you kind of roll forward the 50% growth, you're paying 18x next year's revenue. And I think many are asking in a world where software multiples have collapsed pretty significantly. You're paying a pretty big premium. And I'm assuming there's a reason for that premium. So maybe if you could share your thoughts on how you got to the number.

Yes. I'm happy to start and maybe Andrew can add as well. But when we look at maintenance, Brent, for us, we looked at it as a high-growth market-leading platform. It's really defining the next generation of operations software. It's a large strategic adjacency for us, so it expands our TAM. But importantly, beyond the stand-alone strength of the business, it also gives us very rich operational data and workflow context that really allows us to close the entire loop across design, make and operate, and it strengthens our overall AI foundation as a combined company. So it really enables higher value workflows over time.

We talked a little bit earlier about the construction playbook that we used and Andrew mentioned these numbers. But in construction, we deployed about $1.8 billion of capital through acquisitions, and we've built a business that's close to $600 million of revenue LCM, and that's growing more than 20% here in Q1. So if you sort of think of that in a similar analogy, we expect operations to become an even bigger business than construction over time. just given the TAM and given the growth rate of the business, the revenue multiple will compress pretty quickly on a forward basis as the business scales.

Yes. I think Janesh said it pretty good. I'll just add on and double down on this notion of the fact that the data that we're getting about asset performance and asset life cycles is incredibly valuable to us. it allows us to move up the spectrum from the operational and the static and dynamic wins into the predictive world. That's going to provide a lot of value to the mid-market customers we serve. It's going to provide high-value AI-driven solutions that do things that most small and midsized players are not able to do without some of these tools. So look for us to really dig deeply into that layer of this asset because it's a very important component of it for our context and data strategy.

And just a quick clarification. Is this the largest deal you've ever done?

This is the largest deal we've ever done.

Our next question comes from the line of Jason Celino with KeyBanc Capital Markets.

I'm just trying to understand the MaintainX business a little bit better. Like who would be the core user? Would it be internal operations, maintenance people. And then I went on the website, it looks like some reference customers or some consumer companies, some inventorial service companies. So do you have any overlapping customers today?

Yes. We absolutely have overlapping customers in the manufacturing sectors and machine operating sectors that do overlap with us. The core user is the person actually owning the asset who has a high concern about uptime and managing and maintaining that uptime. It allows them to get the MaintainX people out into the facility, track what needs to be fixed, track how it needs to be fixed. And the value we're going to bring moving forward is we're going to be able to turn that into a predictive cycle and a closed loop into being able to allow them to optimize facilities.

I think the greatest example you can use here is what happens in a small and midsized factory where they're trying to highly automate their processes and try to create a digital twin of the operational capabilities of their factory and reconfigure that -- basis and keeping it running as much as they possibly can. That's going to be a big opportunity for us with regards to the predictive twin capability.

Okay. And then maybe just a clarification for Janesh. I think in the prepared remarks of the PowerPoint, you mentioned that you were maintaining the fiscal '29 operating margin framework. -- did that original framework contemplate a strategic acquisition like this? And I guess, how would you look to absorb and maintain margin framework with this asset and potential future tuck-ins.

Yes, Jason, it's a great question. When we laid out that framework, we had assumed that we could achieve that objective under a range of different kinds of scenarios, which included potential acquisitions as well. Ultimately, the business is generating a healthy amount of operating leverage. And we use that operating leverage to both achieve margin goals as well as reinvest back in the business. to drive sustainable and durable growth in the future. Some of that can be organic. Some of that can be inorganic, and that's what you've seen us do over here today. While MaintainX itself does not have the margin profile that Autodesk does. We are going to absorb that business into Autodesk and stay true to our margin goals, while continuing to balance investments that we need to make in the business as well.

And our next question comes from the line of Taylor McGinnis with UBS.

Janesh, if I ran my math right, it looks like the guide for adjusted constant currency billings implies around high single digits growth for the remainder of the year. And I think revenue growth is closer to 10% or so. So could you just unpack the delta there was there any pull-forward of deals into 1Q? Or is that just a reflection of the impact from some of the sales changes?

And then secondly, enough to throw too many questions at you, but I believe you made a comment about a benefit price realization to billings, but that also weighing on unbilled deferred revenue growth. So I'm wondering if you could just pack that -- unpack that a little bit more specifically with RPO growth of 9%.

Yes. I'm happy to touch on both of those, Taylor. So in terms of the overall growth profile for both billings and revenue, Keep in mind, it's really the effect of the sales reorg that we had, where you'll see the effects show up in billings first and then you see the effects show up in revenue over time. So that's one piece that you need to just keep in mind.

And our guidance largely reflects that in terms of the pace of normalization of new business productivity coming back into the sales as we go -- sales team as we go through the reorganization and complete the operationalization of that. That's probably the biggest piece to think about with respect to the guidance.

And then in terms of the RPO and the price realization, RPO can move around in any period. It is affected by a number of things, including contract durations, timing, currency. And in our case, as you know, it's also affected by the impact of the new transaction model, which is now starting to wear off.

And so in Q1, what we saw was RPO growth was a bit slower in part, reflecting slightly shorter contract durations. That follows the change that we had been making to reduce discounting on multiyear contracts. So when you -- that represents a really good economic trade-off for us because the price realization is longer term over multiyears, when we go out and secure the renewals in the future, those will be at the undiscounted levels or the lower discounted levels compared to what we had in the past. So that's a longer-term play. But it does impact the RPO and the -- particularly the unbilled deferred RPO in the near term. But it is a good economic trade-off for us and 1 that we consciously made. So customer relationships are healthy, and we have a strong foundation of renewal rates. So we feel pretty good about the underlying momentum of the business.

Our next question comes from the line of Alexei Gogolev with JPMorgan.

Janesh, could I build on the previous question, please? So when customers consider their contracts, what drives the decision between multiyear and annual contracts? Is there any element of budget uncertainty or some perceived switching flexibility or maybe cloud and we have road maps? And does it differ by AECO or manufacturing or maybe by enterprises versus SMB?

Yes, it's a great question, Alex. It's less about budgets or anything of that sort. For us, I think it's really just a couple of issues. One that I just touched on, which is that we reduced some of the discounting on multiyear contracts because we have such a strong foundation on strong renewal rates, and we felt confident that it was the right thing to do for the business long term.

And the second thing that I'll call out is that there can be sort of timing issues and cohort mix issues as well. As tend to be 3-year contracts. A lot of our product subscriptions tend to be 1-year contracts. And so just depending on some of the mix of what's up for renewal and what's not up for renewal, you can see some level of fluctuation there too. But that's all just normal and part of the ongoing business. So there was nothing unique or specific that I would call out other than those factors here in Q1.

Okay. And Andrew, you referenced assistance and MCP infrastructure and the harness layer for frontier models, what's the near-term product road map, where it shows up first and what customers can do that they couldn't do before?

Yes. So there's numerous things that we built into the assistant layer that customers are going to be able to do, they have done before. Coming up very shortly is what's called the building layout explorer. It's going to be built into the former building design suite. It allows people to explore the layout of a building within the framework of the envelope for the building that they're proposing and that they're exploring. These are the kind of capabilities that are built off of models that we've created ourselves that allow customers to do things that they would not be able to do dynamically with some of the other kind of horizontal large language model tools.

We're also going to be building in additional capabilities that bring in some of our vertical tools into the assisted workflow so that they can actually dynamically create some user interfaces that solve particular problems for them. Again, going to be unique to the assistant. I don't want to say too much because we're going to have a lot of announcements at AU that kind of tell people where we're going. But you're going to see us add a lot more to the layer between the frontier models and what the assistant does and some of the capabilities that Autodesk builds on top.

Our next question comes from the line of Joe Vruwink with Baird.

Great. Does something like Claude for creative work and Autodesk involvement become a channel for new customer user acquisition to the point where you'd actually see new subscriber and seat growth accelerate? Or maybe if it's not clouded for creative work, but more holistically about what you're doing with MCP servers? Does this become a format where just the usability around your models make the applications more applicable to like people that wouldn't naturally be key users of Autodesk?

Whenever you meet the customers where you're at, you bring new customers into the ecosystem, right? And part of what we're doing is to meet the customers where they're at. We pull them into the ecosystem and then they're able to explore the capabilities that we're able to help them finish above and beyond what they do in some of these other layers. So you'll -- this is absolutely a channel for us, but it's also meeting the customers where they're at today.

Okay. And then on MaintainX, moving downstream in operations and connecting the asset life cycle, there's other vendors that have also put these pieces together. I think there's maybe been a range of successes and maybe the pieces end up functioning separately, but there's just not good cross-pollination and kind of upstream design ends up working, but it doesn't connect downstream, how does auditors maybe think about tackling this proposition differently than it's been tackled before?

Certainly, we're aware of all those other expirations in this space. One of the things I want to make sure that you understand here is it's not just about the maintenance piece and what we're acquiring today. It's about the whole experience around how a digital twin actually operates for our customers in their real-world settings. So we're actually building out capabilities that circles a whole bunch of the problem. And I gave some of those examples in the factory space.

But also when you look at some of these other solutions and why MaintainX is managed to grow so fast, A lot of these older solutions required custom solutions, they were dependent on other platforms like Salesforce, for instance. And they were narrowly focused on an ecosystem of vendors that were supported by the particular player.

MaintainX is a complete heterogeneous solution. Every asset that the customer has to manage can be managed within an environment like maintenance, which I think is a very important differentiator as they move here. But you combine that also with what we're trying to do with the end-to-end where you're defining the twin, you're running things in the twin and you're moving into optimizing and predictive workflows, it's something that other vendors have not done and have not been able to do successfully. And again, the reason MaintainX has been successful as it is in consolidating the space is because they crack the code on how to drive some of these solutions in and out of scale.

I just add there is you can see the evidence of these differentiators that Andrew talked about and the growth profile of MaintainX compared to the growth profile of some of those other companies.

Your next question comes from the line of Ken Wong with Oppenheimer.

Fantastic. The first one for you, Janesh, I just wanted to kind of clarify the billings guide constant currency billings growth was raised a bit at the low end, but the constant currency adjusted for transaction model was unchanged. Is that just rounding error and the underlying confidence of billings is higher? Or are you trying to say it's neutral.

Yes. I think that's just largely rounding. Because we guided in whole percentages. We focused on the total dollars of billings. We didn't see any big shift in terms of the impact of the new transaction model. I think that's just largely rounding right there.

Got it. And then Andrew, just on the go-to-market changes, it sounds like kind of within the range of outcomes. Would you say it's just kind of a typical learning curve stop? Or I remember last year, there was maybe some invoicing and billing dynamics that you guys had to iron out those kinks, like are there any notable items that you guys feel you need to course correct?

No, nothing we didn't plan for in the cycle. When you move sales incentives around and move sales rolls around, you're obviously going to go through a cycle of absorbing those changes and absorbing those things into your pipeline, you're going to go through some pipeline disruption and all the things associated with that. These are things we factored in. So we're not seeing anything we didn't expect like we discussed during the new transaction model change. It's all kinds of things we baked into the cycle and into the change management.

Our next question comes from the line of Michael Turrin with Wells Fargo.

Great. Appreciate you taking the question. as you're obviously well aware, the company has worked through a fairly notable and impressive transformation over the past few years. Maybe just a 2-part question for me. You could just provide us with kind of a grounding update on where the company stands in terms of technology replatforming and evolution of the pricing model and how that positions the company competitively from your perspective? And then as the follow-on, just maybe also speak to confidence in layering MaintainX into that, just confidence in the foundation you've set as this being the right point to kind of bring something new into the fold there.

Yes, Michael, that's a really relevant question. So as you know, we've made a lot of investments in kind of changing the company and preparing it for the future at various levels. One of the things we've also did very early on is we prepared for a mixed blended world of subscription and consumption. It's one of the things I think we're well ahead of a lot of other companies in the application space. So we already have offerings that allow us to provide subscriptions for people that are heavy users blended consumption models like Flex for people that are occasional users. And we also have ways and means of which to blend these things together. We have capacity models, project-based pricing model.

So we have a lot of various models that allow us to meet the customer at the project level and also meet them at the usage of AI in ways that maybe other players in the space don't, which I think is really important, and we built the systems and processes up around that. We've also built the systems and processes that will allow us to bring in acquisitions and integrate them into our processes more effectively.

Now MaintainX is a subscription model, and they're moving into the consumption space moving forward. So they are a natural fit for some of the capabilities that we already have. So we feel pretty very confident about how we can integrate them and move them into our processes. But we're -- we've come quite a way up in the maturity curve, and we feel pretty good about where we are with regards to being ready for the new world in terms of some of the pricing models and the packaging models that are associated with that.

Our next question comes from the line of Josh Wood Hilton with Wolfe Research.

Perfect. Amazing. But I would pause there for a second. Maybe just 2 quick ones for me. First one is just something we noticed is there was a rebranding or repackaging of Autodesk built on the eStore to form a build. And along with that, it feels like the pricing of that offering is I don't know, significantly the right word, but mid-teens cheaper than it was previously. Is there any change in the strategy that you guys are seeing in construction around how you're using price as a lever to entice customers, especially since the offering itself is pretty good. And then I have a follow-up for that.

Yes. So you're actually involving 2 things there, Michael. So let me, I mean, Joshua, sorry, let me help me with that a little bit. So the rebranding of everything under Forma is to acknowledge that we have an end-to-end solution that's entirely cloud-native from design preconstruction planning all the way into construction. So everything is branded under the former layer. So former for construction is now connected to directly through a form of data management to former site design and form of building design.

The offering you're talking about is form a build Essentials. Build Essentials is a version of build design to reach the small and midsized general contractors, so it's an effort to expand our footprint down market at a price point and a capability point that works. So it's essentially a smaller version of RDF build that fits for the people who are participating in the project more broadly. That's what that price point is.

It's basically going to expand our footprint and our reach into the entire ecosystem. And it's designed to actually accelerate some of our expansion into other parts of the construction process.

Makes a lot of sense. Maybe just 1 more, and I'm going to preface this with we have a ton of print I've been bouncing around on calls. That's been addressed already, I apologize. But if I step back, you guys just put out a really solid quarter. I don't think I've gotten anybody really ticking at the results themselves. But then we also have this deal that you're announcing coming into the fold and it's pretty sizable. And I think if there's one piece of feedback that I've been getting since results dropped, it's just elsewhere in our coverage or in our software space where companies have tried to layer in some pretty sizable M&A recently. -- it's been for -- it hasn't exactly gone well. Is there anything that you can maybe give us or communicate to us that can increase the confidence that now is the right time to make this acquisition that the core business is still healthy and nothing has changed there? And that like -- and that this is the right time to be making a deal of this size, if that makes sense.

So we're a very disciplined company when it comes to acquisitions. And I want to go back to what we did with construction because, again, we're running a very similar playbook that we do with construction. And frankly, over a 5-year period, a lot of the pricing dynamics and all the operating dynamics are actually very similar when you adjust for the 5-year difference in time frame. So we're super disciplined about these things. We do work like this when we know we can absorb it and we know we can execute on it.

The timing is right because this is the time when you want to expand the breadth and depth of your data and context layer across entire life cycle. The broader and deeper your context and data layer, the more competitive you are in the future agent or because the more workflows, you can automate, the more value you can bring to your customers. So the timing is right for us, super disciplined about processes like this, and we've been waiting to do this and plan to do this for quite some time. Janesh, anything to add?

The only thing I would add in terms of thinking about this versus the broader Autodesk businesses, keep in mind that at the time of close, MaintainX will still be a very small percentage of Autodesk overall. So it's not going to be enough to influence the overall core business growth rates in a meaningful way in the initial stages. And then just to help you understand how the maintenance business is performing. We will give you appropriate information to understand that. So in the early quarters, we'll give you good information on that, so you can understand how it's contributing to Autodesk.

But just given how small it is as a percentage overall, I would not assume a permanent stand-alone quarterly reporting framework on it, but we will certainly be transparent in the early quarters as we bring it into the company.

And our next question comes from the line of Tyler Radke with Citi.

Okay. Great. Andrew, I'm curious if you talk with your big EBA customers, what is sort of their appetite to allow Autodesk to use their data in terms of AI? And how is -- how have those conversations evolve, particularly considering the exciting road map and all the innovation you're doing?

Yes. Our relationship with our customers is 1 of transparency and choice. We are very transparent about what we're doing with their data and how we're using it and where we're using it and where we're going to give them choice for opting out of how we use their data. That relationship has been highly effective. It's resulted in robust conversations with a lot of customers, and I think it's in good outcomes for them and for us.

Everybody wants the automations we're able to deliver. A lot of customers realize that they can't deliver some of the things that they really need at the scale that they're at. So as long as we continue to lean into transparency, be very straightforward with our customers and direct about what we're doing and what we're not doing and offering some level of choice. We've been having a very productive relationship with all of these customers and really good discussions.

Our next question comes from the line of Clark Wright with Piper Sandler.

I wanted to follow up on the discussion about MaintainX kind of graduating from subscription to subscription plus consumption. Maybe you could review for us what that might look like for that business model? How far along are they? Is it meaningfully contributing to the growth rate? And then a follow-up, just a lot of Autodesk's focus has been on the AEC segment and the Manufacturing segment. I think there's really an opportunity with MaintainX to expand to a lot more owner-operator presence.

And so after spanning from manufacturing to a lot of those other industries that you mentioned in terms of critical infrastructure or commercial real estate, do you see a investments in go-to-market that will happen to make this asset extend into some of those other verticals, beef up the sales force to kind of grow owner-operator presence?

Yes. First off, it's far too early to look at MaintainX to the lens of consumption and things associated with consumption. They're very early in that journey. They've got a bunch of AI-driven capabilities. That will evolve over time. Now with regards to the larger question about branching out to those other segments, again, following very much what we did in construction, we built an entire go-to-market machinery around construction that allowed us to reach various players within the construction ecosystem.

That's why we pulled it out separately and that's why we engage the way we do to make these businesses successful, is that we want to make sure we're building the ecosystem, not just the product ecosystem, but the go-to-market ecosystem that allows us to reach the various customers. You heard us kind of talk pretty vocally about the first pillar being probably in the product manufacturing space. But remember, we already have a footprint in were operations, and we already have a footprint in building operations as well.

Our desire is absolutely to get deeper into the owner-operator workflow because we feel that converging them and bringing them in closer to the higher process is going to be valuable to us valuable to them and valuable to the rest of our customers in our ecosystem.

Thank you. That is all the time we have for Q&A today. I would like to hand the call back over to Vice President, Investor Relations, Simon Mays-Smith for any closing remarks.

Thank you, Andrew, and good to speak to everyone. We'll look forward to chatting to many of you on the road over the coming weeks. If you have follow-up questions, please ping me or my team, and we'll look forward to chatting on our next quarter's earnings. Thanks very much. Goodbye.

Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.

All right. Let's get started.

Thank you, everyone, for joining us. My name is Keith Weiss. I am filling in for Elizabeth Porter, who just had a beautiful baby girl. But actually really excited to be talking with Autodesk, speaking with Janesh Moorjani, CFO of Autodesk. Before Elizabeth took over, I covered Autodesk for a long time, and it's always been one of my favorite companies.

Mine too.

Excellent. A long, long time ago, I came out of college as an idealistic young man, wanted to be an architect. So I've always been pining to be back in this field. And now you're settling into your role as CFO. You've had some time to take a look at the sort of scope of the business. I'm sure you're excited about it when you kind of came in the door. Now with some time under the belt, maybe you could talk to us about what excites you most about that longer-term potential at Autodesk?

I'm happy to, Keith, and thank you for hosting, by the way, while Elizabeth is out, so we appreciate that. Before we talk about the long-term excitement, what excites me the most in the short term is reading a safe harbor statement. So let me do that first. We may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements. That was so exciting. As you said, I've been here about 14, 15 months now. And when I first joined the company, it was on the thesis that we've got a stable, consistent, resilient growth business. And superimposed on that, we've got some terrific catalysts in cloud and AI and all the investments the company was making on the platform side as well as the opportunity to continue to create shareholder value by driving margin expansion. So it was a terrific trifecta of all of those things.

And I think what excited me over the past 14 or 15 months, I think that conviction has largely played out. And what excites me the most is, again, just those same three things about the future. When I look at the market opportunity ahead of us, we've got some fundamental secular trends that are working in our favor. You look at the adoption of technology within spaces like construction. You think about the digitization of manufacturing, you think about all of the investments that are going into infrastructure and so many of the other spaces in which we operate. So we've got some terrific growth drivers in the industries in which we operate. That's working really well for us. And we've been investing heavily in cloud and AI for many years now. There was a point in time in the past when people used to sometimes think why we're making those investments.

And clearly, those were the right decisions to make based on where we are in the present. And the future potential for those is, I think, incredibly exciting as well. And we've proven the ability to deliver strong margin expansion, and there's more to come on that in our long-term target as well. So all of those things still exciting about the future as well.

That's a great opening to the conversation. I want to start on kind of the near term, and then we'll expand into sort of the longer-term product vision. Last week, you guys reported earnings, and it's really a solid set of results across the board. You beat on billings, revenues, margins, free cash flow, all ahead of expectations. Maybe you could sort of help us dive into that and provide a little bit more color about the overall health of the business in Q4 and as you head into your next fiscal year, how are you feeling about both the environment that you're operating in and the efficacy with which Autodesk is operating in that environment?

Yes. Q4 was a great quarter for us across all fronts. When I look at the business from the standpoint of industries in which we operate or verticals or segments or geographies, we did really well across the board. Data centers did really well. Industrial buildings did really well. If I look at it from a geographic lens, emerging markets where there's tremendous infrastructure build-outs happening, we continue to do well on that front as well. So overall, no matter which dimension you look at, the business continued to do well, and that's on the back of strong expansion business as well as new business growth that we were seeing. And it goes back to the fact that in many of our businesses in which we operate, fundamentally, our customers are actually capacity constrained. And there's not enough people to do all the work that there is to be done. In construction, as one example, there's probably 8 to 10 months of backlog.

And so when you see strength in one area like in data centers, it's coming out of some place else, but there's always a volume of work to get through. And over the course of last year, if I think about the economic backdrop, we had a lot of noise in the external environment, but we never really saw that flow through to customer buying patterns. Customers were concerned, but they still made the investments and they still wrote the checks. So we feel very good about how customers spend through that time frame just because they see the same underlying demand drivers over the long term. And we expect the same will continue in fiscal '27 as well.

Right. So if we dig into that, Autodesk has historically been seen as more macro sensitive than most in software. But it sounds like the customers are starting to understand the value proposition better, right? It's not a cost that comes in with new projects. It's a way of making your business more effective. It's a way of enabling you to get to that backlog. It's a way of augmenting a human capital. So is this making your business less cyclical? Is it enabling you guys to grow more durably despite what is -- it feels like always going to be a very noisy kind of macro backdrop.

Yes. That is my sense. The business has been a very consistent grower. If I look back in time over the past 3, 4 years, we've delivered a very consistent level of growth. That has been across different elements of noise or volatility that you see in the external environment. I think a big part of that is just the diversification of the business as well that we have. We've got strong presence in AEC, but also in manufacturing and a much smaller presence in media and entertainment, heavily diversified across geographies. But even within AEC, the Autodesk of 10, 15 years ago was an Autodesk that focused solely on design -- plan and design. And since then, we've extended into the make, which was construction and even on the manufacturing side with Fusion. We've got declared ambitions to complete that life cycle and go into the operate phase where over time, then our involvement with projects is not going to be measured in months or years, but it's going to be measured in decades because that's the life cycle of these assets.

And that will then inform what happens earlier in the plan and design stage as well. So as we've grown the business across all of these different vectors, that's helped bring a level of stability to the business as well and the ability to withstand some level of external movements. No business is completely immune from the macro, but we feel pretty good about the business we've built.

It's a fascinating expansion of the product strategy and definitely going to dig into this. Basically, Autodesk is becoming almost the operating system for physical assets, whether it be a building or a product over time, and it's hugely expansive to the TAM. But before we go there, I want to talk about margins. You're the CFO, I got to dig into margins. It's my contractual obligation. So FY '27 -- FY '26 was a really good year for margin expansion, 200 basis points of margin expansion. You guys think you could add another 75 basis points in FY '27. Part of that is a restructuring that you talked about a 7% reduction in workforce. Could you talk to us a little bit about the puts and takes of that? Like where is the -- where are the heads coming from? How much of that gets incrementally invested back into the business? How do you think about that balance between pushing more leverage, pushing more margin versus going after that big growth opportunity that we've been talking about?

Yes. I'll put that in the context of some of the broader business model changes that we have been making because that's actually helped us drive the margin over a period of time. And you may not have followed the Autodesk story recently. I know you did some time back. But what we did was we fundamentally changed how we go to market in what we call the new transaction model. And with -- in many of the developed countries around the world, we now have a direct relationship with our end customers. The partner still plays a very important role, but we -- the customer places an order on us directly that allows us to build better integrations with them, better understand how they are using the products. We get great demand signals from them.

We can use that back into funneling new and expansion motions. Now one of the mechanical effects of that model was it changed the accounting, which increases our revenue and increases our expense, which the net result is sort of a mathematical headwind on operating margin in percentage terms. It doesn't affect the dollars, but it affects the percentage. So this year, as we think about all of the changes that we made on the go-to-market side. We started off with the implementation of that new transaction model. We made some changes on the partner side as well. And then in preparation for being able to work more closely with our customers directly, we did one restructuring a year ago.

And in that restructuring, we largely took out nonselling resources, customer success, marketing, sales operations, and we reinvested some of that back in the business to build new capabilities that we knew we would need for this year. And what you saw us do here in January in this latest restructuring, which is the final step of that overall business model transition and go-to-market optimization, as that final piece of the puzzle comes together, we did impact some of the sellers, but we also have new tools and capabilities that allow us to work with those customers a lot more efficiently. So where -- some of the savings from the restructuring are actually going to be reinvested back in the business. Some of it will be in selling capacity because we took some people out we need to hire in other locations for different skill sets, different capabilities.

Some of that investment will also go back into the marketing functions. Some of it will go back into core R&D work that we're doing, particularly around AI and platform. And so if I think -- bring this all back to op margin and think about the various puts and takes, that 75 basis points of expansion at the midpoint, that reflects the savings from the restructuring net of the reinvestments that we're making. It reflects the inherent operating leverage that we've got in the business. And it also absorbs within that roughly about 100 basis points of incremental that mechanical accounting percentage headwind. So we're effectively absorbing about 100 basis points of that in this margin expansion that we've got as well. So there is core operating margin inherent in the model, and we're really happy that we're able to deliver that. And this sets us up very well to achieve our long-term margin objectives.

So within that sort of incremental leverage, I spent 10 minutes without talking about AI, and then that's as long as I could go during this TMT conference...

I brought it up.

You brought it up. I haven't asked the specific question. How far along the journey of kind of utilizing these technologies internally from a development standpoint, the customer service standpoint, improving go-to-market, are you guys -- have you guys gone, right, in terms of being able to run your business more effectively? And then we'll turn to sort of like what you're pushing out to customers.

Yes. We have been big users of various AI tools and technologies internally. When things first started to move, call it, a little over a year or so ago, we had 1,000 flowers bloom. We just encourage people to keep adopting it and using it in creative ways to see how they would actually be able to benefit from it in their day-to-day work. A lot of it was just basic productivity enhancements, but productivity enhancements, not in the form that you could immediately monetize. It made us -- it helped us better prepare for our earnings call, but that doesn't translate into real dollars saved anywhere. So that's just one example. But on the development side, now we've started to do a lot more. We've rolled out cloud code quite widely within the organization.

Developers are a lot more productive. And the way I think about this is over the course of the long term, we're going to invest a certain amount of dollars into hiring additional engineering capacity, hiring headcount. And what this allows us to do is shift some of those headcount dollars to technology dollars. We don't want to use AI to limit the output of the organization and drive cost savings. But the way we're thinking about this is if we can use it to drive greater velocity and greater productivity in the development organization while staying invested in R&D, it will just help us accelerate that much faster, and it will help pull the future into the present that much faster. So we're using it as a way in which we can drive greater productivity. And in the initial stages, that also means a greater level of investment on the part of the company because we want to drive the adoption so people see the benefits and don't let the cost be a reason not to adopt the technology in the early stages.

Got it. Got it. And then shifting gears to the opportunity from AI. You said earlier that Autodesk has been talking about AI for a while, right? I remember probably a decade ago, you guys started first talking about generative design, which was utilizing a lot of these machine learning technologies. But now there's new capabilities that are emerging, new large language models. How does that expand the opportunity? Like when you look at these new capabilities being able to reason over unstructured data or whatnot and apply that to the frame of reference of what Autodesk is doing for your end customers, where do you see the white space? Where do you see the incremental opportunity of what Autodesk is now going to be able to do for their customers that 3 years ago, 5 years ago, we really just weren't?

Yes. It's a great question. You have a great memory, by the way. You remember things that we said a long time ago. So yes, we did start investing in AI almost a decade ago. A lot of that was with our initial research capabilities. We built out teams and expertise over time. The level of AI skill sets in the industry is -- it's a very rare skill set. 3D skill sets are very rare as well in the intersection of both of those, those are really hard skills to find. So we started to invest in those capabilities and build those out. The way we think about the opportunity is a couple of things. One is, as I mentioned, people in our industry are fundamentally capacity constrained, right? They just don't have enough people to take on all the projects that they want to take on.

So as AI helps users become much more productive and reduce risk, it allows them to take on more projects with the same level of staffing that they have. It also means that if they can prevent mistakes that would occur downstream, which cost them millions of dollars, if they can prevent those upstream in the planning and design phase, it derisks their projects and again, makes them that much more productive. So fundamentally, when we think about the core customer problem we are trying to solve, it's about capacity and productivity for our customers. In terms of how we go about doing that, there's essentially 3 layers of monetization that we think about. The first is what we just call task automation. It's simply features in a product that makes your users more productive.

It's a feature that allows you to do something faster and then you -- and take the mundane work away from you, and so you feel like you had a much better experience and got a lot more done. That doesn't make our own COGS meter spin any faster. That's just value we deliver to you through the subscription. So we would monetize that. And that also doesn't reduce the number of seats. So we would just monetize that through a traditional seat-based model where the price that we charge for the subscription is directly linked to the value that we deliver through that subscription. Above that, you have more consumptive types of workloads, which are essentially helping them automate entire workflows or even entire projects, what we call system automation or system-wide automation.

So if you think about task workflow and systems, the workflow and systems automation will be much more consumption-oriented or usage-oriented. And then the way we monetize those will also be through usage-based models because those will also be more resource-intensive on our end. And so we had -- we described this all at Autodesk University, which is our user conference some time back. We've been working with customers along this. And we are very early, relatively speaking, in the adoption journey. A lot of what you see come out will initially be around the task automation side, but workflow automation and system automation is also on the road map, and we are starting to work with many customers who are in the early stages of trying those out. And then the important piece is that over the last 8 years or so, as we built the platform capabilities, we've built the technology stack to support it.

And through the whole go-to-market transition that we did, ultimately, we knew this is the path we're going to head down. And so we've actually been building consumption-oriented capabilities in the go-to-market organization as well. Back in fiscal '25, 17% of our business was in consumption-based models. So we've already built the expertise and the knowledge to take these offerings to our customers.

And then is there a gross margin impact that as investors should keep an eye on? You've talked about a lot of these capabilities as more compute intensive. How should we think about that trade-off, the monetization that you just described versus perhaps higher COGS on the other side to power these solutions?

Yes. There will be a gross margin impact in percentage terms over the long term. These workloads will still be gross profit dollars accretive. So it's still the right thing for us in terms of creating shareholder value, but it does have an impact on gross margin. But that's one of the things that we factor in as we think about the inherent operating leverage in the model. And when we laid out our long-term margin target at our Investor Day some months ago, that was certainly one of the considerations as well. So it's one of the different factors that we manage in the overall mix for sure.

All right. So I want to switch gears a little bit and dive into product strategy, starting with the AEC side of the equation. One of the things that I've always found super interesting in the Autodesk story, there's always a lot of focus on the A side of the equation, the architecture and the design and you guys have had a pretty dominant sort of positioning in that, but there's so much white space in the C side of the equation, right? And now you guys are bringing together that design and make into a cloud-based environment. Construction, in particular, has been under sort of technologized or digitized, right? There's a huge amount of inefficiency and waste that takes place in construction. That's not new, but it feels like it's a more fertile ground for adoption of those technologies. So can you talk -- maybe to start out, talk about why is now the right time for bringing these 2 domains together? Why is right now the right time for getting better traction in terms of digitizing what's going on in construction?

Yes. It's a great question. I mean we started to think about extending beyond the pure design stage of the life cycle all the way back in 2018, as I hear Andrew sort of describe some of the history of why we got into make. And we started to invest in those capabilities because ultimately, to your point, when you look at construction, it's one of the least digitized industries there is. And the construction business is -- it's a really tough business. If you overbid on a project, you don't win the business. If you underbid on it, you may lose your shirt.

And so it's a really tough business with wafers and margins. And so we saw this problem and said, look, if we can help these customers, the GCs, the subs and others think about ways in which they can manage the risk in their projects more effectively and make them more productive, that's a significant market opportunity. But also if we connect that upstream all the way back to the owners, where if you think about the entire life cycle, having the owners, having the architects, the designers, the GC, all on the same collaborative platform working through the life cycle of that project, there's a tremendous opportunity there, too. And we've been chipping away at it for some time.

The diffusion of technology always takes a long time, especially the further away you are from key centers like the Bay Area or New York or what have you. And so we've been chipping away at it for some time, but we feel like these underlying growth drivers that have been in place for some time, we see them continuing into the future as well. So we feel very good about our position in construction and across the entire life cycle.

And it also matches kind of what you're seeing taking place with your end customers of that the design to build within one firm is becoming more and more part of the overall environment. And again, you guys become that system of record, right, for the data, the process, the workflows all along the life cycle of that building, and we'll get into the product side of the equation as well. How do you think about the Autodesk competitive advantage, particularly when we're talking about Construction Cloud, something you entered later. There's some -- vendors have been focused on that part of the solution for a while. How do you look to differentiate? And how has that competitive dynamic been playing out in the marketplace?

So when I step back and think about the core differentiators for us, right, we've got naturally a very strong industry presence and awareness and familiarity and a very high level of trust that we enjoy with our customers. But if I think about it from the standpoint of particularly in an AI world, as you think about the core differentiators of Autodesk as a platform relative to some of the other things that might be out there, we touched on this a little bit in the most recent earnings call, but it comes down to 3 fundamental things in our minds. One is the data. The second is the context and the third is the expertise.

And so just to touch on some of those things, we've been -- as we invested in AI, we've been training our foundation models on the data that we've acquired from customers over many, many years and years of projects, hundreds of thousands of customers and years of experience with that. The customers naturally own their own data. We don't own it, but we do have the rights to train our models on their data, which allows us to build much more powerful capabilities in terms of model outputs than things that might be trained on data that's purely in the public domain or unlimited data sets because all of this data doesn't sit anywhere outside in the public world. And even it's scattered across all of our different customers. So it's just with Autodesk where we have all of this access to this data. That allows us to build much more powerful capabilities and models.

The second is the context behind that. As we think about collaboration across the workflows, as we think about the recommendations that come out of it, the models need to be able to use the context of the overall project before you can actually make a commitment or not. The auditability, what the previous decisions were, what the implications are of decisions around everything else. Maybe to use an example, right, if you sort of look at a simple visualization tool and say, here's a drawing and I want to move this wall 10 feet from here to there, it's easy enough to just do that on a screen. But what do you do about all the things that you can't see? When you move that wall, what does it do in terms of egress requirements? Are you now still satisfying the fire code? What about the mechanical, electrical and plumbing, which you really can't see? Did you just cross over some pipes or wires on that front?

So there's a lot of context and richness and awareness of the project itself, not just in terms of who all the collaborators are, but what all the downstream implications are. And using the data that we've got, we have that richness of context that we can then bring to bear in that example. And the third was the expertise that we talked about earlier. So I think those are the core differentiators for us as we think about the end-to-end workflows for customers as they -- particularly as they adopt more AI-oriented solutions from us.

Got it. So if we think about the Construction Cloud in particular, you guys have pulled together a pretty comprehensive suite. Are there parts of the suite that are getting more traction than others? Are there particular landing points that you've been particularly successful with?

Well, I'd say the landing points are more around wherever the nature of the demand is, right? We see a lot of strength from data centers right now. And the insertion point also might vary with the kinds of projects that you're landing. So in data centers, you have very sophisticated owner operators that want to actually dictate what the technology stack is for the entire ecosystem so they can centrally manage the entire project and also operate the entire project in the future. There may be less sophisticated use cases for other construction projects where the owners may not be as involved and they may leave the technology decisions to GCs.

And in that case, that's fine, too, because we work with the GCs and we'll -- the sale to them is around how it makes their lives easier by coordinating across all their subs, making them more productive and helping reduce their risk. So I think that varies based on who the personas are that you're talking to. But the net result of all of that is they all see the opportunity to drive productivity and reduce risk.

Got it. Got it. Switching gears to Fusion. Fusion remains one of the fastest-growing products in the manufacturing industry. Can you talk to us about what's been the secret sauce enabling the solution to really sustain that high level of growth for really the past almost decade now within Fusion. And you've expanded out the portfolio as well. And as kind of a follow-on question, any particular strategies to improve like attach rates and get higher attach rates around Fusion of some of the extensions?

Yes. It's -- Fusion is really exciting for us as we think about the complexity of manufacturing and the opportunity to drive greater digitization in manufacturing. When most people think about manufacturing, they think about the complex manufacturing at the high end, where there's a lot of large incumbent players, highly complicated processes and so forth. The vast majority of manufacturing happens actually in the mid-market and the lower end of the market, where you're thinking about designing simpler products like a desk or like a flower base or what have you. And then you're thinking about how those will get mass produced. And so we see significant opportunity there. That's been our historical sweet spot.

We've played in the mid-market. And for Fusion, a lot of our initial adoption has been in very small deployments, 1 and 2 seats, 3 to 5 seats. So they are not very complex, but we see a significant opportunity, particularly with moving into more multiuser situations, and that's, call it, 10 to 20 seat accounts for midsized manufacturers. And as we do that, that naturally drives significantly more seat count and growth. But also part of the keys to unlocking that is we also need to continue to invest in greater data management capabilities in the Fusion platform. So those have been road map items that we've been investing in for some time, and we had some releases over the course of fiscal '26.

There's more to come in fiscal '27 and beyond. So as we continue to build the capabilities that are suited for that midsized manufacturer, we will continue to move upstream, and I think that will continue to sustain growth for us quite nicely. The other dimension to that is also the complexity of the products that are being manufactured as you go from simpler products to more -- there's tremendous opportunity in just core design and manufacturer of consumer products. And so that's another focus area for us. It's a different dimension or a different way of looking at the same opportunity set in terms of what products are being manufactured, but you'll see more of that in the future.

Got it. And it seems that there's also an element of that full life cycle that you guys have embedded into the Fusion solution or that the product data sits right with it is almost a database, right, of sort of that product data and the component that you could utilize not just in the design, but also in terms of the maintenance of that product over time.

Yes, absolutely. So when we talk about our ambitions in the operations space, it's not just limited to building operations as in the O of AECO, right? It also is all about manufacturing operations, where there's a very large opportunity set as well. The operations space is highly fragmented. And our approach to operations is going to be very similar to the approach that we took in construction, which is we are going to place a couple of big markers down with acquisitions and then build around them. But those will be focused on both AEC, but also on manufacturing operations because the life cycle of what you're manufacturing and then the closed loop to take it back to the plan and design and make phase, that's an incredibly powerful cycle that -- and that can be the gift that keeps on giving for a long time to come.

Got it. So looking forward a little bit, you guys have introduced Project Bernini, right, a generative AI model for 3D. You guys talk about it as a professional-grade foundational model for design. How should we be thinking about the time frame of taking a foundational new capability like that, starting to put into the product and then eventually starting to monetize it more effectively?

Yes. Bernini was the beginnings of what we did with foundation models, right? And it initially started off in our research labs. There's a gentleman called Mike Haley, who actually has been on the road with Simon and many investors have met him as well. And Mike and his team have been really the brains behind a lot of what we've done on that front. And since Bernini, we've invested and developed more in terms of additional foundation models that we've started to bring to market with some of our customers. And those foundation models are the ones that are trained on the data sets with our customers that I talked about earlier and are delivering much more powerful capabilities and frankly, more cost effective as well because they are tailor-made to our particular domains and use cases, so they're not only better outcomes, but more cost effective as well.

So you're starting to see many of those things. We showcased some of the capabilities around that at Autodesk University back in September. Over the course of the next few months, you'll see many more launches from Autodesk in terms of product capabilities and specific products where they will bring some of those capabilities to life. So it's still very early stages, but we are super excited about where that can go in the future. And as we think about the workloads that end up, as I said, being more compute-intensive for us, those will get monetized over a longer period of time. The earlier adoption of that you see and the earlier manifestations you'll see will be more in task automation-oriented workloads.

So shifting gears again, I want to go back to kind of go-to-market. You brought up the transactional model earlier, which is another step on what has been really a long journey for Autodesk in changing the nature of your relationship with the customers. I would argue part one was moving to a subscription model in the first place. You talked about the accounting impacts, which is important for this crowd, but there's also the benefits, right? Can you talk to us about some of the benefits of having that more direct relationship being able to really have that communication or that to build, but still the communication with the end customer.

Yes. It's -- that was the whole intent. When we said we want to have that direct relationship, it was because we felt that knowing what a customer is using and how they are using it will give us much better signals to be able to then go back to them and represent the full breadth of the portfolio that we have and drive greater expansion in those accounts over time. That was the core thesis. That's why we went through all of the pain of the implementation of that model. That's why many investors went through the pain with us as we got through the numbers and the financial impact of that transition. And when we implemented that as there was some level of operational friction in the latter part of '25, in particular.

And we knew that going in, and that's all subsided over the course of '26. So if I think about the benefits of that, there's a few things that I think about right away. First, that's actually helped us be a lot more efficient in our go-to-market model. And we've already seen that reflected in the form of the restructurings that we did and reduce the cost and improve the margin profile of the company. So that's a real and tangible benefit that we've already started to realize.

And over time, what ends up happening is we can continue to drive greater new business growth. Again, we saw very strong results in fiscal '26. Some of that is naturally the benefits associated with the new transactional model. It's really hard to sort of unpack it and say this was a benefit and this was organic growth because ultimately, it's one engagement model that you have with the customer. And then over time, as we continue to improve on the signals that we're getting from the customer, although we rolled the model out in '25, we really started to see initial signals from the customer in '26, particularly as we lap the first renewals.

So now we're in a much more stable state. And as we get -- continue to get better signals from the customers and can engage with them, we can develop the right campaigns, we can develop the right plays with the expansion teams that we've put in place with the restructuring that we just did of the sales organization. So we feel that that's now the setup for driving even greater growth and expansion through those customers in the future.

Got it. So if we bring this all together, multiple vectors of growth for Autodesk. We're talking about improving the productivity of your end customers. So your existing customers become more productive, you're driving more value from them and you have monetization avenues for that in terms of the consumptive. We're talking about going broader across the life cycle of both sort of the buildings and the products that's enabling you to get into more categories, more fully into C, more fully into O with the operations across, again, both building and the product side of the equation. And now you have a better relationship or a tighter relationship with the customers to better understand their problems. How should we think about this sort of all coming together in terms of what's the durable long-term growth that we should expect to see from Autodesk, not just for FY '27, but for the 3 and 5 years beyond?

Yes. I mean you summarized it perfectly, Keith. Those are the things that I think about. And if I go back -- and if I go back to where I started in terms of what excites me about the future, it's the secular growth trends that we see, all the work that we've done to be ready to capture that opportunity through the products, through the go-to-market changes. It's the investments that we've made in AI. Just as we are implementing this final phase of the go-to-market optimization, we just need to be a little bit careful because there's sort of near-term disruption in the sales organization associated with the implementation of the [indiscernible] and the expansion teams and so forth. That's part of what we baked into our guidance as we said we'll be a little bit cautious in the near term associated just with that one factor. But other than that, I feel really good about the long-term growth of the business.

Yes. Unfortunately, that takes us to the end of our time. But Janesh, thank you so much for joining us. This is a great conversation.

Thank you so much.

Thank you for standing by, and welcome to Autodesk Fourth Quarter and Full Year Fiscal 2026 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Simon Mays-Smith, Vice President, Investor Relations. Please go ahead.

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss Autodesk's fiscal '26, 4th quarter and full year results. Andrew Anagnost, our CEO; and Janesh Moorjani, our CFO, are on the line with me.

During this call, we will make forward-looking statements, including outlook and related assumptions on products, artificial intelligence, sales and marketing optimization, go-to-market strategies and trends. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K filed with today's press release. for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is relayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. We will quote several numeric or growth changes during the call as we discuss our financial performance. Unless otherwise noted, each such reference represents a year-on-year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release and supplemental materials available on our Investor Relations website.

And now I will turn the call over to Andrew.

Thank you, Simon, and welcome, everyone, to the call. We delivered strong fiscal '26 results today with billings, revenue, non-GAAP operating margin, non-GAAP earnings per share and free cash flow all above the high end of our guidance ranges. .

As demonstrated at Autodesk University and our Investor Day and reflected in our results today, we remain well positioned to deliver for Autodesk customers and investors. We have successfully executed one of the most far-reaching transformations in enterprise software, redefining our business model, evolving our go-to-market, reimagining our products and scaling our platform. In January, we completed the final phase of our go-to-market optimization. While initiatives like this are difficult and complex, they are making Autodesk more resilient and unlocking new avenues for growth and margin expansion.

We're also enhancing our portfolio with cloud-based platforms and capabilities that seamlessly connect design, make and operate workflows. These platforms enable partners and customers to extend and customize our solutions, driving greater value creation and expanding our addressable market opportunity. And we're defining the AI revolution for our industries to empower customers with new tasks, workflow and system automations, and capturing shared value to subscription, consumption and outcome-based business models that blend human and machine capabilities.

In the coming months, Autodesk will roll out powerful AI capabilities built on a combination of frontier models and our proprietary models that understand 3D design and make. Autodesk is building the future and the path to it for our customers. We have been preparing for and working towards the cloud and AI for more than a decade. It's why I believe our best days and greatest opportunities lie ahead.

I will now turn the call over to Janesh to discuss our quarterly financial performance and guidance. I'll then come back to update you on our strategic growth initiatives and why Autodesk is best placed to benefit from 3D agentic AI.

Thanks, Andrew. Q4 was another robust quarter for Autodesk, capping off a strong fiscal year. Autodesk continues to demonstrate growth and resilience, investing to advance our leadership in cloud platform and AI while also expanding operating margins.

Overall, the underlying momentum of the business in the fourth quarter was similar to prior quarters and better than the assumptions we built into our guidance ranges. We again saw strength in AECO, particularly in construction and emerging markets with sustained investment in data centers, infrastructure and industrial buildings more than offsetting softness in commercial.

EBA and product subscription billings, linearity of billings during the quarter and upfront revenue were also strong. Total revenue in the fourth quarter grew 19% as reported and in constant currency. The contribution from the new transaction model to revenue was approximately $137 million in the quarter. Total revenue grew 14% in constant currency and excluding the impact of the new transaction model. Please see the tables in our press release, earnings deck and XL financials for details by product and region.

Billings increased 33% as reported and 30% in constant currency. The contribution from the new transaction model to billings was approximately $185 million in the quarter. Billings grew 32% in constant currency and excluding the impact of the new transaction model. As a reminder, our billings growth rate in fiscal '26 was skewed by the new transaction model and by the transition to annual billings for most multiyear contracts.

Turning to margins. Fourth quarter GAAP and non-GAAP operating margins were 22% and 38%, respectively. GAAP operating margin was broadly flat year-over-year, primarily reflecting a restructuring charge of $100 million related to our go-to-market optimization. The action we announced in January marks the culmination of our sales and marketing optimization program and reflects our sustained commitment to both investing in our strategic priorities and achieving the long-term margin goal we talked about at our Investor Day.

Non-GAAP operating margin was up 120 basis points year-over-year, benefiting from operating leverage from our revenue outperformance as well as ongoing cost discipline, partly offset by the margin drag from the new transaction model.

Fourth quarter free cash flow of $972 million benefited from overall billing strength as well as the linearity of billings in the quarter.

Moving on to capital allocation. We repurchased approximately 1.1 million shares for $333 million in the fourth quarter. For the year, our share repurchases increased to $1.4 billion a bit more than 50% of our free cash flow and reduced our shares outstanding by 2.1 million shares. Recent share price weakness triggered greater share repurchases under our programmatic share repurchase grid. This increased share repurchase activity above guidance lowered our average purchase price and further reduced share count.

Let me finish with guidance. Our guidance philosophy is unchanged. Our guidance continues to be based on the range of possible outcomes in our bottom-up sales forecast, which is grounded in the momentum of our business. We've assumed the macroeconomic environment will remain broadly stable through the year. You will recall our guidance at the start of fiscal '26 was shaped by a prudent assessment of a few key factors.

First, as we enter fiscal '26, we anticipate potential disruption from our restructuring and marketing, customer success and sales operations. We see the potential for disruption again in fiscal '27 and we believe that both the probability and the potential impact of disruption are higher given the focus of the restructuring this year is on customer-facing sales functions. We have embedded this risk discretely into our guidance for fiscal '27.

Second, last year, we anticipated potential disruption from our appointment of a new Chief Revenue Officer. This did not materialize as Andy Elder settled into his role rapidly. And finally, last year, I was new to Autodesk. Over the past year, I've gained a deep understanding of the business and its resilience, which has strengthened my confidence in Autodesk's ability to grow our scale, invest in its strategic priorities and drive expanded profitability.

So the way to frame our fiscal '27 guidance is that we expect the underlying momentum of the business will remain strong. Like last year, our constant currency guidance incorporates prudence to reflect temporary risk to billings and revenue as we operationalize our sales optimization plan. Unlike last year, it does not reflect additional prudence for a new CFO and CRO. And of course, we cannot assume that we will get any tailwind from currency movements this year in the same way as we did last year.

Let me point out a few items in our guidance measures. As you can see from our guidance, billings growth in fiscal '27 no longer has a tailwind from the new transaction model or from the transition to annual billings for most multiyear contracts. We expect billings to be slightly more weighted towards the second half of the year, in part reflecting our assumption that there will be short-term disruption earlier in the year from our sales restructuring and in part due to the weighting of our largest EBA cohort in the fourth quarter.

On revenue, the noise from the new transaction model will significantly diminish during the year from a tailwind of roughly 3.5 percentage points in the first quarter to roughly 1.5 percentage points for the full year. We will talk about it less as that noise fades.

And again, our assumption that there will be some impact on billings from our sales restructuring earlier in the year is reflected in the implied revenue growth later in the year.

Non-GAAP margins will reflect ongoing operating leverage, savings from restructuring, sustained investments in our long-term strategic priorities, roughly 1 point of incremental headwind from the new transaction model and prudence to reflect risk as we operationalize our sales optimization plan. Free cash flow will reflect 2 discrete movements in fiscal '27. First, we expect cash restructuring outflows of between $135 million and $160 million during the year. And second, we do not expect to pay meaningful U.S. federal cash tax in fiscal '27 due to the R&D investment provisions in the One Big Beautiful Bill Act. The net effect of these discrete cash movements is immaterial to free cash flow in fiscal '27. Our U.S. federal cash tax payments will begin to normalize in fiscal '28.

Additionally, we continue to manage our stock-based compensation with discipline. We expect SBC to fall below 10% of revenue in fiscal '27 continuing the trend of the last few years. Reflecting all this, for fiscal '27, our billings guidance ranges $8.48 billion to $8.58 billion. Our revenue guidance ranges $8.1 billion to $8.17 billion. Our GAAP operating margin guidance range is 26% to 28%. Our non-GAAP operating margin guidance range is 38.5% to 39%. Our free cash flow guidance range is $2.7 billion to $2.8 billion.

Our capital allocation framework is unchanged. We will continue to deploy cash to the highest return opportunities, prioritize organic investment in R&D and accelerate the realization of our strategy with targeted and tuck-in acquisitions. And we will maintain a healthy buyback program with the goal of reducing share count over time.

Over the last few years, we've applied approximately 50% of our free cash flow towards share buybacks, and we expect to do the same in fiscal '27. We expect our share buyback in fiscal '27 to be similar to fiscal '26 in total dollars with the precise amount determined by our purchasing grids. Subject to acquisitions, we expect to apply approximately 50% of our free cash flow towards share buybacks over a multiyear period.

In summary, we remain disciplined and focused on the controllable factors that drive our revenue, operating margin, earnings per share and capital allocation, which are the key building blocks of free cash flow per share. The slide deck on our website has modeling assumptions for the first quarter and full year fiscal '27. As I mentioned at Investor Day, we are updating and streamlining certain disclosures to simplify Autodesk's reporting. There's more detail on those changes in the deck, too.

Andrew, back to you.

Thank you, Janesh. Autodesk is focused on the convergence of design and make in the cloud, enabled by platform, industry clouds and AI.

Let me give you some examples of our progress in the quarter. Our customers and AECO architecture, engineering, construction and operations are demanding convergence. Convergence reduces risk increases quality and optimizes cost and resource use during the design and build phase of an asset, and it enhances efficiency, resilience and reuse during operations. All of this is in service of deploying fewer resources to every project so they can bid on and win more projects with the resources they have.

To better serve these needs, we intended to deploy capital to extend our footprint deeper into operations, applying the same playbook that proved successful in construction. Former [indiscernible] construction previously known as Autodesk Construction Cloud is a fast-growing component of our make solutions and has strong momentum with owners, designers, GCs and subcontractors seeking to converge design and construction workflows.

For example, following a competitive RFP process, Prestige Group, a top 3 real estate developer and asset owner in India selected Autodesk as its core design delivery platform for its engineering, digital transformation. We won back a major U.S. utility displacing a competitive solution with Forma for construction, further demonstrating the value customers see in our modern, scalable platform, common data environment and tighter integration across design and construction workflows.

A major hyperscaler is expanding its partnership with Autodesk to accelerate time to operation, cost management and digital twin workflows across data centers and facilities while improving collaboration and coordination across an ecosystem of more than 2,000 companies, including GCs and subcontractors.

As part of its enterprise digital strategy, a global pharmaceutical company chose Autodesk to be a strategic technology partner for the design, build and operation of facilities to connect data, systems and workflows throughout the entire project and asset life cycle.

ERP, a global engineering consultancy is expanding and standardizing on pharma for data-centric workflows, real-time collaboration across disciplines and geographies, and and AI-driven insights to drive innovation and better outcomes for clients in the built environment. 3 in our top 400 contractors adopted former for construction this quarter, including Roblin, which is replacing a competitive solution to leverage the power of a connected construction platform across preconstruction, construction and virtual design and construction.

These stories have a common theme converging people, processes and data across the project life cycle to increase efficiency and resilience, decrease risk and prepare for an an agentic AI world. Our comprehensive end-to-end industry clouds and platform drive convergence and extend our footprint further into the larger growth segments like infrastructure and construction that we discussed at Investor Day. All this is reflected in our strong momentum in both infrastructure and construction.

In manufacturing, customers are demanding convergence as they invest in their digital transformation to leverage granular and unified data and embrace AI-driven automation capable of industry transformation. By consolidating our design and make platform, customers have the flexibility and connectivity across workflows to increase agility, innovation and resilience.

For example, after successfully adopting fusion for in-house design and manufacturing of spare parts on production lines, a global brewing company is expanding the deployment to additional breweries to deliver cost savings and improve equipment uptime, a special purpose of shipbuilding and marine engineering firm with more than 2,000 employees, is adopting Fusion Manage as a mission-critical system for every new vessel project, aligning project management and multi-supplier collaboration in 1 place.

Typhoon, a Belgian industrial manufacturer selected our manufacturing solutions to replace legacy unintegrated tools, which were causing lost engineering hours to nonvalue-added tasks and inefficient collaboration. Seeking a unified future-ready platform, a multinational automotive manufacturer is replacing a competitive solution with Autodesk design solutions to standardize workflows and improve integration and collaboration across creative and technical teams.

A diversified industrial manufacturer is transitioning more than 900 users onto Autodesk's design and manufacturing solutions from a complex network of legacy systems. While Autodesk platform services will be leveraged by sales teams to rapidly modify and visualize product configurations in customer conversations, a global manufacturer of advanced lithium-ion batteries is leveraging Autodesk's manufacturing solutions for asset standardization, digital factory simulation and simulation-driven quality improvements to drive growth and efficiency.

Converge data opens up new opportunities for Autodesk. As customers seek efficient innovation, attach rates of Fusion's extensions are growing strongly, and we've delivered meaningful productivity gains to customers where we deploy AI. We have continued to see success with our AI-powered sketch auto constrained infusion.

Since its launch last year, the AI model has delivered over 3.8 million constraints, up from 2.6 million last quarter. Along the way, the model has been retrained and the UX improved. As a result, the acceptance rates by auto constraint suggestions to commercial users have now grown to almost 2/3 with 90% of those sketches fully constrained.

In education, we expanded our relationship with Valor Institute of Technology, VIP and India, where students are applying industrial-grade Autodesk tools to real-world design challenges. For example, engineering students are using fusion to design, simulate and optimize the formula race car. While architecture students are leveraging Revit and forma to design, simulate and visualize complex architectural projects which embeds sustainability and constructability.

And lastly, we continue to find new ways for our customers to consume our products and services in ways that work best for them. For example, Shoba, a real estate developer that designs, engineers, constructs and finishes units in-house uses our Flex offering to scale usage dynamically across projects and regions while maintaining full visibility and control over consumption and cost and aligning investments directly to business outcomes.

Let me finish by talking about AI. Building agentic AI requires data, context and expertise. Scaling and monetizing it requires a platform and next-generation business models and go-to-market. Let me unpack that a bit by talking about what's needed to build agentic AI capabilities. First, data. AI agents need large quantities of physical world data to learn how to drive design, make and operate decisions. This data needs to be high fidelity, contextual, geometry rich, span 2 and 3 dimensions and represent physics and engineering-based principles for the entire design, make operate life cycle.

Few companies have access to large amounts of real-world data to train agentic genic AI for our industries. Autodesk does. Second, context. Autodesk operates at the intersection of digital and physical worlds. This is one of the most complex real-world context in technology. When making inferences a genetic AI has to operate inside a live project where the correct answer depends on the design intent, current model state, regulations and standards, constraints, dependencies, permissions and approvals. Autodesk provides agents with this context, decisions must be compliant, coordinated, traceable and reversible.

Autodesk is a system of record where authoritive project and product context lives and where changes are executed, check and recorded. This makes Autodesk the natural control point for genic workflows.

Autodesk AI can propose and enable humans to verify and safely commit. Few companies understand this complex industry context across every discipline in the process. Autodesk does. And third, expertise specialized data and context are prerequisites, but so is specialized AI expertise.

For almost a decade, Autodesk has been building a world-class AI team for 3 design, make and operate. and cultivating a broad external ecosystem to support it. Over that time, we have built a strong reputation for having access to the right data, undertaking cutting-edge research and solving the most complex problems in 3D AI.

With those strong foundations reinforced by Autodesk's unique purpose and culture, we have been able to attract and retain top talent and develop our own 2D and 3D multimodal models that understand how the world is designed and made.

Few companies have been building their 3D AI capabilities, talent pool and ecosystem for almost a decade, even fewer have sufficient breadth and depth of 3D AI capabilities and expertise to build on. Autodesk has and does. Data in context fuel the Knowledge Graph, which is foundational to any artificial intelligence data are a context complexity makes the Knowledge Graph hard to replicate for our industries.

Even with data in context, you need sufficient specialized expertise to generate unique and valuable intellectual property. And then you need an ecosystem of partners built around that intellectual property, as you saw recently with our investment in World Labs. Few companies have all this. Autodesk does.

Let's move on to scaling and monetizing agentic AI. In preparation for the cloud and AI, Autodesk modernized its platform and go-to-market over the last few years. well ahead of industry peers. 2 industry peers are ready for the business models and go-to-market motions that will monetize their AI-driven future, Autodesk is. We built a platform that provides the identity, permissions, geometry kernels, data models and compute infrastructure needed to deploy AI safely and at scale into design, engineering, manufacturing and construction environments. Platforms enable safety, innovation and efficiency at scale.

Autodesk has built Autodesk Platform Services, APS, as an open platform that is purpose-built for an agentic AI world. It means we can ingest and process data more efficiently, accelerate our agent AI innovation and deploy agentic AI solutions at scale. Few companies have built infrastructure specifically for our industries. Autodesk has.

To summarize, building a genic AI for design and make requires data, context and talent. Scaling and monetizing it requires a platform and next-generation business models in go-to-market. Few companies have all these advantages. Autodesk does. It is not a coincidence. We have been preparing for and working towards the cloud and AI for more than a decade.

While some new entrants have some of the required capabilities, they lack the data and contact needed to deliver value. At Autodesk University in last year's Investor Day, we demonstrated how we're defining the AI revolution for our industries, empowering customers with new tasks, workflow and system automations and capturing shared value through subscription, consumption and outcome-based business models that blend human and machine capabilities. The pace of our innovation continues, and we have much more to share with you in the coming months.

I've never been more confident in the long-term value we are creating for our customers, for the industries that shape the world and for you, our shareholders.

Operator, we would now like to open the call up for questions.

[Operator Instructions] Our first question comes from the line of Saket Kalia of Barclays.

Absolutely. Andrew, maybe just to start with you. I want to zoom into your AI comments a little bit because I thought they were super interesting. When you think back to Investor Day last year, I think you talked about Autodesk's path to monetization -- and today, you're talking about sort of the AI competitive moats.

Could we maybe talk about where Autodesk fits into the broader AI ecosystem? And maybe specifically, -- how do you sort of see your relationship with the LMM's evolving over time? And how do those competitive moats maybe help balance that relationship? Sorry, there's a lot there, but does that make sense?

Yes. That makes sense. Thank you for that question, Saket. It's a great question. Look, at a high level, it's not our goal to compete with the core capabilities of what the Frontier models are good at. What our goal is, is to ensure that the combination of what the frontier models do, what an LLM does and what our proprietary foundation models do is always better than what a frontier model can do alone. .

And the reason we have so much conviction about that is really kind of the things I highlighted in the opening commentary, but I'll kind of go through it again a little bit here, right? It's the data, the context and the expertise we are sitting on volumes, large volumes of data about real-world problems, real-world situations, real-world constraints that is simply very scarce and very hard to get access to.

When you combine that with the deep context knowledge we have around design and engineering, into preconstruction planning and construction into manufacturing and all the things that go into making something -- you get this strong combination between data and context. It's very difficult to replicate. And that's going to allow us to always kind of stay in front of what is going on in the horizontal and the base foundation models. And that's really our goal.

Most companies in our industry are really going to struggle to do that because they don't have the volume of real-world data, they don't have the deep design and make context. We do, and we continue to use that and we'll continue to use that to stay ahead.

Got it. Makes a ton of sense. Janesh, maybe for my follow-up for you. It was helpful sort of how you compare the guidance from -- for this year compared to last year at this time. Could we maybe talk a little bit about the absolute levels of prudence that you've incorporated into the FY '27 guide maybe compared to last year? And how you sort of thought about that prudence over the year? .

Saket, I'm happy to talk about that. And maybe I'll just start by saying that the underlying momentum of the business remains really strong, and we see the demand drivers from fiscal '26 continuing this year here in fiscal '27.

In terms of the guidance, as I mentioned in the opening remarks, like last year, we've reflected prudence in the guidance to reflect the temporary risk that we see to billings and revenue related to the sales optimization plan. But unlike last year, we have not reflected additional prudence for our new CRO or CFO.

On the modeling and how that plays out over the year, we've assumed that there will be a short-term disruption in the early part of the year to billings growth from the sales restructure and then that assumption flows through rapidly to the underlying revenue growth later in the year.

If I think about where those potential impacts might be, it will likely be out on new product subscriptions because on renewal billings, which is, as you know, the largest part of the business and then also on self-serve and EBAs, we expect those to be relatively unaffected. But absent that temporary disruption on new product subscriptions, we expect the underlying customer demand to remain strong throughout the year.

Our next question comes from the line of Jay Vleeschhouwer of Griffin Securities.

Andrew, for you first. There are obviously many ingredients to your product-led growth, and you spoke about that, and it's certainly baked into your billings guidance. But I'd like to ask about -- 2 parts of that, 1 quite old, 1 very new. The older part is how you're thinking about the relative positioning of and development of pharma versus Revit?

And the newer part is how you're thinking about what seems to be multiple opportunities to connect the world Lab technology into various parts of Autodesk, your data models, tandem pharma, et cetera, how you're thinking about that.

And then secondly, as a follow-up, it's sad but true that you're going to be discontinuing the disclosure of direct and indirect percentages. So maybe take the opportunity to talk about your thinking of the role of the channel, the opportunities and priorities that you're setting for the channel from here and then perhaps also for the Autodesk store.

That sounded like 3 question, but I'll treat it as 2. All right. First off, let's talk about the relative trajectory of former versus Revit. As you know, our industries evolve over time. Even with rapid technological changes, projects go on for months to years. There's a lot of complexity, older projects over their lifetime often go back on previous releases and all the things associated with that.

So there's a rate and pace of technology absorption that's kind of unique to our industry. So when we look at the trajectory of Forma and Revit, there's a couple of things that are really important. One, forma and the whole stack around farmer from design to make is going to be very much focused on the cloud and AI-enabled tools. Everyone is going to have access to the workflow tools, the agentic layer, that's the Autodesk's assistant, but some of these deep kind of model -- foundation model-driven workflows are going to be built into pharma and already are.

Revit is going to benefit from all the workflow enhancements associated with, like I said, the agentic layer of the Autodesk assistant, but it's also going to be tightly coupled to the workflow with Forma. And that's always part and parcel of how we think about things. We want to bridge the 2 worlds for our customers, so that as they go through their technical transition over many years likely, they have a clean path between these products and these products work together in a clean and powerful way throughout that whole transition.

And it's very important to us, but look for a lot of the model-based genic features to show up in forma the assistant based workflow genic layer will absolutely work for cross forma and Revit.

Now when you talk about World Labs, look, we're very excited about that investment. And we're excited to work with a deep technology company that's focused on something that we feel is really important. World models are important for physical AI because of their ability to spatially reason, reason about physics and also respond to real-world changes because of their awareness of what's going on in 3D.

We see this as a fun foundational kind of horizontal technology that will power lots of solutions. It's starting in worlds that are associated with games and media entertainment, but there's so much more there, Jay. It will go deeper into initial architecture design, it will end up going into areas associated with digital twins, with factory automation, robotics, all of these things associated with that.

So we're partnering them to bring that technology first into the media and entertainment space and kind of create workflows between Marble and our tools. But over time, look for us to engage more deeply with World Labs and connect their technology with our technology in all sorts of interesting ways, just like we do with the large language models today.

And the last one, okay, that's right. 3-part question. The direct, indirect piece, okay? So yes, you're right. We're not going to disclose that split because most everything is coming in direct to Autodesk now. It's an agency model. We're capturing things directly, and I think it's important to recognize that.

So in terms of the channel incentives and the things that we're doing to change things that we're doing the exact same thing with the channel that we're doing with us. We're focusing the channel on new business creation, going after new accounts, going after expansion in existing accounts. Our channel is compensated that way now. Renewals are compensated lower. New business is compensated higher. Our sales force is compensated that way.

So we have tight alignment on new business growth, both from new accounts and expansion between our sales force and our channel. And as a result, that will drive more of these numbers to higher as time goes on.

Our next question come from the line of Adam Borg from Stifel.

Awesome. Andrew, obviously, you hit on AI in the prepared remarks and kind of the moats that you all of that to have. And of course, AI has been on all of our software mines of the late. But I'd like to just take a step back and when you speak to customers, where exactly are they in their AI journey? And what exactly is that they want audits to help them ways on this front?

Yes. Look, the customers are -- especially in the GC and engineering community, they're exploring AI pretty aggressively right now, trying to understand what it can do and how it can help them. Absolutely, they want to see the complexity and time of creating a model to be reduced over time.

But really, one of the things we're working on very closely with them is wrangling data. and bringing data together in intelligent ways so that they can actually get insights and action things in an agentic way on top of complex data flows. And that's one of the areas where we engaged with a lot of customers. That's why you see engagement on platform services and people extending their environments and building, frankly, on top of our building very complex life cycle workflows on top of our APIs in our environment. So that's an area of strong engagement right now. .

That's great. And then maybe as a quick follow-up for Janesh. Back at the Analyst Day, we talked about consumption mix of total revenue, I think, in fiscal '25, that was 17% any update you have for fiscal '26 and how we should think about this consumption-based mix over the course of the year?

Yes, Adam, I'd say it was about similar. And just as a reminder, when we talked about this at Analyst Day, we said that EBAs were roughly 15% and the pure usage based, which is largely flex that was roughly 2%. So in the aggregate, it was about 17%, and that was for fiscal '25 and fiscal '26, I think, was roughly similar. That's what we saw here in the year.

Our next question comes from the line of Joshua Tilton of Wolfe Research.

Huge congrats on a very strong end to the year. I have 2 questions. I'll ask them at once. My first question is obviously, you can't help but notice that the revenue growth guidance for this year is starting at a higher point than you started the guidance for last year. Could you maybe walk us through some of the puts and takes for revenue growth maybe actually finishing the year above what you grew revenue last year?

And then maybe my follow-up to that is in regards to Saket's question, when we weigh all the puts and takes that you discussed around the conservatism in the guidance, we put an equal sign after that. Does that equal guidance that is more conservative this year than last year, less conservative, similar conservatism? Just what's the answer to the question of what do all the puts and takes mean for conservatism this year versus last year?

Josh, this is Janesh. I'll give you a single answer to both of those questions, which is, overall, when I step back and think about fiscal '20 -- we were very pleased with how the business performed. And you saw that across the quarters. That strength reflected the broad momentum that we've got and strong execution across the entire portfolio. The current year guide primarily reflects the prudence of the near-term go-to-market optimization.

And that impacts billings in the early part of the year with the flow-through to revenue over time. Ultimately, remember that the new transaction model and the go-to-market optimization are really both designed to improve our long-term new business capture. That's been the core thesis that we've shared before. We remain confident in it for the long term, but we are staying disciplined about what we assume in the near term.

Our next question comes from the line of Jason Celino of KeyBanc Capital Markets.

I have 2 questions. Maybe the first one for Andrew. It's an AI question, sorry, but it's not about competition or moat. But maybe a scenario in which AI actually works in architects and civil engineers become efficient and so efficient that these customers don't need to grow headcount, how much has the industry grown head count historically? And if that's able to be applied to Autodesk growth? And then what happens in a scenario where the AI efficiency is what we kind of think it might be how might that affect your future growth opportunities, if that makes sense?

Yes. No, that absolutely makes sense, Jason. So first off, I just want to make sure that you understand in our industry, we have a fundamental capacity problem. There is not enough capacity in the ecosystems that we serve to build everything that needs to be built and rebuild everything needs to be rebuilt.

When capacity is sucked up in one area, it takes away from other areas. So remember, there's this underlying capacity probably out, not enough money, people, materials to build and rebuild everything.

When you look at the way we're moving forward, we absolutely want fewer people per project because we want our customers executing more projects. There's plenty of demand for projects out there. So at a kind of a task-based automation level, right, the kinds of things that you're seeing us do right now around speeding up modeling activity and things like that, that's kind of improving the core value of the [ seats ] software.

And we don't expect seats to go away anytime soon. There will be a solid core of seats, but the task-based automation is going to add to the value of that seat. That seat is going to get more valuable as we enable one person to execute on more aspects of a project. So again, it's fewer people for projects, more projects executed at the task-based level and at a seat-based level.

The important thing to recognize -- wait, there's something else here, okay? I wanted to talk about the workflow automation a little bit, Jason, because as we move into workflow automation, basically with the agenda layer of the audit assistant, we're actually monetizing the project now, not just the task that individuals are doing, but they hold disciplines across the project.

As you know, we already deliver project-based pricing around construction. We deliver site-based pricing and consumption-based pricing. -- we're going to monetize more of that project activity through consumption as we reduce the number of people are working for project will monetize other aspects of the cross disimplanation to the project. And that's important to recognize because that expands our TAM.

And the last piece, and if you have a follow-up, that's fine, is around the systems automation. When you get to the level of systems automation, you certainly help with the individual and the project, but you also get into the wallet of the person paying for the project, the owner.

And that puts you in a position where you've actually expanded your TAM deeper into the actual kind of total spend on the project, the total spend on the product, what the end user or the owner or the operator wants to get out of that product. So multiple avenues for us to monetize agentic AI across that entire process from task workflow to system.

Interesting. Yes, maybe we can explore it in another instance, but yes, it seems quite incremental. And then my one follow-up for Janesh is quick. It sounds like Q4 benefited from some better linearity. Maybe is it possible. I understand like what happened where it were some deals from Q1 closed earlier in Q4. It's just when I look at the implied Q1 guide ex currency, ex model transition benefit looks like it's deselling by 4 or 5 points. So curious if there was any details on that. .

Yes. Jason, I'm happy to provide some color there. Q4 was a very strong quarter, as you noted, and we're very pleased with that momentum.

In terms of the exit rate of 14%, there's 2 factors that I'd call out. First half, for fiscal '27, recall that we've got this near-term impact to billings that has some impact on revenue, not only for the full year, but it has some impact on revenue growth in Q1 itself. So that's something to consider. A

nd also, Q4 benefited from lapping an easier fourth quarter from the year ago period. So that's also something you need to adjust for when you look at that 14%. But overall, when I look at our momentum, and I look at the underlying strength of the business and the improvements we've made in the go-to-market model, we feel very good about where the business is today.

Our next question comes from the line of Bhavin Shah of Deutsche Bank.

I have 2 as well. I guess, first, either Andrew or Janesh. I think you guys have been pretty clear about the continued need to optimize the sales organization and changing up the incentives with the partners. And I know you talked this an account with your guide. But maybe can you talk operationally, what are you guys doing to help mitigate any impact that might have any disruption there? How do you make sure that renewal activity is healthy as you kind of incentivize new business? .

Yes, I'm happy to take that. We -- when we made the changes to the partner compensation plans for fiscal '27, that was for the partners that are operating in the new transaction model. And just as a reminder, this has all been part of our broader plan around incentivizing partners to focus on more new business, and it's really been a core element of our overall new transactional model thesis.

And so the change that we made was to increase the incentives on new business and reduce the incentives on renewals starting fiscal '27 with the goal of keeping the total dollars unchanged. And as part of that, we did -- we were aware that there might be opportunity for people to think about the timing of transactions, and we did put operational guardrails in place with the partners to try and avoid that kind of activity.

And so we actually saw those work quite effectively. There are some early renewals that happen every year. But here in Q4, those were not remarkably different than what we typically see. They were not a significant contributor to the outperformance in the quarter. And also, as you know, early renewals don't even impact revenue. So we really didn't see any impact from pull forward early renewals associated with that activity.

Got it. And maybe, Andrew, look, as you have a conversation with customers this quarter, particularly your larger EBA customers that are looking to expense Autodesk for multiple years, what are the types of things that your customers are asking you to help solve that might be different than what they were maybe a year or 2 years ago? And how is that helping inform your product road map into the future?

Yes. So look, as we've moved more across design and make and deeper into each aspect of those, customers are really kind of asking us for classically calling convergence. They want us to kind of stitch the glue together between those things. They want fast feedback between a design decision and a make decision between make decision and a design decision and they want some kind of agentic layer that helps them sort through the noise and helps them get to what's right, what's wrong and how do we quickly focus on the thing that needs to be changed so that they reduce downstream risk later.

That's the kind of things we're digging into. That's why people are investing more and more in what we're doing because of the way we've connected design and make together across the whole life cycle.

Our next question comes from the line of Joe Vruwink of Baird.

Great. I ask a long-winded question, so I might have ask 2 separately, but I wanted to start with Autodesk platform services. It's certainly being put to good use now. within how a lot of customers are thinking about AI projects. And I specifically wanted to ask about the new monetization strategy you've launched around customers opting into their intended API use when you think about just how those bundles are being priced, are they priced initially to drive adoption, so we might not see like a discrete uplift factor you're calling out in FY '27. But if you do your job that might very well contribute to growth in, let's say, FY '28?

So API monetization is very much specifically targeting machine usage of our IP. So someone that's doing a lot of 24/7 compute and access of some of our more complex APIs. We actually have customers that do that. Remember, when they call an API, they're not just pulling a piece of data, they're actually calling some functionality that sits on our cloud.

And some of our customers have been doing fairly sophisticated things running these tools over and over again through large periods of time. So we're targeting monetizing that machine usage. And frankly, in Q4, we already had some customers lean in and pay up on the consumption model around API usage that was driving a lot of value inside their accounts. So positive early signs on that.

But remember, there's not a lot of customers doing that yet. We're just getting ready for that future where people are driving a lot of machine usage. We don't want to get in the way of the people running regular usage, adopting, integrating and using our APIs in ways that are not a genetic or machine driven. So that's where we're at right now, and we're already seeing customers kind of engaging with us on some of these areas of deep machine execution.

Okay. And that kind of gets to my second question but a lot of your larger customers, they already have in-house development teams with AuditoCenters of excellence. I'm just thinking about the AI risk narrative that customers can go and build whatever they want. Well, you kind of allowed them to build a lot of what they want, but it's all complementary to Autodesk. Does that change anytime soon? Or are you actually seeing this whole strategy drive usage into your kind of mainstay products. And so it ends up kind of lifting all boats, if you will. .

Yes, it's absolutely the latter. What we're seeing is the customers are leaning into using these APIs to actually build solutions that they might have used behind the firewall solutions for in the past. And that's true in both the AEC base and the manufacturing base kind of old behind the firewall, kind of rigid, inflexible implementation, they're kind of dying I like to call them my next dead thing working.

I used to talk about files being dead thing working now behind the firewall implementations and complex rigid systems with Dead things working. And I think our customers are exploring our APIs and our IP in really elastic ways to try to build solutions on top of what we've built so that they can kind of do things that they used to bring in large vendors to do with complex back-office implementations on our stack, which is lifting the rest of our stack up with it.

Our next question comes from the line of Ken Wong of Oppenheimer & Company.

Andrew, can you talk about the go-to-market optimization that you're putting in place in '27, the commission changes, the direct sales restructuring, like how much of these actions were originally in the blueprint? How much of it is because observations from '26, whether it was execution or the really strong results help inform these particular changes?

Yes, Ken, for the most part, these were part of the original blueprint, right? We knew that we had a series of goals we wanted to accomplish in terms of driving go-to-market efficiency. We knew that we were highly focused on renewal optimization, renewal automation, reducing overlap of resources on renewal activities so that we could more efficiently bring in the renewal dollars, and we knew we wanted to shift money to new business development and new business acquisition. So these were really basically baked into our thinking from the get-go in terms of how we were phasing out our go-to-market optimization.

Got it. Understood. And then, Janesh, just a follow up on that. In terms of the 7% reduction in force, how should we think about the reallocation of those resources? I'd assume a few people have done math and would have assumed a little bit more on the margin profitability side, but it looks like it's reinvested in the business? .

Yes, Ken, we guided to 75 basis points of improvement year-over-year, and that's on the back of very strong outperformance in fiscal '26. That reflects both the underlying operating leverage and also the savings from the restructuring -- and as you noted and as we mentioned when we announced the restructuring, we are making planned investments back into the business as well.

And then also, as a reminder, we've got roughly one additional point of headwind from the new transaction model. So that's something else to factor into. And then finally, I'll just point out on the overall operating margin is that we've also reflected the prudence that we embedded in the revenue guide. We reflected that as it flows through to the operating margin as well. So that's something else to factor in.

Our next question comes from the line of Alexei Gogolev of JPMorgan.

Andrew, in some of the recent comments that you made, you were talking about the upside from data centers. I was wondering if you could talk a bit more where you think this upside could come from the design centers increasing seats or are there new products being sold, new design deals being built my thinking is that some of those projects are quite penetrated among the customer base. And all these well-known architect teams they probably already have out of this. So where would this uptake come from?

Yes. The data center projects are driven by very sophisticated owners. So a lot of what's happening is that the owners are buying more of our suite to manage the design and the execution of these projects. And that's actually getting deeper into the supply chain. We expect the demand for data centers and tools for data centers to continue in several years from now. .

But remember, when that demand shifts, it opens up capacity for other types of projects that come in, like there's lots of infrastructure projects in the U.S. that I guarantee you are being stalled by the fact that capacity has been being consumed by data center work right now.

But the owners are driving a lot of the adoption of technology, and they're looking at the design through make cycle. Like I said, they're very sophisticated operators, and they buy very sophisticated tools and they go deep into the process across our entire stack.

And Janesh, very quick question on free cash flow. So you mentioned that there will be a restructuring charge, partially offset by cash tax benefit from BBVA. So the net effect of the cash movements they seem to be somewhat immaterial for fiscal '27. But does that mean we should see a step up in free cash flow margin and free cash flow conversion in fiscal '28?

One of the important things to keep in mind about '28, Alexei, is that our federal tax payments will begin to normalize from fiscal '28. So you just need to factor that in discretely.

Our next question comes from the line of Tyler Radke of Citi.

Yes. Thank you very much. So just a follow-up on sort of the underlying growth. So obviously, there was some upfront benefits and billings linearity benefits exiting this year. But as we think about that drop-off implied in the guide, can you just help us understand how much is sort of driven by the go-to-market changes in that restructuring?

And I guess, specifically, like what are the biggest risks this year that you didn't maybe necessarily see pan out in Phase 1 of the restructuring. And then are you thinking about sort of the data center contribution similarly for this year? Or should that be an incremental tailwind just given we're all seeing CapEx numbers go up into the right?

Yes. Tyler, this is Janesh. Maybe I'll take that. So a couple of thoughts on the 1% for Q4 and comparing that to the Q1 growth rate. As I mentioned earlier, there's the 2 things to keep in mind. One is that the 14% laps a really easy fourth quarter from last year. So that's just something that you need to account for. It's naturally a higher number than you saw in Q1, Q2 and Q3 of last year.

And then if I -- the other factor is that there is an impact to revenue growth in Q1 from the go-to-market changes that we have assumed. The reason that the difference between this restructure and the prior 1 is that the earlier restructure that we had about a year or so ago that focused primarily on non-selling roles, and most of those were in marketing and customer success and sales operations.

In this restructuring, as we mentioned, when we announced it, the majority of the impact is actually in customer-facing sales roles. So when you have that, there's always a natural level of disruption that happens associated with that, and that's just something that we needed to discretely call out and consider here in the guidance. And then I'm sorry, what was the second part of your question?

Yes. It was just around the -- obviously, the data center as an end market has been strong. Like how are you thinking about that for next year? Is that going to be a sort of a greater percentage of your end market or business?

Yes. It's -- we've been very happy with the momentum we've seen in data centers for a few quarters now. But as Andrew said just a couple of minutes ago, for us, the way we think about this is our industry is fundamentally faced with capacity and productivity challenges. And when demand shifts to one part of the industry, if for any reason that demand erodes then the capacity shifts elsewhere.

So we think of it in the aggregate and think of it as a shift more than anything else. Data center, the business has been great. We'll continue to see how that contributes to the business in fiscal '27. We saw some strong business close here in fiscal '26 by way of demand from -- for cloud from customers that are building out these data centers. And then longer term, that ultimately translates into an opportunity even for operations, which we've talked about externally before.

Okay. Great. And then just a quick follow-up for Andrew. Post the World Labs investment, are there sort of other partnerships and investments that we should be expecting you to make? Or do you sort of feel like that sort of has you covered at least for now, obviously, a rapidly evolving market .

Yes. Look, it is a rapidly evolving market. In terms of big partners that we'll be engaging with World Labs is a pretty significant one, but look for us to lean into the operations space in an interesting way, very similar to what we did in construction following a very similar playbook so that we can kind of move quickly and start to turn that opportunity into even a greater life cycle opportunity for Autodesk, moving from like months to years of engagement on projects to decades. .

Our next question comes from the line of Michael Turrin of Wells Fargo.

Just one for me, apologies for being on mute. Just the manufacturing segment accelerated to now above 20% growth. Can you speak to what's driving the strength there? And I'm curious if it's all correlated with some of the emerging markets commentary that you're making? Or just any other just kind of supporting details you can provide there?

Yes. Overall, what I'd say is manufacturing continued to perform well for us. The make business in the aggregate performed well. You saw that with 23% growth, which includes construction and infusion. Construction revenue actually accelerated during the quarter. some of the trend, the underlying trends that we've seen earlier in the year by way of the strengthened demand, those continued.

We continue to focus on our strategy of continuing to drive multi-seat adoption in manufacturing accounts. And then we also continue to see strong adoption of some of the features like we talked about the auto constraint feature and provided some statistics on that. So we're seeing great adoption there, too. Those are some of the things I would call out.

And ladies and gentlemen, that is all the time we have for Q&A today. I would now like to turn the conference back to Simon Smith for closing remarks. Sir?

Thank you, Latif, and thanks, everyone, for coming along. We look forward to seeing many of you over the coming weeks. If you have questions, please just ping me or the Investor Relations team, and we look forward to catching up again next quarter. Thanks very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Okay. Excellent. Well, hey, good morning, everyone. Welcome to day 1 of the Barclays Tech Conference. My name is Saket Kalia. I cover software here. Really honored to have the team with us here from Autodesk. We've got Mike Haley, SVP of Research; as well as Simon Mays-Smith, Head of Investor Relations. We've got about 30 minutes together. Let's take the first 20, 25 minutes to go through -- let's go through some fireside chat for the first 20 or 25 minutes, which I know is going to be fun and then we'd love to make it interactive. So any questions that you've got, just pop up your hand and we'll get a mic around.

So with that, Mike and Simon, thank you so much for being with us here today. Simon, why don't you kick us off with the safe harbor?

We may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements.

Absolutely. Now we can talk. Well, listen, guys, thanks a ton for coming. A lot of great stuff to talk about here with Autodesk. But maybe, Simon, just to level set for us before we dive in with Mike, can you just recap a few of the most important points you wanted us to know coming out of the last call, just so that we're all on the same page.

Yes, and perfect segue. It's really sort of 3 things. First, the business is performing pretty well, both in absolute terms and compared to almost all of our competitors. Secondly, we gave some talking points really, but what things to think about for next year and those are basically divided into 3 buckets. One is that we will continue to think about macro and potential disruption from sales and marketing optimization when we set guidance in February.

Secondly, that we will have headwinds from the new transaction model to margins, which is why we said the path to fiscal '29 goals would be nonlinear. And thirdly, we reminded people just on the math of the new transaction model -- sorry, the switch to annual billing transition has given us a tailwind to billings growth free cash flow growth in fiscal '25 and '26. And obviously, that process is pretty much done by the end of this year.

So growth in billings and free cash flow will be normalized -- more normalized in '27 than it has been in '25, '26, all those things we said before, so that's the second thing. And then the third thing is just banging the drum that we are years ahead of our competitors in AI, thanks for the work that Mike and others in the company have been doing, and we're pretty excited about it.

Absolutely. That's a good summary and there's a lot to dig into there as well. But Mike, maybe to start with you. This is your first Barclays tech conference with. Hopefully, the first of many.

First of many.

Yes, absolutely. But maybe for those of us that are meeting for the first time, can you just give us a little bit of a brief background on yourself and your mandate in your current role?

Yes, sure. Sure. So in my role, I lead up Autodesk's research. So Autodesk research is around about a 300-person organization in the company. Who -- we are the only organization inside Autodesk fundamental mandate is to say 5 to 10 years ahead of the company, right.

So our job is to derisk technologies in a safe, quick rapid environment and to find new investment opportunities. So we are doing everything you can imagine from AI to robotics, to new forms of user interfaces and across all of our industries, architecture, manufacturing and media, right? So we have -- that's why we have a significantly sized organization.

Now coming to Simon's point, coming out of that work, we started doing AI work in my lab, in 2009, and we've been gradually expanding and growing that. In 2018 is when we created our AI Lab, which is kind of like our own deep mind kind of organization, right? Where we're doing very, very deep work, not on generic AI that everybody else is working on, but on AI that is specific to geometry, to shapes, to structures, to products, to buildings, in other words, the things our customers are building. So that's where we've been laser-focused now for 7 years.

So what you're now beginning to see from us is the other part of my job, which is leading our AI strategy across the company. So I lead all of our generative AI work. We have a large cross company investment in this right now. We've been heavily focused on taking this technology that we developed in the lab and bringing it to market right now. We announced a bunch of that at our Autodesk University Conference this last year, which I'm happy to share later. But it's a really exciting moment for us.

What I'll also just mention is that the cycle time these days between research and product is shrinking. I've been doing research for a long time. It could often take a decade for this new technology. It can be a matter of 3 to 6 months now. So the role of research in actually developing product and getting it out to market is becoming different, which is a pressure I'm feeling and -- but it's a good thing.

Two things to add, sorry, which are important. That time to market is a process and that muscle takes time to build. And actually just putting that together, building on that expertise is one of actually our barriers to entry and what it's going to take time for our competitors to replicate it because building that research breadth and depth and then making it work faster is hard to do.

And second one is that centralization is critical. A lot of companies are letting go 1,000-flowers across the company, We're doing very efficient AI invest, not focused investment as well. So having a centralization of focusing the resources behind it is very important.

That is. That is, That cycle time, in particular, something that I hadn't thought about. Maybe just to build on that a little bit, though, Mike, and maybe to dig into some of the individual areas of Autodesk's business. I want to start with the architecture piece. Of course, anchored by your leading tool Revit, maybe the high level question I want to ask is, how is generative AI going to change the daily life for an architect in your view, if at all?

Yes. No. Look, I think it's going to be a radical change. Is it all going to arrive at one night? No, it's not. But I would break it into sort of 3 categories of change. So the first one is we've been pushing this idea of sort of outcome-based design in architecture for a while, which is really about thinking of what you want the ultimate product to be at the end of the day, I want it to be low cost, I want it to be low carbon. It has to exist within this existing city infrastructure.

There's all of these broader mandates that are known at the beginning of a project, but it's hard to actually compute had to actually use those in any meaningful way at the beginning of a project. It's much easier to simulate and everything later on to make sure it complies to those and that's often too late. So AI is able to help people early in conceptual design, right, that the beginning of creating a new structural building or infrastructure to understand the impact and the goals that you want to go after. So that's the first thing.

The second thing is the actual way you operate and interact with each other in the architecture space. This might be an architect working with a customer for example, who is trying to understand what a building might look like a new foyer in a hotel, what's this going to look like? Or it might be working with engineers and they're sharing information with each other.

The whole architecture and building practice is renowned for it being difficult to communicate with people. It might be due to different representation of information or different skill levels of the people you're talking to. AI is beginning to eliminate that. It's beginning to be able to produce rendering instantly of what the architect is talking about or take the structural engineers information and automatically transform it into the architecture information.

So now they too can talk to each other much like a language translator. That's the second one. The third one we see is really around what we call automation. So at least 70% to 80% of any design work. And this is not just true for architecture. This is true for manufacturing as well. It's not creative stuff. It's doing pretty much repetitive kind of tedious work, like, for example, producing plans, like 2D actual blueprints. You go to a construction site, there's still somebody walking around with size rolls of paper, right? Nevermind the iPads.

So producing those is not a creative endeavor because the 3D model already exists, but it's tedious. It takes weeks to produce those. Let AI produce that for you. So there's a whole set of workflows that are going to -- just going to literally become automated overnight because they just don't -- they're not creative banks. The time wastes effectively. So just those 3 alone, you can imagine how those play out across architecture.

Yes. That's super interesting, Simon, maybe to follow up for you on that point. I mean in application software, we've all sort of debated about kind of seats and value, particularly this year. Maybe to Mike's point, as Autodesk sort of enhances that productivity of an engineer of an architect, how do the -- how do you think the economics here could change? I mean could there be fewer seats, but maybe more value that Autodesk earns? Curious just in general how you think about that?

Yes. So the way we're sort of thinking about it is on the sort of seat size, we think that the seat-based model will be around for a long time for the foreseeable future. So think about it as sort of access to the kingdom sort of thing, sort of base layer of functionality. And that will be driven by really 2 things. One is that there is more work to do than there are people available to do it in our industry.

So if you go and speak to our local Department of Transportation, ask them how much work they have to do, how much money they have to do it, and you'll see there's a huge mismatch between those 2 things and then multiply that across the economy and across the globe. So there is much more work to do than there are people available to do it.

So not -- there's pressure for more people, not less people that just isn't the resources for those people. And secondly, as we expand into adjacent verticals, our whole strategy is to connect workflows end-to-end in the cloud. So as we expand into construction, as we build our business and operations and maintenance and similar manufacturing, similar in media entertainment, we are adding new people and seats under our ecosystem.

So our addressable ecosystem is actually expanding over time. But in addition to that, as we build our AI business and deliver more value to our customers, so as we talked about at Investor Day from task automation through workflow automation to system automation, the amount of value that we can deliver to our customers will significantly increase. And I'll talk a bit about that in a second and also the marginal cost will increase.

And so there will be more consumption pricing just naturally because of that to capture that value and also to reflect the marginal cost from compute of doing that. The value that we deliver really has 2 elements to it. The first one is around the machines can do stuff. And I guess that's the other important point is as you move up that value chain, the lead consumption will be a machine rather than a human being because human beings just cannot handle the complexity of the models get bigger and bigger basically, where the machines can.

So machines bring 2 new types of TAM to us. The first one is that they can do stuff that humans can't so they can. To Mike's point, they can see stuff in the conceptual design phase that 2 years after construction, a human being just would not be able to conceive of and to bring that value into the process in a way that humans cannot do. So that is new value we can deliver to the customer that we capture through consumption pricing. And the second way is that machines create new monetizable time because they work 24 as a day, 365 days a year. They don't sleep, they don't go on vacation. So it is essentially creating time that doesn't exist today. So new value, new times, new TAM to us, capture with consumption.

That's interesting.

And sorry, just another thing, which you didn't ask but is important is that the consumption will be some form of metering. To be honest, we don't precisely know what it is. It could be some form of token. It could be some form of value delivery. It could be some form of API monetization. We're not quite sure.

What we do know is that Flex is basically built as a sort of universal front end. So we can plug in any sort of metering system on the front end of Flex and then have at the back end, essentially deliver a consumption experience through that. So a lot of the work we've been doing over the last few years has been getting us ready for this.

Yes, absolutely. That's really interesting in terms of how to monetize time and how that might become a bigger vector. Mike, maybe from just a product perspective in architecture, what can customers leverage now in terms of generative AI from Autodesk? And to Simon's point, just around sort of the different industry clouds, do these customers eventually need to move to Forma, right, in order to eventually kind of gain the those capabilities?

So it's actually surprisingly a little known fact. We actually built an early AI tool into some of our software more than 10 years ago. We have something called Construction IQ which sort of -- yes. So the reality is there's actually been a bunch of stuff for a while. Our Innovyze water products, have a bunch of AI in them for doing flood claim analysis and all of these kind of things. So this is all over the place within the products today.

Now what we are doing, what we launched at Autodesk University this year is our new assistant, Autodesk Assistant, which is now available across all -- it's becoming available across all of our products across the industries, but it's specifically in things like Forma and Revit and these kind of products, right? That is enhancing your experience across a multitude. It's the agentic sort of environment, right. We're doing a bunch of stuff.

Now that is also being enhanced by the work that our team has been doing that I mentioned in the beginning. So what we also announced at Autodesk University is our neural CAD for buildings. And that's what I was referring to earlier on in these large foundation models to be building that can actually think in terms of buildings. So they're not thinking in language, they're thinking in terms of building, right? So they can compute buildings, you can interact with them and they can literally create structures and things for you, right?

Now what we did is we showed that available in Forma because that was very much part of the sort of conceptual design workflow that I was talking about before, but rapid exploration, that kind of thing. But you can expect to see these features -- many of these features also beginning to appear in products like Revit, as well because, depending on where they are in the life cycle, like I said, some of these are like automation features if they relate to documentation generation or deep design development, they're going to be inside Revit. If they relate to conceptual design, there will be inside something like Forma.

Yes, absolutely. I want to move to construction, right? So we talked about architecture, right, the next piece, of course, right? And Simon, maybe it's for you. I mean, picking up off of architecture and moving to Autodesk Construction Cloud or ACC. Can you just remind us what you've said on just the growth rates of that business? I feel like it's been very healthy and certainly reflecting market share gains. Maybe that related question then would be why do you feel like ACC is gaining market share.

Because they're awesome. The -- I mean, the short answer is it's the fluctuation of the strategy and it's working, which is that we put in place a bunch of acquisitions a few years ago. We replatformed it on to build. We're doing the same thing in precon at the builders the site business -- we then extended our relationship with our large integrated design build companies at the high end of the market. We've been building the on-ramp and precon which is a bit that connects design with construction.

And then we let up our channel a couple of years ago to go into the low end of the market. And what we talked about at Investor Day and at AU is when also launching a sort of much more easy-to-use version for the site business as well over time as well.

And what that is then slowly doing is squeezing into the sort of middle bit of the market, which is where some of our vertical competitors operate a bit. And so what you see the result of that, and also we're rapidly iterating as well and getting better, and therefore, we have reaching site future parity and then future superiority is we are -- where we're coming head-to-head for greenfield business, we're winning more -- much more than we're losing.

And then also beginning to get into some of the renewal business and some of our competitors as well. So that's quite fun, too. And then also then replicating that across the globe, adding in new applications like pay apps to build out the ecosystem and expect us to do more of that over time as well. So in terms of growth, we don't precisely split it out.

And actually, as we integrate the construction business more tightly with the design business because that's our strategy. It doesn't make sense to talk separately about the design and construction business. It is a connected workflow end to end in the cloud. But as a rough proxy, the growth of the make business is the best rough proxy you can see externally. And in terms of new customer additions, obviously, we're continuing to add a nice number of new customers too and certainly better than the -- a number of our peers.

Yes. Absolutely. I certainly shows. Mike, maybe just on that point, I mean construction, meaning out in the field, right? Like it's such an intense workflow, right, just in terms of the communication, all the changes that are happening, maybe a similar question we talked about with architecture earlier, but you kind of think about the opportunities for leveraging AI in PC?

I mean, again, I can mention Construction IQ, right? There was a tool that we realized nearly 15 years ago that we could understand the patterns of behavior for subs and start to have -- we used to go at the weather report, you arrive at the construction site every morning and it tells you where you need to put your attention on the construction side, people loved it, right? That was an early tool. This is pre the sort of deep learning era we're in now.

Now what we're seeing is that -- just like you said, there's so much information produced in the average construction project, but just waiting through getting an AI that can actually help you focus on what you need to focus on bring summaries, to detect changes, to predict issues that happen. This is where we focused on right now. So much building on everything that Simon said all these tools, all this platform that we've built out.

This gives us the sort of data nexus, if you want to now apply AI to begin to sift through that, to give you what you need. So that -- our customers are loving that. When we show them just simple integrations of language, large language models and vision language models into that. that can go through a bunch of material and say, it looks like that picture is a leak in the basement. Something's going on, I found this other document that was published at around about the same time, you might want to look at all these things together. Just a single occurrence like that can save the company hundreds of thousands of dollars. So just being able to bring AI on top of that massive amount of data that is constantly changing, huge opportunity.

And I just want to connect 2 things that Mike said which is that -- which is essentially the AI within a vertical, a silo and the value that's what he was just talking about, but also what he said earlier with former in the conceptual design phase is essentially what AI can do is bring what I call good enough simulation much earlier into the process. So the way I think about it is it means that you start off pointing in the right direction much more, much more precisely, which means that you then avoid problems later, which cost you money and cost you time.

And so if you're just in a vertical silo, you will never be able to do that. Whereas if you can connect the data with AI in the cloud using it and then use AI to make those work and those systems -- automation, that's really what we're talking about. That's also -- that's when I'm talking about creating new value, that's some of the things we're talking about. The Holy Grail here is something called constructability. When you're designing the software needs to understand what is constructible and how to make it constructible and that's our north star.

We talked so much about product and AI. I think one of the things that is helping with this, right, is actually the agency model shift, right? Because now it creates such -- so much of a closer tie-in between Autodesk and the end customer, right? Obviously, the partner is still very important, but I think there's a little bit more of a direct connection between Autodesk and the customer.

And so I'd love to shift to this topic a little bit and maybe start with you, Simon, because I think we're getting into the later stages of that shift. Maybe the question is just for some of us that are kind of fine-tuning our models, how should we sort of think about that revenue benefit as we go into next year? And of course, I don't expect you to give a numerical answer exactly, but what are some of the breadcrumbs that you've given as we think about sort of that underlying growth rate of the business, which I think has been pretty healthy, plus whatever mechanical items might be on top of that.

Okay. So just to sort of press on what you said the way you because pointed to the changes that we've been making over the last few years and with apologies to some of our long-suffering shareholders who've traveled with us through these changes. But the reason why we are -- one of the reasons why we are years ahead of our competitors in AI is not just because we've been doing a bunch of work on the model is because we're doing a bunch of enabling work to enable us to do it at scale without blowing a hole in our margins, basically.

And 2 of the key components of that are going more direct to customer, which is, as you said, the new transaction model but also or partly into the new transaction model and also building a sizable and automating the back end of a consumption business. And if you don't have those 2 things, in addition to a subscription mechanism, then you're not going to be able to do AI, profitably do AI at scale.

And so I know it's been painful to do, but it's one of our causes for optimism the reason that's cause for optimism that very few of our competitors have done any let alone all of those things. and they're going to have to do all of them, and they're going to have to do them quickly. Otherwise, they're going to be in trouble. So that's one of our causes for optimism that we've done those hard things and have already done.

As it relates to sort of just numbers, we haven't precisely said. So we've told you that by fiscal '29, the difference between our goal of 41% and stripping out the new transaction model is about 400 basis points. And you know that we've already -- by the end of this year, done 300 basis points of that headwind has come through by the end of fiscal '26. So there's 100 basis points of headwind to margin still to come. And just math because of the way the contrary revenue, as you know, flows through into sales and marketing, a big chunk of that will come through next year.

So that will allow you then to estimate what the margin headwind is next year and then if you gross it up, that will enable you to do some math around what the revenue tailwind is for next year. So that's probably the easiest answer -- the way to answer the question. We haven't given any underlying guidance for next year. What we have said, just to repeat what I said at the beginning, which is that we will be mindful of what impact the economic cycle could have on the business next year, and we will be mindful of the potential disruption from our sales and marketing optimization when we set guidance next year.

Absolutely. I think that's very thoughtful. And of course, maybe bringing the topic of margins back a little bit. I mean, Mike, I think Autodesk went through an optimization exercise of its workforce earlier this year that -- I think part of that exercise was to enhance resources and kind of growing parts of the business like generative AI. So maybe the question it's a bit broader is what are the areas that you want to be investing in, in '27? As you think about that quicker product cycle?

Giving away too much.

Understand.

No, look, so we've begun the journey in investing in platform several years ago, as you guys know it. And that has been where we've been putting a lot of our money, and that's where we're going to continue putting investment right? The platform is becoming increasingly more important in this world of -- you'll be seeing these agentic workflows that have appeared in this last year. If you don't have a platform agentic workflows are meaningless because the agentic workflows literally require a platform in order to function.

So for us, permitting to all of these agent-based architectures and offering agent things, we've been able to respond to this really quickly because we had a platform. We had 180 completely separate products, there's no platform behind it, it would have been tough, right? So continuing to invest in platform is going to become important.

Underneath that, though, data, of course, our data systems, if you don't have proper data flows, none of the stuff works. And it's the non-sexy stuff, but you've got to get this kind of stuff. Its foundation. Our customers expect it said we've been working on it. We've made incredible progress powering a lot of the AI stuff that my teams are doing. And then, of course, the AI stuff. So I mean, what you will see next year is increased investment in AI all the different platform aspects and then specifically around the sort of agentic ecosystem as well. You see a lot of investment on the -- certainly on the technology side.

So just to talk a bit about data and why that's important and how hard it is if you have on-prem data versus cloud data and all accessibility.

Yes. So I mean, there's sort of 2 aspects to making AI work, right? One is the sort of data side and one is the actual physical infrastructure side you need to run AI. On the data side, our customers put in an enormous amount of data into the Autodesk ecosystem, which is fantastic. So we get to provide their data back to our customers to learn from their data, provide services to our customers, do all this kind of work directly and make it very, very easy for them.

So that's one part of making the data equation work. So when we standardize data models that makes that flow of much, much, much more easier. On the -- but not all of our customers' data is necessarily in our cloud either. So this is where our APIs and our platform becomes incredibly important to the they can still leverage our tools without necessarily having to commit to putting everything in that the data is still flowing through our platform.

So getting that entire data ecosystem right, both in the cloud from a sort of standardized architecture and then also providing these APIs is in -- so that's what we've been putting in place. So that's the sort of data side of that. On the infrastructure side, the other thing we've been doing is spending a good chunk of our time on the AI side is actually building out all the infrastructure for a large-scale AI training and then, of course, for large-scale inference.

As we deliver these things, that's where you see your cost obviously climb because that's proportional to transactions and users, right? So we're in Amazon House, all of our stuff is on the Amazon architecture. I was at Amazon Reinvent just 2 weeks ago. And we are doing things on Amazon that nobody is doing right now, certainly in our space. because we are able to scale these models, we are able to train them at levels that even just 3 years ago, we couldn't imagine being able to train things sufficiently. But it's been a journey. We've been on the 3-year journey now to really get this infrastructure in place now.

So now the good news is we have it in place, which is why you're going to start seeing more and more AI models come out from us, not because we're suddenly inventing more, but because we've actually got this infrastructure that enables us to just train more models as we go.

So that's the front end of the research getting -- coming down, then the productizing of it, right.

Definitely a theme in both of your answers in terms of, hey, we've done a lot of the hard work that a lot of our competitors have.

You got to be early, right?

Absolutely. Yes, absolutely. For sure. Simon, I want to go back to the model, right, and just maybe just to put a bow on the margin discussion. One of the things that, frankly, I've struggled with a little bit as I think about the model is kind of the shape of margin expansion between now and fiscal '29, right? You mentioned the target of 41%. And as you said, as Janesh said, that path should be nonlinear.

But he's also said that fiscal '27 should really bear the full brunt of the new model, which, of course, implies lower margin. So I just wanted to ask how you kind of thought about it because I kind of thought about the revenue impact should sort of be incrementally less next year. And therefore, the margin impact will be incrementally less. But I just want to make sure I tie out my thinking with how --

I think the -- your understanding is what we intended to communicate, which is the impact of the new transaction model is cumulative. So by definition, the big impact, when you finish the transition from the pre-revenue cost into the sales and marketing cost, that is when the maximum impact we will be largely done with that. I mean it will continue to build.

The transition will be largely done by the end of the year. So in terms of absolute number, it will be the biggest. But in terms of the increment year-on-year, that is much smaller than it was in '27 than it was in '26 versus '25. So I think you're both correct in your understanding in how we work, but I know there's been a misunderstanding. Yes, it's the increment that people care about, and that is smaller next year.

Okay. So maybe to summarize that, I mean, it seems like the dollar impact of the transition really I mean if I use the word peak, right, it should really kind of peak next year in terms of the dollar impact, but the incremental margin impact. To your point, it's been cumulative, right? So we should be thinking about -- understood. Correct.

So the peak incremental is this year and then the dollar is next year.

Understood. Understood. Very clear. Maybe I want to just to ask Simon last modeling question, then I want to wrap up with Mike. I mean just to shift to billings here, Simon. I mean we'll be finishing the invoicing transition, I think, in Q1 of '27. So it sounds like we should see still billings pretty healthy through Q1. But I think with long-term deferred, only kind of mid- to high single digits of total deferred at the end of the year. Should there be anything that really drives the difference between kind of underlying revenue and underlying billings growth going forward? Or should those 2 kind of starts to approach each other?

I mean the short answer is yes, is that once you get rid of the noise, the new transaction model and the billings transition to annual billings, yes, billings and revenue growth should start bearing much more relationship to each other. You then get the usual noise around different cohort sizes and a bit of FX in there. But substantially, thank God, billings will become much less -- well, everything would become much less noisy.

Correct. Absolutely. Well, listen, in the last minute that we've got left, Mike, I've got a fun question for you. I mean just -- as we think about that cycle time is a really interesting point that I haven't thought about, right? Which is just the amount of product development that you could be doing over the next year. When we're sitting here on the stage in a year from today, what are some of the milestones and the innovation that you want to be talking about as we look back on calendar '26?

Yes, yes. So what I want to be able to do is look across our industries and have the actual designers, the architects, the engineers understanding what AI tools actually look like in the future -- because the problem is today, most engineers and architects go and look at ChatGPT or Gemini and go, "Oh my god, you're going to make a product with a big green button that says make a building. I'm going to put it in a prompt and it's going to do that."

Believe me, no architectural engineer wants that set and nobody wants that. In fact, it doesn't work because these things are way more complicated, as you can imagine than that. So -- but what's happening is nobody is yet producing the tools, but we are now beginning -- beginning to produce those tools.

So if we're sitting here next year, I would love to have the sort of suddenly have this vibrant ecosystem, much like we have in the public around things like ChatGPT, but in this case, it's not ChatGPT. It's a bunch of incredible AI features they're enabling architects, engineers and designers to start creating the future world in a way that they've never been able to before. And they're leaning into these tools because they're not replacing their jobs, they're making them more efficient, they're making better products at the end of the day, and they're building on that sort of success. It's fundamentally transforming the mechanism of those industry. That's where I want to be in. It's a big goal, but that's where I want to be.

It sounds like it will be a fun year, though. Well, with that, I couldn't think of a better way to end. Mike, Simon, thanks so much for being with us here today.

Thank you. Appreciate it.

Okay. Hello, everyone, and welcome to Day 2 of the UBS tech conference. It's great to see everyone in the audience. For this session, we have Autodesk. So we have Andrew, who is the CEO; and Janesh CFO. So Andrew, Janesh, thank you so much for being here.

Thank you for hosting us.

Perfect. And before we dive in, in case you have any questions, you can submit them through the app, and I'll try to take a few of them at the end. But with that, Janesh, I know you have a big speech that you'd like to give.

It a very important PSA data. So we may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements. And now that we all feel so much better protected back to you.

Well done. Well done. Okay. So maybe to kick things off, you guys just reported last week, strong 3Q results. There was a nice upward provision to the 4Q guide. So maybe you could just talk about the drivers behind that momentum and how we think about some of those demand trends going into next year.

Yes. Maybe I'll just kick us off Taylor. So overall, Q3 was a really good quarter for us. We felt that the momentum from the first half continued very nicely into the third quarter. We saw continued strength in many areas, in data centers and industrial and infrastructure. Those are, again, continuing teams that we had. Overall, the team executed well. We saw great strength not only in AEC, but if I look at it from a geographic perspective, we saw strength in different parts of the world, particularly in a lot of emerging countries.

Also based it out as a highlight. So the quarter played out really nicely for us. Our go-to-market execution has been -- and the optimization of the go-to-market has been progressing nicely as well. And all of that allowed us to then have a nice healthy beat across the board in both revenue as well as the profitability measures.

And that allowed us to raise guidance across the board for Q4 and the rest of the year as well. So, so far, I think that's played out really nicely. The important takeaways for us really around that consistency of growth and the diversification that we've built in the business over the last several years -- and the go-to-market transition that we've made has -- that's all helped us build a business that we think is very resilient for the future.

And so we're excited about next year. The go-to-market optimization is ongoing, and that's something that we will naturally consider when we think about fiscal '27 guidance when we get to that point as well as the macro. But overall, we felt pretty good about Q3 and how the rest of the year is lining up.

Perfect. Yes, let's talk about that resiliency because I know the big question that you guys got from investors is around the potential growth durability. So Andrew, I know that there's been numerous transitions over these last several years. So in terms of where Autodesk stands today and whether or not they're positioned maybe better than they have been in the past seize a lot of these emerging growth opportunities. Can you comment a little bit about that?

And on the durability question, I know there's a lot of questions around there's been products. They've been in the market for a while. Is there still sufficient runway left? What are your thoughts there?

Yes. Yes. So we have been through a lot of transitions. All of these are intended to modernize our business. We've been very intentional about creating a face to the market for Autodesk that looks like a modern SaaS AI provider. We've successfully done that. We're ahead on executing consumption algorithms.

We've changed the way -- the relationships we have with our partners. All of these things are fundamental things that allow us to kind of accelerate the business into the future. When you look at the business moving forward, one of the things that Janesh highlighted was the consistency, right? And there is kind of a strong core consistency in our business. Fundamentally, our business is highly capacity constrained, our customers' business, in particular, right?

There's not enough existing capacity to fulfill all the demand for what needs to be built or rebuilt in the world, both in AEC and manufacturing. So that capacity problem is one of the things that we're primarily focused on over the long term. And it's the idea of allowing our customers to execute on more projects with fewer people for project and actually bringing per project cost down, but increasing the portfolio of projects getting executed.

Now if you look at the durability of our revenue that core basis of capacity, that's not going anywhere. That goes back to the consistency in our business. That core base isn't going anywhere. Our customers need to have that capacity to execute on what's out there today and in the future. What they need is incremental capacity. And that incremental capacity is going to be added -- everybody says agents, I say digital humans, I don't know which one is better.

But we're going to be adding incremental capacity through automation. And that capacity is going to come along several vectors. One, let's just look at construction right now. Construction still has a long tail of execution here. We've got personas and construction that we've hit. We've hit field execution. We've got preconstruction planning. We've got resource manager. We've got a whole set of personas that we can hit in construction that are going to be durable growth opportunities for us.

You look in manufacturing, there's a growing shift to the cloud in manufacturing. Fusion is arguably the fastest-growing application in its space. The durability of that opportunity in the mid-market of manufacturing in Europe and the U.S. is very strong. There's going to be continuing cycling from new applications in that space. And then you look at infrastructure. Infrastructure is not going anywhere. And the backlog and infrastructure projects is huge. So we're going to be rolling out in that area as well. So if you look at what we're doing for our customers, we're rolling out new technology to increase their capacity. It's going to be durable over years to come and just kind of play into the consistency of our business.

Perfect. I want to talk about some of the AI opportunities and infrastructure ones. But before we get there, Janesh, maybe to throw this question over to you because you've talked a lot about the potential for durable growth as we look ahead. But then on the last earnings call, made comments about the macro uncertainty and the potential to continue a guidance philosophy that embeds a conservative approach. So could you maybe talk about when you look into the future and the growth drivers that give you the most comfort in being able to sustain growth, what are those? And secondly, what are you trying to get through to the audience in terms of the messaging around 2027?

Yes. I think the starting point for our confidence for next year is this year's performance. And over the last couple of years as well as this year, we've had just a remarkably consistent growth that we've delivered on an underlying basis when your net LP affected the new transaction model.

So that's the starting point for -- as we think about growth for next year. And then at the Investor Day that we had in October, we laid out a number of areas where we continue to see opportunities for us to drive growth. Construction is one. Fusion is another one, infrastructure. And some of these things have been delivering growth for us this year, and we see those as continuing into next year.

We talked about adjacencies like operations that you'll get into over time. So all of those things give me confidence in the underlying momentum that we -- and strength that we see in the business. The main messages I wanted to make sure that investors understood coming out of our earnings call, there were twofold. Number one is that we see a consistent growth pattern in the business. But second, just a reminder that our go-to-market optimization is not yet complete.

And so when we get to that point in fiscal '27, the approach that we took this year guiding prudently held us in really good stead. We still have a lot to execute on the go-to-market optimization next year. The macro will be uncertain. So we will take a similarly prudent approach when we think about our guidance for next year as we get to fiscal '27. In terms of exactly what the underlying growth is and exactly how we think about the specifics on go-to-market optimization and so forth, we've got work to do on that front until we get to that point, but those are the broad takeaways.

Perfect. And Andrew, let's go back to what you were talking earlier about being able to address capacity constraints with AI. So there's a lot of -- there's a number of exciting AI initiatives underway at Autodesk, whether that be generative design, what you're doing with AI agents, MCP servers. So could you just talk about the current pace of adoption that you're seeing amongst your customers? And when do you think we'll see industry-wide production use of AI.

Yes, you're actually seeing it already. And as we said at our Investor Day, our AI strategy has kind of three stages. We're starting with task automation, which is just basically making day-to-day productivity easy for our customers. It's very protective of our business. It provides a lot of customer delight. Then we're moving to essentially workflow automation, connecting disciplines together, automating the workflows with them. And then basically with systems-level automation, we're taking workflows and automating multiple workflows to provide systems level solution.

So progressively, over time, we're going to be delivering more and more value into the ecosystem. If you look at the adoption today, we're super focused on making it easy for the customer to adopt AI. We're not trying to throw tools out there and say, "Hey, isn't this a great thing figuring out how to use it." What we're doing is we're tackling specific problems. What we did with Fusion, though it's kind of down in the weeds, but what we did with the constrained automation tool and Fusion is a great example of that. It's a very labor-intensive thing that our customers do, but now we're automating it 2.6 million constraints automated so far to date.

And the acceptance rate is above 60%, which is very high for any kind of generated feature. Those kinds of things, you're going to see more and more of those coming out, and they'll get adopted very quickly, because we've specifically designed them to problems the customers have today or areas of bottleneck. So we're focused on some of the bottlenecks. Some of the things we're rolling out next year will be focused on bottlenecks as well.

And then what you'll see is as we move into workflow and systems level automation, you're going to start seeing us monetizing some of those things differently. Task-based automation would the customers are just going to get it.

Workflow automation system, I mean, we're going to start monetizing those in consumptive ways over multiple years. So our goal is to make sure we deliver things that are easy for the customer to use, understandable and provide value quickly. That's how you drive the adoption, and we're seeing it so far. .

Yes. Let's talk about the monetization strategy because you guys introduced API-based pricing around the platform services. So could you elaborate why when you spoke with your customers, why did this pricing model make the most sense? What is the overall customer reaction been to that? And could this be something as needle moving to revenue as next year? Do you expect this to take time? What's the pace around that?

So API monetization and MCP monetization, they're kind of related, right? And essentially, what you're monetizing is machine usage of our IP, our products or some of our cloud capabilities. To date, some customers, very few could run a suite of our products, construction cloud, Revit 24/7 and execute on real workflows, basically creating their own digital human in the process.

We're going to monetize that moving forward, and we're also going to monetize connections to our APIs through MCP servers and other types of cloud APIs as well. That's just the way things are shifting as machine usage becomes a larger component of the capacity creation for our customers. Today, it's a small number of customers that do that. So don't expect anything to move the needle suddenly. But over multiple years, more and more customers are going to be having machine usage of our products rather than kind of human usage. And that's going to be how this capacity shifts around from the human-based capacity to the digital capacity.

Yes. Makes sense. And how important is the data layer in all of this? Because when I was at Autodesk University, it seemed like there was a greater emphasis on platform services than maybe in the past -- and -- which makes sense, right? Because if you think about AI, these agents, they need to have access right to all the information internally, it's -- it makes a lot of sense in that regard. But how big of a catalyst could that be? And then a second part to this, could that actually be a catalyst for cloud migrations to form a Fusion, Autodesk, Construction Cloud.

The short answer is yes.

Yes.

No. Look, as you noticed Autodesk has moved from a design to design and make company, which, by the way, increases the number of personas we touch. We're going to -- you're going to see us move to an operate company as well. So it's design, make, operate. the number of personas that cut across that entire light is very large. What's the glue, the data flow.

The data flow is the glue from the design process through the entire kind of preconstruction process or manufacturing engineering process, all the way to where you cut metal or build a building all the way through to operations. So the data layer actually provides the fluidity across all these various personas and allows us to kind of automate workflows between personas.

And actually automate entire outcomes across all those personas. So that's going to be a big part of how we get there. That's why you heard the customers talking so much about it, because they are aware that the data is the unlock. So -- in the past, we had lots of proprietary data formats. We're embracing lots of open formats to make sure that people are using our platform to manage those data flows, and we're using those data flows to automate and create the digital capacity. So it's a big deal, and it is an unlock.

Yes. Do you -- are you starting to hear that appetite increasing with your customers in terms of realizing that cloud is important for AI? Or is it still very early days?

Oh, look five years ago, we really didn't -- 5, 6 years ago we didn't really have a SaaS native compound or business. Now if you look at what we've done with Construction Cloud Fusion, we're 20% round of our revenue is SaaS native. It's growing rapidly, growing high double digits, it's doing quite nicely. So customers are realizing that if they want to get to that future, they have to embrace SaaS as part of that. Otherwise, the data flows aren't as easy to manage, because you're trying to connect lots of behind the firewall silos with various other places.

You've got people that are outside your firewall. When it's all in the cloud, you can connect to everything and bring it back and federate it across multiple things using the cloud as a hub for that. Customers realize that and as a result, adoption has gone up.

Perfect. You mentioned the opportunity a little bit earlier, so I'd love to dive deeper in on that. At the last Analyst Day, you broke that out in the TAM, I believe, for the first time it felt like there was a bigger emphasis on the civil and infrastructure opportunity. I know you mentioned that on your last earnings call. Could you talk about what's driving that focus on these opportunities?

And am I right in the read that this feels that there's more emphasis behind it than maybe there was previously. And that could be a question for Andrew and then Janesh, a follow-up to that. How do you think about this opportunity as it parlays into the durability of Autodesk Construction Cloud and the greater AEC opportunities .

Yes. So operations is a natural extension of what we're doing with BIM and modeling and manufacturing, especially around mid-market factories. Mid-market factories need to operate like big factories. So the little factories and the little machine shops need to have the same level of automation and control that large factories have. So there's a huge opportunity as people reshore and redo the supply chain around operating progressively smaller and midsized factories.

So we're very much focused on that as well as buildings. So operations is a natural extension. It extends into a life cycle that's well beyond the design and make process. Design and make process plays out over years, asset management operations plays out over decades. Right? So it's a big difference for us. And the unlock is really clear. Tandem is the first play into this with the digital twin technology. We're going to extend that.

Look for us to attack that market the same way we attack construction. Six years ago, we didn't really have a material construction business. We stood up a division. We did some acquisitions of new tech stacks, accelerated that. And over a 5-year period, we built a highly successful, fast-growing business. That's the same path we're going to take with operations. And it will increase the stability and consistency of our business long term.

Perfect. Janesh.

And I just think about the growth longer term across design make and operate. Operators, obviously, a new area for us and adjacency we are going to get into. So I think that plays out into the revenue model over a much longer period of time. In the near term, if I think about design and make, and you see the numbers from the earnings release, and Andrew mentioned a minute ago that the underlying businesses like Construction and Fusion continuing to maintain and deliver strong growth for us, roughly growing at about 2x the overall design business or 2x the overall rate of growth in the business, give or take a few points in any quarter.

But we see that continuing. Because fundamentally, in those markets, we are not dam constrained. Construction is -- has a long way to go in terms of adoption of digitization. Andrew talked about the mid-market opportunity in Fusion where, again, we feel like we have plenty of headroom for growth. So I see that make part of the business continuing to sustain growth for next year.

Perfect. Yes. And let's talk about the opportunities in manufacturing and media and entertainment. Any big initiatives going into your fiscal year 2027. And any catalyst the audience should watch out for in those sectors? .

Yes. There's a couple of unlocks in manufacturing. One is the data management layer that sits in the Fusion Cloud. We've invested significantly in that, and it's been a major customer request in terms of taking Fusion inside of some of our accounts from say, 2 to 5 seats up to 5 to 20 or 30 seats.

So the customer has been asking for it. We've invested in significantly. That's going to be an unlock heading into next year for multi-seat accounts with Fusion. So we expect that to drive some growth. We're also, like I said earlier, very much focused on mid-market factories. And we have a product portfolio that allows people to lay out those factories, but we're also very much focused on helping them manage those factories.

And I think that's a good multiyear growth opportunity that will show some [ kernals ] of growth next year as well. Media entertainment, the shift has consistently been -- remember, we're in the high end, film. We make products for the directors and the high end. We don't make it for the consumer market in the same degree. Though we want to bring some of that technology down to the consumer market, but we make it for the high-end film and game market.

And more and more, we've been moving to managing the whole production process from the capture onset all the way through into post-processing and special effects. So we're making it easier for the customer to capture the data early, manage the process of making sure it's right and pushing it into post production.

Perfect. And then maybe switching gears to 2026 calendar year and what you're hearing from your customers as we close out 2025. Andrew, how would you characterize overall customer conversations in terms of how they're thinking about spend going next year? Do you anticipate it could be similar to what we saw this past year? Are there any opportunities for growth unlock? Any pressure points that you're monitoring closely. What are you seeing there?

In generally, the sentiment is consistent with what we've seen this year, going into next year. Remember, we have large EBA cohorts that renew on a regular basis. These are 3-year contracts, right? So we get kind of visibility of how peak customers are looking at their 3-year investment. No one is downsizing their EBAs. We're seeing expansion in the EBAs across basically all of our customers, which is a strong signal that you're going to see consistent kind of investment in technology heading into next year.

Perfect. And then another big opportunity that you guys now get a lot of questions on is just the data center opportunity. I would imagine this ties in a little bit to what you guys are talking about with operate, right, and the digital twin opportunity. Could you just elaborate the tailwinds right you're seeing around there and how meaningful that could be to the business as we look into next year and beyond. \\

The digital twin opportunity in particular.

The data center opportunity. But I would say I would imagine digital twin plays into that in the part infrastructure.

Look, with our business, our business is highly distributed across multiple segments, multiple geographies, right? And remember, I always said there's not enough capacity to meet the demand that's coming in. So whenever something is getting executed on, there's something else waiting in the queue saying, "Hey, pick me, pick me."

All right. So right now, data centers are consuming a large chunk of that capacity. In the past, there was commercial buildings, community consuming some of that capacity. That execution is going to continue into next year. But even if it starts to fall off, there's other things that come in to consume the capacity. So we don't see any concern about sector shifts from one build-out to another, but we also see data centers continuing well into next year as well.

Perfect. And Janesh, let's dive into some of the financials and some of the nitty-gritty details. So as we look into 2027, there's still a couple of moving pieces on revenue and billings. So one being we're still working through, the new transaction change. So first question for you is in terms of the tailwind that, that could be the billings and revenue growth next year, any qualitative color you could give there and how that might compare to the 600 basis points of uplift we saw on the revenue side.

And then not to throw too many questions at you. But a second piece, we get a lot of questions on billings, because you had a big renewal cohort this year. So as we look into next year, could that possibly be a headwind such that we see more of a disconnect between revenue and billings growth adjusted for FX and the model change?

Is there a possibility that billings growth could dip below right, revenue growth? Do you expect them to be more in line? Just any color you can give there, I think, would be really helpful.

Yes. On the first question, Taylor, what I would say is I realize that the whole new transaction model has thrown a lot of our metrics often. It's just made it a little bit harder for people to understand the business. But as you said, this year, that's providing about a 600 basis point tailwind to the as-reported numbers on billings and revenue.

And this year, fiscal '26 is the peak of the transition. We will still have additional tailwinds next year, but they will be a lot lower than what we saw this year. And maybe one way to think about it is the tailwinds on the revenue and billings also imply that there's a headwind on the operating margin. And so maybe one way to sort of think about this in terms of a rule of thumb is, this year, we've got about a 300 basis point headwind on operating margins.

And what we said at Analyst Day was we expect that in the terminal state that we'll be about a 400 basis point headwind overall on operating margins. So that gives you a sense of how much of the transition we are through and then you can sort of back into the fact that next year, we'll have a very modest tailwind on the billings and revenue side. And when we get to that point, we will actually spell it out for you like we did this year in terms of what the exact underlying math is and what the as-reported views will be, but you should expect it will be a lot lower than it was in fiscal '26.

And then to the other part of the question in terms of thinking about the comps on billings on an underlying basis next year, I think a big part of that depends on how we close Q4. We've got a very large EBA cohort still to close. Most of that is loaded towards January. So I think that will largely dictate what the underlying business growth is next year. But -- so it's hard for me to give you any specific views on '27. At this point in time we are working through our plan ourselves. But ultimately, you should see billings and revenue converge.

Perfect. That's really helpful. And then maybe moving to the go-to-market transition. So we talked earlier, this has been a multiyear approach. We've seen a number of these transitions. More recently, you've talked about the move to self-service. That's been a tailwind to the Autodesk store.

Next year, it sounds like there's going to be some changes to comp incentive plans for partners. So could you just unpack a little bit of that more? What changes should we expect going in next year? Andrew, that could be one for you? And then, Janesh, in terms of how we see impact to the model from those changes? Maybe you could talk through what you're contemplating there?

Again, we always said it's a multiyear go-to-market transition. The big part that we saw this year was getting the self-service ramped up, getting through the new transaction model changes. We've lapped out. We're in good shape. Heading into next year, what you're seeing is this now -- all right, let's turn that self-service around renewals and things like that into an advantage.

So the partner comp structure is changing. The amount of money we're putting in commissions into the partner ecosystem isn't changing, but how they earn that money is changing. Significantly less money is paid out on renewals, a lot more is paid out on new business generation. And that's part and parcel of how do we turn the new transaction model, the intelligence we've got about the customer, the self-service we're building in around renewals into incremental value for Autodesk in terms of getting out to those new personas we've been talking about, getting some of those new products growing in particular ways.

That's the first step of doing that. Now obviously, there will be some churn and kind of disruption associated with that. We factored that in, but that's the big change that's coming next year.

Perfect.

Yes. In terms of the model next year, I think Andrew covered the highlights already, right? For us, this has been a multiyear transition. We signaled to the investment community to our partner community, what we were doing long before we did it, and then we went ahead and did it. And so far, it's played out consistently with the way we would have expected. And there's more to be done. We signal to the partners that we're going to make the changes. Then we announced the changes in the third quarter, so well ahead almost 6 months ahead of when they actually take effect.

And so we've been very consistently telling the investment community and the partner community that this is the direction we're headed. And so that's all played out quite nicely for us. So that just underlies that consistency of execution and momentum that I talked about earlier.

Perfect. And Janesh on margin. So you have the out-year target of 41%, 45% on an adjusted basis. So can you talk through the trajectory in getting there? Because you've commented earlier that, that's not going to be a linear path. So maybe you could elaborate a little bit more on that. And then as we think about the levers to getting there, I know on the AI side, you've talked about the potential to see gross margin compression. I would imagine the offset of that is operating OpEx efficiency. So how should we think about those moving pieces?

Yes. Taylor, maybe I'll take those in reverse order. I'll just describe what the levers are, and then I'll talk about the path to getting there. So in terms of the underlying levers, the biggest one is going to be our continued go-to-market optimization. And that continues into next year. It's been a multiyear journey for us.

So -- as we said, that's been progressing nicely so far, but there's more to be done on that front. The other big lever for us is just the inherent operating leverage that we've got in the business. You've seen us deliver consistently against that this year. And as we continue to grow, the marginal dollar of revenue may not need the same marginal dollar of investments, and you will start to see some of that.

And as we get that operating leverage and realize that, it's a conscious investment decision we make in terms of how much we invest back in the business, particularly for R&D and we think about our future from a long-term perspective versus how much we flow through to the bottom line. So that's played quite nicely for us. Embedded in that is the fact that as some of these cloud-based workloads increase, they will put pressure on the gross margin. It's gross profit accretive in terms of dollars of gross profit, but in percentage terms, it does create a little bit of margin dilution and we factor that in into the 41% that we outlined.

So those are some of the big levers that we think about. In terms of the path to getting there, we've said it will be a nonlinear path. And the main thing there is when we talked about the incremental headwinds from the new transaction model on operating margin, most of that will get layered in next year. So it's more around just the mechanics of the new transaction model rather than anything underlying in the organic health of the business.

In fact, this year, it's been a good year for us when we laid out that target at Investor Day back in October. At that point, our current year view was 37%. We've already bumped that up 50 basis points, so we're already well on our way there.

Perfect. And maybe in the last minute or so that we have left, we can talk about a couple of the pricing levers Autodesk has -- so I know you guys have spoken about there's a cohort of your customer base that's sitting on heavily discounted licenses, right? There's maybe the opportunity to monetize that a bit more as we look ahead.

So could you just talk about how you're thinking about the opportunities from price going forward, how that could contribute to growth? And then also two, as you see the pricing model evolve. How should we think about that playing into the mix too.

Yes. So to start with that cohort comes up in fiscal '29, so it's a long time away. And even when that comes up, we give those customers a very natural glide path of some sort. For those of you that are thinking way out into the future already, I would not think about a step function change, but it's more of a glide path. But more broadly, in terms of pricing, we think about pricing largely as a function of value and I'll keep the response brief because we're almost out of time.

But inherently, as we deliver more value to the customers, we think about how we monetize that. That could be in the form of price increases. That could be in the form of new products. But importantly, as we think about new monetization models, particularly in the world of AI, there will be some functionality that gets delivered in the existing products for the existing prices around task automation, as Andrew mentioned.

And then as we think about more usage-oriented models, those will be more for workflow automation and system automation kinds of use cases where the value that we deliver to the customer will largely be metered differently and measured differently. So we'll use consumption-based models for those.

Perfect. So with that, we're out of time. So everyone, let's give Andrew and Janesh a round of applause, and I appreciate all your insights today.

Thank you, Taylor.

And Taylor as well. Thank you.

Thank you, everyone, for joining.

Thank you for standing by, and welcome to Autodesk's Third Quarter and Full Year Fiscal 2026 Earnings Conference Call.

[Operator Instructions]

I would now like to hand the call over to Simon Mays-Smith, Vice President, Investor Relations. Please go ahead.

Thanks, operator, and good afternoon. Thank you for joining our conference call to discuss Autodesk's Fiscal Third Quarter results.

Andrew Anagnost, our CEO; and Janesh Moorjani, our CFO, are on the line with me. During this call, we will make forward-looking statements, including outlook and related assumptions and on products, go-to-market strategies and trends. Actual events or results could differ materially. Please refer to our SEC filings, including our most recent Form 10-Q and the Form 8-K filed with today's press release for important risks and other factors that may cause our actual results to differ from those in our forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. Autodesk disclaims any obligation to update or revise any forward-looking statements. We will quote several numeric or growth changes during this call as we discuss our financial performance. Unless otherwise noted, each such reference represents a year-on-year comparison. All non-GAAP numbers referenced in today's call are reconciled in our press release and supplemental materials available on our Investor Relations website.

And now I will turn the call over to Andrew.

Thank you, Simon, and welcome, everyone, to the call. We delivered strong results today, with revenue and non-GAAP earnings per share topping the higher end of our guidance ranges with billings, non-GAAP operating margin and free cash flow exceeding our expectations. We are again raising our full year guidance across the board.

As demonstrated at Autodesk University, shared during our recent Investor Day and reflected in our results today, we're well positioned to deliver for Autodesk customers and investors, even in an uncertain geopolitical, macroeconomic and technological environment. We are successfully executing on the most far-reaching transformations in enterprise software, redefining our business model, go-to-market, products and platform.

In doing so, we are making Autodesk more resilient and unlocking new avenues for growth and margin expansion. We're enhancing our products with cloud-based platforms and capabilities that seamlessly connect design and make workflows to deliver more value to our customers and expanding our addressable market opportunity. We're building a platform with a vibrant third-party ecosystem that will make our solutions more valuable, enable new monetization opportunities and make Autodesk more efficient. And we're defining the AI revolution for our industries, empowering customers with new task, workflow and systems automations and capturing shared value through subscription, consumption and outcome-based business models that blend human and machine capabilities.

Autodesk is building the future and the path to it. Our best days and greatest opportunities lie ahead. I've never been more confident in the long-term value we are creating for our customers, the industries that shape the world and for you, our shareholders.

I will now turn the call over to Janesh to discuss our quarterly financial performance and guidance. I'll then come back to update you on our strategic growth initiatives.

Thanks, Andrew. Q3 was another strong quarter. Overall, the underlying momentum of the business was similar to prior quarters and better than the assumptions we had built into our guidance range. We again saw strength in AECO where our customers are benefiting from sustained investments in data centers, infrastructure and industrial buildings, which is more than offsetting softness in commercial. Upfront revenue, the Autodesk Store and billings linearity during the quarter were also stronger than expected. Our go-to-market optimization plan remains on track and operational friction from the new transaction model implementation continues to ease.

Total revenue in the third quarter grew 18% as reported and in constant currency. The contribution from the new transaction model to revenue was approximately $124 million in the third quarter. Total revenue grew 12% in constant currency and excluding the impact of the new transaction model. Please see the tables in our press release, earnings deck and excel financials for details by product and region.

Billings increased 21% as reported and 20% in constant currency. The contribution from the new transaction model to billings was approximately $135 million in the third quarter. Billings grew 16% in constant currency and excluding the impact of the new transaction model. As a reminder, our billings growth this year is skewed by the new transaction model and by the transition to annual billings for most multiyear contracts. These tailwinds will significantly diminish next year. RPO of $7.4 million and current RPO of $4.8 million, both grew 20%, benefiting from tailwinds from the new transaction model.

Turning to margins. Third quarter GAAP and non-GAAP operating margins were 25% and 38%, respectively, reflecting year-over-year increases of approximately 330 and 120 basis points, respectively. This reflected operating leverage and ongoing cost discipline and was partly offset by the margin drag from the new transaction model. Our margin progress this year sets us up well to achieve the long-term margin goals we talked about at our Investor Day. We still expect progress towards that goal to be nonlinear, given incremental headwinds to reported margins in fiscal '27 from the new transaction model.

Third quarter free cash flow was $430 million, which benefited from the earlier timing of billings in the quarter and lower cash tax payments. As a reminder, our free cash flow growth rate this year is also skewed by the transition to annual billings for most multiyear contracts. This tailwind will also significantly diminish next year.

Moving on to capital allocation. We purchased approximately 1.2 million shares for $361 million at an average price of approximately $306 per share. Year-to-date, we have repurchased 3.7 million shares for approximately $1.07 million. Turning to guidance. I will again speak to the numbers excluding the impact of the new transaction model and in constant currency, to give you a clearer view of the underlying dynamics of the business.

In the earnings deck, you'll see that we've split the impact of the new transaction model and currency movements for our fiscal '26 guidance. We've assumed the underlying momentum of the business remains consistent with previous quarters for the remainder of fiscal '26. We have a large pool of EBA and product subscription renewals to close in the fourth quarter of the year, and we'll also have our toughest new transaction model billings and revenue growth comparisons with last year. The macroeconomic environment seems broadly stable, but macro uncertainty remains elevated, and we remain mindful of potential disruption as we continue to execute our sales and marketing optimization plan.

So we built some risk into our guidance range for the remainder of fiscal '26 and expect to again reflect these factors in our fiscal '27 outlook in February. We remain disciplined and focused on the controllable factors that drive our revenue, operating margin, earnings per share and capital allocation which are the key building blocks of free cash flow per share.

Reflecting all this, we raised our billings guidance range to between $7.465 million and $7.525 million and raised our revenue guidance range to between $7.15 million and $7.165 million, which flows through the current momentum of the business through our full year underlying guidance. The bottom end of our full-year guidance range reflects some macroeconomic risks for the final quarter of the year.

We've raised our non-GAAP operating margin guidance for the year to approximately 37.5% or approximately 40.5% on an underlying basis, which excludes the impact of the new transaction model. We've also raised our free cash flow guidance range to between $2.26 million and $2.29 million. As we said last February, utilization of U.S. deferred tax assets will mean we pay little U.S. federal cash tax in fiscal '26.

We do not, therefore, get incremental cash benefit from the One Big Beautiful Bill Act this year. Further, we now expect to buy back approximately $1.3 billion of stock, which is at the high end of our previous guidance and a 50% increase compared to fiscal '25. The slide deck on our website has more details on modeling assumptions for the fourth quarter and full year fiscal '26.

Andrew, back to you.

Thank you, Janesh. Autodesk is focused on the convergence of design and make in the cloud, enabled by platform, industry clouds and AI. We are at the forefront of convergence because we've been evolving and investing in the business models, products and platforms and go-to-market to capitalize on it. We are at the forefront of neural AI foundation models, which we are deeply integrating into our products, not as a surface level add-on, and have access to decades of digital data, enabling us to generate greater value for the next wave of AI for the physical world.

AI will enable inference across tasks, workflows and systems, which will supercharge convergence. Let me give you a few examples of our progress in the quarter. Our customers in AECO architecture, engineering, construction and operations are demanding convergence to reduce risk, increase quality and optimize costs and resource use during the design and build phase of an asset and to yield enhanced efficiency, resilience and reuse during the operations and maintenance phase of an asset. Autodesk Construction Cloud has growing momentum with owners, designers, GCs and subcontractors seeking to converge design and construction workflows.

For example, a leading global food processor and asset owner is migrating over 700 active projects from a competitive solution to address challenges with end-to-end capital project management, infrastructure owners like the South Carolina Department of Transportation will replace legacy tools with Autodesk Solutions to execute long-term plans to improve state infrastructure and resolve maintenance and resilience challenges.

Integrated design build companies like Daiwa House Industry Co. Ltd, a pioneer of industrialized construction in Japan is adopting Autodesk Construction Cloud and Autodesk informed design to connect its manufacturing and construction processes, placing Autodesk at the center of its common data environment for building systems. And general contractors like Flynn Group are migrating to ACC to unify design intent with field execution in a single data environment to improve project coordination and efficiency. These stories have a common theme.

Converging people, processes and data across the project life cycle to increase efficiency and resilience, while decreasing risk. Our comprehensive end-to-end industry cloud and platform drive convergence and extend our footprint further into the larger growth segments like infrastructure and construction that we discussed at Investor Day. All of this is reflected in our sustained strong revenue and new customer momentum in infrastructure and construction.

Our manufacturing customers are also demanding convergence to drive cost and research efficiency during the design and make process by converging product development workflows in the cloud, leveraging centralized and granular data in unified data models and embracing AI-driven automation capable of industry transformation.

For example, industrial machinery companies like Micro Matic are replacing disconnected competitive solutions with our unified Design and Make platform to connect data and workflows, which increases collaboration and drives efficiency and speed to market through component reuse and fast, reliable iterations. Machinists at an American cosmetics company will save hours per week by using Fusion for manufacturing and simulation to automate nesting, tool pass, 3D printing and programming of multi-access machines to create spare parts.

To further strengthen and scale its integrated design and manufacturing processes, total environment is leveraging Fusion's advanced capabilities in manufacturing, simulation, design and data management by unifying workflows on a single platform. The company will eliminate disconnected tools, enhance collaboration and improve efficiency across its operations.

And a French automobile manufacturer is adopting Fusion to produce electric motor prototypes after a benchmarking analysis shows the Fusion platform to complete a machining task in 12 hours, which is 10 and 15 days faster, respectively, than competitive solutions. Converge data opens up new opportunities for Autodesk as customers seek to drive efficient innovation. Fusion is driving strong growth with extension attach rates increasing and driving average sales prices higher, and we're delivering meaningful productivity gains to customers where we deploy AI.

We have continued to see success with our AI-powered Sketch AutoConstrain in Fusion. Since its launch this year, the AI model has delivered over 2.6 million constraints and has been retrained and the UX improved all along the way. The acceptance rates for AutoConstrain suggestions to commercial users have grown to more than 60%, with 90% of those sketches fully constrained.

In education. Wake Technical Community College, Kimley-Horn and Autodesk have entered a strategic partnership to prepare more than 6,000 students for high-demand careers in design, engineering and construction. This initiative will Integrate Fusion, Forma, Civil 3D and Autodesk Construction Cloud into WTCC's course work with Kimley-Horn's nationally recognized internship program. creating a direct pipeline from classroom to career. And lastly, we continue to find new ways for our customers to consume our products and services in ways that work best for them.

For example, a multidisciplinary AEC consultancy firm is using Flex.consumption to rapidly scale and manage projects across multidisciplinary teams and distributed supply chains to accelerate project delivery and reduce risk. Attractive long-term secular growth markets, our focused strategy of delivering ever more valuable and connected solutions to our customers and a resilient business are generating strong and sustained momentum, both in absolute terms and relative to peers.

Our disciplined execution is driving greater operational velocity and efficiency. We are deploying capital to grow the business, further reduce share count and enhance value creation over time. In combination, we believe these factors will deliver sustainable shareholder value over many years.

Operator, we would now like to open the call up for questions.

[Operator Instructions]

Our first question comes from the line of Saket Kalia of Barclays.

Great to see the better results. Well done. Andrew, maybe to start with you. I'd love to pick up on the theme from Analyst Day a little bit and see if you could just weigh in on sort of the seats versus consumption AI monetization debate for Autodesk. But maybe also as part of that, touch on your broader ecosystem of partners and customers. Does that make sense?

Yes, that does make sense. And thanks for that question. It's very proposed. So look, there's 3 things we want to pay attention to here. The first one is there's still a fundamental capacity challenge in all the industries we serve, AEC and manufacturing. There isn't enough current capacity to meet all the demand for what needs to be built or the supply chain needs that need to be throughput inside of both manufacturing and AEC. So we have a capacity challenge. The second -- so there's a lot of work that just needed to go to kind of create more capacity.

So the second thing, I think it's really important is, in the future, there's still going to be projects that require intensive human engagement in order to successfully execute. They're going to be more complex. But there's also going to be projects in the future where there's less requirements for human engagement, machines are going to execute more on these things. And there's going to be a balance between these 2. And the last thing is something I've been saying over and over again. Our goal is to decrease the number of people that are working on a particular project, but increase the number of projects that our customers in our ecosystem are executing.

And if you do that, what you're going to see is we're going to be capturing incremental consumption value through the things that we do by monetizing machine-based execution, providing outcomes and all things associated with that, while also still supporting the people-based work that's going to go on the ecosystem. This is equally true of our customers.

Our customers are going to be seeing their balance shift from sometimes, in some cases, billable hours to also consumptive execution through machine-based execution based on their intellectual property and their IP and their unique knowledge set. So we're all in the same journey together, but it's going to play out over time. And you're going to see us actually capturing more value and creating more capacity for the industry we need because the industry desperately needs it.

That makes a ton of sense and super helpful. Janesh, maybe for my follow-up for you. I appreciate the detailed guide for this year. I was wondering if you were able to just give us any color on fiscal '27 high level as we think about our models.

Saket, I'm happy to do that. So let me elaborate a little bit on what I said in the prepared remarks. First off, just by way of context, the business is clearly performing very well this year. That said, we've got a lot of business to close, particularly in January. The second thing I'd point out is our sales and marketing optimization plan has gone very well so far, but we are not complete with that. We touched on this a little bit at Investor Day. So I think there's still some risk of disruption next year.

And then finally, while the macroeconomic indicators have been broadly stable, uncertainty does remain elevated in the environment. So just -- we just think it's best to maintain a prudent posture on our underlying growth for fiscal '27. We are performing very well this year, and we're looking forward to the rest of the year.

Our next question comes from the line of Adam Borg of Stifel.

Just on the Autodesk Construction Cloud, it's great to hear the continued traction and even the customer coming over, migrating 700 active projects. When you think about your existing Autodesk Construction Cloud installed base, for those existing customers, how penetrated are you in terms of the projects that are already brought over to Autodesk? Any color around that and the ability to continue selling broader parts of your growing ACC portfolio, be it payments or preconstruction, et cetera, would be really helpful. And then I have a follow-up.

I really like that question. Okay. So first off, let me just start at the fundamental level, right? The reason why Construction Cloud is doing so well is that we've got this design to preconstruction through construction execution solution. It's completely unique in the industry, and it's built on a modern platform, this is not an aging platform that's going to kind of age out of what people need in the future.

It's a highly connected, AI-ready, SaaS-based platform. That's really a huge selling point for us. And what you just mentioned there, Adam, is completely true as we're acquiring new customers and penetrating new accounts and displacing competitors in lots of accounts, what we're doing is we're starting off with a set of projects. So we're not even fully penetrated in all the projects that we've executed with our customers to date.

I mean, in the accounts where we are with our customers today. So there is actually not only increased penetration that will happen over time within the accounts we have as new projects come and light up and old project sunset, but there's also additional expansion just driven by the power of our value prop.

That's really helpful. And maybe just building on the theme of converges in design and manufacturing. We talked about this a little bit at the Investor Day, but as you think about convergence and the opportunities with Fusion over time, how do you think about the PLM market more broadly for Autodesk.

Yes. So another great question, right? And I really appreciate it. So first off, remember, we're targeted the mid-market, and that's where there's a lot of growth in supply chain activity. These customers need convergence because they need this end-to-end digital productivity. And I just want to make it super clear to everybody. Most of those customers have nothing with regards to PLM. They don't have anything, all right? They may have a data management solution, they may not. Most of their work is actually done through spreadsheets and ad hoc connectivity with some of their ERP systems.

They don't have any kind of strong data management or life cycle solution. We're building a solution for those customers. And we're going to go in there and say, you can get what the big boys have and you can get the kind of control and the cloud visibility and the cloud data flow that was reserved only to a few, and they need a modern platform. They need a SaaS-based platform. They need what we're bringing with Fusion.

So that's how I look at the market. We built these capabilities in the Fusion. We're going to continue to enhance them. And we're already starting to see success with small accounts of 2 to 3 users expanding to larger accounts because we have these tools that are really hard for a lot of people in the mid-market to get and deploy.

Our next question comes from the line of Jay Vleeschhouwer of Griffin Securities.

Andrew, my first question for you is a corollary to the question I asked you a quarter ago about the pace of new technology adoption. And the question has to do with something interesting you said at AU, I think it might have been a main stage, where you said as far as your customer base is concerned, that "no one gets left behind" which is an important general commitment, but what are the practicalities of that in terms of customer migration, packaging, promotions, all those sorts of things that you've done or will need to do with regard to migrating your customers in a way that you implied.

Yes. So look, we're attacking this from multiple vectors, okay? So first off, packaging is the first one, right? As you know, if you're a collections customer or Revit customer, you get the form of design application shipped with your bundle. So you're already getting something that is you're paying for the future and the present, right? So you're capturing the value right there and you're part of the ecosystem.

The other thing that we're doing is, we're also making sure that we have the CDE available to as many customers as possible. That's form of data management, and we'll talk more about that in the future, which is a really important piece of the puzzle as well. The other thing that's really important, and it needed to get airtime because you're going to see something similar evolve in the Fusion world as well as we talked about Revit is rolling out as the first Forma Connected client next year.

And what that means is what we're doing is we're tightly connecting the workflows between the feature-deep desktop product that customers use today and the evolving emerging product they'll be using tomorrow so that they can seamlessly move between these 2 products in such a way that they can get the benefit of one, while also harnessing simply and easily the benefit of the other.

And that's a really important part of the strategy as we move forward. Because the adoption does take time. It takes time for people to change these things. And we're also hyper focused, especially in the AI side on rolling out features that may not look sexy at the headline level, but are real productivity enhancers for our customers that get real adoption.

What you're seeing with AutoConstrain and Fusion is a great example of that. It's a highly adopted feature. Now explaining it to everybody exactly what it does usually requires a video, but to a customer, they get it, and they love it. They accept these things, like 60% acceptance rates. Some of the these sketches are 90% constrained. It's the kind of stuff that you're going to see us continue to roll out that really makes a difference in how our customers work.

Janesh, for you, given the revenue upside across each of the segments, could you comment on any new or incremental trends you're seeing in usage telemetry, either by vertical or geo or a stand-alone product versus collections, anything of that time in terms of the usage component that helped drive some of that growth in AEC, manufacturing and so forth.

Jay, thanks. What I'd say is the momentum in Q3 continued from the first half and the trends we saw in Q3 were similar to what we saw in Q2 as well. And you see that strength reflected in the different product lines and the different areas of the business. I touched on some of the areas within AECO, for example, around data centers, infrastructure and industrial that were all bright spots again. And you see that reflected in products as well. Similarly, when you look at the Autodesk Store and some of our emerging geographies that did well, you'll see the trends reflected in those -- the products that get sold in those -- through those routes as well. So overall, I'd say it was very consistent with what we had seen in Q2. Nothing new that I would highlight as an emerging trend.

Our next question comes from the line of Jason Celino of KeyBanc Capital Markets.

I wanted to ask about the normalized growth you saw this quarter, the 12%, again, similar to last quarter, a slight acceleration. But was there -- like what was the inorganic contribution to that normalized number? I'm just trying to understand if there was some modest acceleration than if there was, what do you think drove that?

Yes. I'm happy to touch on that. There was nothing unusual with respect to M&A activity in Q3 that affected those underlying growth rates and say, what we saw there was just the continuing momentum that we've seen in the business, as I mentioned just a moment ago, the sources of where that outperformance came from in terms of the upfront revenue, the Autodesk store and stronger billings linearity during the quarter, I think all of those played a role in helping us get to the ultimate outcome that we delivered over here. So overall, it was a strong quarter across the board. The team executed really well, and I think that's what you're seeing reflected in the numbers.

Okay. Great. No, that's helpful. And then when we think about the commentary around the EBA cohorts that you have for Q4, I'm just curious what type of behavior you've seen so far from like a renewal standpoint, or if customers are willing to engage earlier. Just curious if you have any tidbits that will be helpful there.

Jason, in terms of what we saw in Q3 was very strong engagement from many of those customers. We closed all the business that we were expecting to close. And if I think about some of the typical metrics that we have around attach rates and so forth, those all played out as we expected they would. Q4 is our largest quarter for EBA renewals and we also have a very large product subscriptions renewal cohort to close here in this quarter. Q4 is heavily weighted towards January. So there's still a lot that we need to get done. But again, the team did well here in Q3 and that momentum has continued nicely.

Our next question comes from the line of Taylor McGinnis of UBS.

Andrew, first one for you. Just on you mentioned earlier about still some elevated uncertainty out there, but it sounds like you guys are seeing some strength in areas like data centers, industrials and whatnot. When you speak with customers regarding their spending plans across AEC, manufacturing and M&E for calendar 2026 or fiscal year 2027, I guess any early insights that you could share with the group in terms of what you guys are expecting to see?

Yes. Customers aren't flagging any differences in their spending pattern, all right? I think one of the things that's really, really important to note is, one, the current momentum is going to continue a little bit. And also what the customers are looking for is they're preparing for future productivity enhancements. So everyone is investing in their digital infrastructure [indiscernible] for any changes in the demand patterns, what sector might be more important as we move forward. So most of our customers are flagging a continuation of their investment. Some areas are flagging a little bit more investment because they've been kind of maybe slow on the investment in the past. But we don't see anything changing in terms of the consistency level right there.

Perfect. And then, Janesh, maybe just one for you. On billings growth, you made several comments in the prepared remarks just about how growth has been elevated this year because of the new transaction model and also because of the larger base of multiyear billings customers, and we're going to start to lap that going into next year and see some moderation in growth.

So can you just help us unpack the mechanics there a little bit more. So as we look into 2027, could we start to see if we adjust for FX in the new transaction model revenue growth and billings growth start to align with one another? Or is it possible that we could actually see some tougher comps and maybe there's a divergence between the 2? Any additional color you can give there, I think, would be helpful.

Taylor, I'll break that into 2 parts. One is around the underlying business performance that you mentioned and the second is just the mechanical aspects of modeling the growth for fiscal '27. So first, in terms of just the underlying growth that we see in the business, we feel very good about this year. And if you look back at the last couple of years, we've demonstrated consistent growth, and that trend has continued in this year. We've also talked before about the diversification of our business across industries, across geographies and customer sizes. That's a strength for us.

And again, we saw that play out here in Q3 as well. If I look ahead, we're excited by the growth potential of businesses like construction, in Fusion, infrastructure and some of the others that we outlined at Investor Day. So overall, I think we're executing really well, including on the AI strategy and road map, and we feel very well positioned in that regard.

So if I think about the growth for the future, I think all of those things give me confidence, but also when I guide for next year, we will consider, as I mentioned, the go-to-market optimization and the macro risks that I touched on at the start of this call. And then in terms of some of the underlying mechanics, thank you for the question. I think it's actually helpful to spell out what we expect to see next year.

So to break that apart, if I think about the billings and free cash flow growth rates this year have been inflated because of the transition to annual billings for most multiyear contracts. That's a business model transition that we expect to complete during Q1 of next year. And so we expect that reported billings and free cash flow growth will start to normalize during next year.

Billings and revenue growth rates have also been inflated this year from the new transaction model for which we provide the details separately on an underlying basis. And on that transition, we expect a smaller impact from that in '27 than we had in '26. We'll also have incremental headwinds to reported operating margins from the new transaction model next year. But ultimately, as you know these are just near-term accounting effects, and the underlying business has been performing consistently well. Our goal is to try and get to as reported numbers as soon as we can. So that will be our focus in the future.

Our next question comes from the line of Elizabeth Porter of Morgan Stanley.

I wanted to follow up regarding some of the new AI capabilities like AutoConstrain, which appear to have the high acceptance rates and measurable productivity gains. The question is, are these product improvements translating into observable changes in retention, multiproduct adoption or expansion activity. And just as the platform overall delivers more value with AI, how are you thinking about the pricing power. Any sort of larger, more periodic price increases or a steadier cadence tied to just incremental AI-driven capabilities? Is that an opportunity that you look forward to?

Yes. So thank you for the question, Elizabeth. So first off, let's be very clear, this is a multiyear journey here that we're on, right? And I want to be clear that there's -- we're going to be kind of moving along with our customers here and focusing on key areas of adoption and finding levers of productivity that make a real impact on them.

We're starting with tasks, AutoConstrain is a classy example of a task within the modeling. We're going to do a lot of that. That task automation is highly protective of our existing business. And what the customers love is they see large incremental productivity increases that are not classically easy to replicate in a traditional kind of development model and feature creation model. So task automation is highly protected with the existing business, is highly retentive and we see some of that with some of the satisfaction ratings we get with some of this technology we move forward.

We're going to be moving more and more into workflow automation, as you see us move next year. We talked about some of this at AU, we showed some pretty compelling workflows between various products and across various products from design to preconstruction planning and things like that. Those workflow automations are going to ultimately offer additional monetization opportunities because some of it will be included with the subscription, but some of it will not, will be charged for incrementally.

And as the customers adopt those and as we find the right workflow levers, you're going to see us start to capture some of that value. Now as we move down the curve into systems-level optimization, those are going to capture the most value. They're further down in the pipeline, but they're also the kind of things that have huge impacts on our customers and huge value delivery, and we're going to capture some of that value.

We're going to share some of it with our customers, but we're going to capture that value. So [indiscernible] automations are highly retentive. They have retentive effects. You can see that with the way the customers are satisfied with the product and what they see in the product. The workflow automations are going to be also highly retentive, but they're also going to offer incremental monetization opportunities and system-level optimizations will offer more monetization opportunities. But this is going to take time.

Great. And then just as a follow-up, I wanted to ask on the margins where it was really impressive to see the underlying margin expansion kind of move up in the full year guide. So the question is, where are you seeing the most outsized success that's driving up the full year view? And what are the levers that are having more of an impact in the near term versus what can be more of a driver next year for the underlying margin trajectory?

Elizabeth, maybe I'll take that one. I think the underlying levers are the same near term as well as longer term. The biggest lever in terms of achieving our margin targets over the long term will be our go-to-market optimization. And on that, we've already made great progress so far, and that will ultimately further reduce our sales and marketing as a percentage of revenue.

We also have inherent operating leverage, which is something that we've demonstrated for a few quarters now. And so that shows up in the near-term numbers, and that will also be a driver for us longer term. And embedded in that operating leverage, there are a few puts and takes. To start with, on the gross margin front, we expect that cloud and AI workloads will ultimately be accretive to gross profit dollars, but they will pose a headwind to gross margin as they scale.

We think that's actually a sign of success if that happens in terms of our strategy for adoption working quite nicely. On the R&D side, as we've shared before, we will continue to prioritize investments in innovation and AI-driven initiatives, but at the same time, drive efficiency through common components in the platform. And on the G&A side, we will just scale efficiently as we continue to grow the business.

So those are some of the things that I see. And in terms of the rate of progress of getting to the 41% margin target that we outlined, as I had mentioned earlier, the path to getting there will be nonlinear, just given the additional margin headwinds we expect from the new transaction model this year. But overall, we feel we're well on our way to achieving the target, and we've already raised the current year outlook here by 50 basis points. So we feel pretty good about that.

Our next question comes from the line of Josh Tilton of Wolfe Research.

Thanks for sneaking me in, and congrats on another great quarter. Two for me. One more near term, one maybe long term. Just in the near term, I think if I look back, this is probably one of the biggest increases of the billings growth guide going into Q4 that we've seen maybe ever.

And I'm just trying to understand or maybe you could help me unpack what exactly is driving that near-term performance? And then my follow-up to that is just more longer term, the agency transition seems to be going well. I wouldn't say well underway, but I feel like it's hit maybe critical mass to some extent. Can you maybe talk to some of the levers that you have to incentivize this newly formed channel to drive better new business growth for you guys going forward?

Josh, maybe I'll start. In terms of the outperformance that we had here in the third quarter, there's a couple of sources. One is, as I mentioned, just consistent strong execution from the team, which is something that we are all very proud about. But the second is also just in terms of the guidance philosophy that we had and the approach that we took entering the quarter where, as you know, against the low end of our billings guidance, we had assumed a pretty severe macroeconomic scenario, which we had been quite transparent about and that didn't play out.

The broader macroeconomic environment was relatively stable. So I think you saw some of the benefits of that here as well. And if I think about the Q4 view on that and the extent of risk that we've got baked in, there is a little bit of risk baked in at the lower end of the guidance range, particularly on billings. But given that we've got basically just a little over 2 months here left to go in the year, we didn't feel like we needed to take as dimmer view of the macro for Q4, as we had previously taken.

And to the second part, Jason, I mean, Josh, sorry, I'll weigh in on that a little bit, okay? So there's a couple of things that we're enabling with the new transaction. One, we have better customer intelligence which is going to allow us to be more efficient with our partner engagements. The other one is, is we're working really hard to automate more of the things that are associated with renewals.

So if you look at the way we want to move forward, you're going to see us incenting the channel more on new business than on renewals, which is going to align the channel with kind of our long-term objectives. It's easier to make renewals now, so we should be paying less on renewals, and we should be paying more on new business so that the channel can build the right kind of capacity for the new business and hunt a bit more and renew in a more automated way. So look for us to continue to push that as we head into next year, tighter intelligence going into channel, more efficiency, more automation, more self-service tied to renewals and a stronger emphasis on new business generation.

Our next question comes from the line of Joe Vruwink of Baird.

I wanted to go back to the FY '27 outlook. And I guess what I really want to ask is, do you need the same level of prudence when you frame the forward outlook like you have been using. And I just sit here and appreciate that this year, you started 8 to 9. It looks like it will end closer to 11. There's something to be said about prudence, but also nothing wrong with communicating strength when it's evident. And I think you're not only seeing strength, but it would seem like next year, definitely end of stages and some transitional elements, early stages on things like consumption or cloud adoption that can contribute more. I'm just wondering if some of that factors into a different approach to the outlook.

Joe, so look, on fiscal '27, it will make sense to talk about the specifics when we are actually guiding to fiscal '27 in February. What I wanted to do today is share our overall enthusiasm for how we're executing here in Q3. I talked about some of the momentum that we are seeing and some of the factors that continue to excite me about the business in the long run and just be transparent about some of the factors I'll consider when I set guidance in terms of the specific levels of those, we'll talk about those on the next call.

Okay. No, that's fair enough. There are some good sessions from your large customers on how they've set up kind of centralized Autodesk development teams and you have different regional teams that are now building around platform services in a coordinated way. A lot more talk about how agents are factoring into what these teams are now starting to do.

I guess there's this idea still percolating out there that AI is going to make it easier for your large E&C customers, these same entities maybe just do more internally? And I guess I wanted to ask what you're seeing on this topic. And really when we see a large E&C account, talk about data sciences on staff and what they're doing, should we really think, well, Autodesk is ultimately having a role here?

Yes, you should absolutely think that, Joe, okay? Our goal is to make it easier for them to apply their IP with their data scientists to the workflows that make the most impact on their business, but our platform is going to be everywhere in this.

And the services and agents we build associated with our platform are going to be core to how they create that value from their IP, incrementally above some of the models that we build ourselves and that we deploy into their environments. We want to coordinate and work with agents they may build internally with the agents that we have and one should be augmenting the others. So look for our platform to be everywhere that these customers actually execute and incrementally build capabilities on?

Next question comes from the line of Bhavin Shah of Deutsche Bank.

Great. Congrats on the strong results. Janesh, I know you spoke about this briefly in your prepared remarks. But in terms of channel productivity, excuse me, how much time is still spent on operational elements? And when do you think the channel gets back to full productivity? And is there any kind of impact also with all the M&A activity happening with your resellers?

Yes. We continue to address some of the operational friction that our partners faced on the new transaction model. Andrew referenced that as well. I think we've made very good progress, and I think much of that is behind us at this point in time. There's a bit more to be done, but we are well on our way. We saw the EMEA partners get their first renewals here in September on the new transaction model and that generally went as we expected it would.

And I think at this point, we've tapped -- we've lapped all of the first annual renewals. So in terms of the future, we continue to focus on how we and our partners can deliver more valuable and data-driven and connected products and services to our customers. We have seen the strategy working quite nicely, particularly at the low end where many of the customers that previously used to buy from the noncontracted partners or the silver partners are now buying from us directly on the store.

And some of our larger partners are focused on continuing to build out value-added services that allows them to build more connectivity and offer better solutions to customers, which then works quite nicely for us in the long term as well.

That's helpful there. And as a follow-up for Andrew, maybe just for you, there's been some recent headlines about agents turning 2D sketches into 3D models via CAD software. As innovation continues to evolve here, what role can Autodesk play? And how are you thinking about evolving the product capabilities as agentic and copilots that turn sketches into the models continue to evolve?

Yes. I think you should assume that the level of data that Autodesk has in this particular area and the level of focus will certainly excel above anything else you see out there. We just focus where the biggest returns are right now.

Our next question comes from the line of Tyler Radke of Citi.

So the direct revenue has grown significantly. I think it was up 85% this quarter. You called out strength in the online store, the Autodesk store. Just wondering, is this strength? Is this coming in well above your expectations? And how should we just think about the mechanics of taking more business direct and potentially that being a tailwind to the reported revenue that we're seeing.

Tyler, I'd say in Q3, things worked as we expected they would. We were expecting to see an increase in the mix of direct revenue as the new transaction model continues to scale. So that generally played out the way we expected it would. And in terms of the impact of that on the model, it does affect the as-reported numbers, as you know, which was why we also provide the views on an underlying basis.

I'd say the store strength has continued for some time. A portion of that might be channel shift, but a lot of it is also just general strength we've seen particularly in a number of the countries around the world that we've talked -- where we haven't rolled out the new transaction model, we've been seeing strength in those countries as well. So I think it is a bit broader based on that.

Great. Helpful. And then, Janesh, just on the underlying growth, I know you got some questions on this, specifically as we think about FY '27 guidance. But you started off the year in sort of the high single-digit ballpark. And I think if we look at the Q4 guide, normalized growth is closer to kind of the low teens. Is that a fair characteristic of where the underlying growth of the business is today? Maybe there's some onetime revenue in that Q4 number as it relates to EBAs. Just help us understand like where is that underlying growth of the business in your view now? And I assume that's maybe a few points higher than it was at the beginning of the year.

Tyler, at the start of the year when we laid out our guidance, again, we had been prudent for a variety of reasons. It was also my first guidance for the full year as CFO, we had just done a restructuring. There were a number of other factors as well that played into that. But if I -- and at that point, I had mentioned that I viewed the business as being a consistent and resilient business. And I think that's played out quite nicely.

If you look at the growth we've seen over the last couple of years. And then if I look at this year, we've had very consistent growth across the 3 quarters of this year and that same consistency is implied in the guide for Q4 as well. So we feel very good about the way we've executed and all the irons we have in the fire to continue to sustain our momentum in the future. But again, we will consider our overall risks around go-to-market execution as well as the macro when we guide.

Our next question comes from the line of Ken Wong of Oppenheimer & Co.

Andrew, I wanted to circle back on a comment that you made about the incentive structure to partners. I realize that you guys are taking it down on renewal to incentive some hunting. Any early feedback from partners and I realize it doesn't take effect usually until February, but any early behavioral changes that you guys are noticing from the channel?

Yes, nothing pronounced, okay? No early changes. Obviously, partners always have lots of questions when we change their incentive structure. But generally speaking, they get what we're trying to do and they understand what's going on here. We're not trying to take money out of the channel ecosystem. We're trying to shift how it gets paid out. It makes total sense to them. We haven't seen any initial kind of changes in their behavior right now at all.

Okay. Perfect. And then on the VBA side, Janesh, I realize you're not expecting any tailwinds on the free cash side. Are you guys seeing an early impact on the top line in terms of kind of customer spending behavior or any customer project activity?

Nothing that I would directly attribute to the One Big Beautiful Bill Act yet.

Our next question comes from the line of Koji Ikeda of Bank of America.

I wanted to follow up on a previous question on free cash flow. And Janesh, I think you mentioned there's about 2 more quarters left before free cash flow normalization. Did I hear that right? And then beyond that, what should quarterly free cash flow seasonality look like? Is there a fiscal year example from the past that we could look at that would be a good representation of what it would look like going forward?

Yes. Koji, the comment earlier was around the growth rates that we would expect will come down. If I think about the absolute dollars of billings that we have at this point in time associated with the change in the multiyear to annual billing transition. I think that piece is done. But in terms of thinking about cash flow and providing maybe a general rule of thumb, I would say holding aside any significant discrete items we generally would expect free cash flow growth to be correlated with our underlying non-GAAP net income growth. And of course, we will call out any large discrete items when we provide guidance.

Got it. And then maybe a follow-up here question for Andrew and thinking about the AI strategy and the data access strategy for AI through MCP and API calls. How have customer usage trends been around there? And any update on how we should be thinking about any timing of the monetization opportunity with the data access strategy?

Yes. So there's actually a fairly robust use of some of our APIs by the customers. And also, [indiscernible] monetizing some of that access as well and a lot of customers are expecting that. Most customers won't be impacted by that, but those customers that are most heavily using machine-based kind of applications associated with our APIs, will probably see impacts in terms of billings associated with their usage, right? Again, the AI monetization will play out over time. The API monetization will play out over time. But MCPs and APIs are definitely another source of monetization that you'll see us pulling the lever for as we move forward.

Our next question comes from the line of Michael Turrin of Wells Fargo Securities.

I'll give you a chance to summarize some of the prior comments. I think high level, the question is you're raising numbers across the board. For fiscal '26, it's not something we're seeing a whole lot of across software these days. So maybe just expand on your perspective around what's driving that and how much of that is beyond the scope of just macro and business model changes. And then on CAD, specifically, it's another quarter of standout growth 15%. So maybe touch on that segment and if there are any specific dynamics to be mindful of there as well.

Yes. I'm happy to touch on both of those. If I had to summarize Q3, I would say it reflects the consistent momentum we've seen from sustained execution this year against the backdrop of a stable macro, while on the guide at the lower end, we had assumed that the macro would worsen. So I think it's both our execution as well as the more prudent guidance assumptions that didn't play out.

In terms of the growth of the AutoCAD business, there's a few factors there. That growth is partly affected by just the mechanical accounting on the new transaction model as well. So I think that's part of what you're seeing. But also, we talked about strength in the Autodesk store and strength in emerging countries like India and LatAm and the Middle East and some of the AutoCAD strengths that we've seen comes from those countries and from the Autodesk store as well.

And Michael, I'll just add one more thing to this because I have to. We have been making some serious and important strategic decisions over the last 3 years about how our business is structured and how we move forward. You're seeing the results. All right? These are the results that we ultimately said we were going to deliver as a result of those investments and those changes. They were hard changes, difficult lifts. Now you're seeing the performance associated with those lifts.

Thank you. And that is all the time we have for Q&A today. I would now like to turn the conference back to Simon Mays-Smith for closing remarks. Sir?

Thank you, Latif, and thank you, everyone, for joining us. Looking forward to seeing many of you on the road over the coming weeks, wishing my fellow Brits Happy Budget Day tomorrow and my fellow Americans, Happy Thanksgiving on Thursday. Thanks very much, everyone.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Welcome, everyone, and thank you for joining us today. We're delighted to have you with us. My name is Simon Mays-Smith, and I am the VP of Investor Relations. We have a great lineup of presenters for you today. We're going to start with Andrew then have detailed presentations from many of our leaders, and then we'll finish with Janesh's financial update.

We have 2 short breaks planned, and there will be a Q&A session with the entire executive team at the end. Before we start, I have 2 process items to cover. First, please enter your questions any time during the webcast in the Q&A tab. We'll get to as many of them as we can in the time available.

And second, let me share our safe harbor statement with you. I'll let you read through it. But in summary, we may make forward-looking statements during the course of this presentation. Please refer to our SEC filings for information on risks and other factors that may cause our actual results to differ materially from these statements.

Now with that, let me hand it over to Andrew to kick it off.

Good morning, everyone. Thank you for joining us. 5 years ago, Autodesk embarked on one of the most ambitious transitions in our history. Many of you wondered whether a decades-old company could truly reinvent itself for the cloud era. Today, I'm going to show you that we not only succeeded but emerge stronger and more efficient than ever before.

Our business transformation is complete. Our growth momentum remains strong and steady, and we're positioned to lead our industries in the age of AI. Autodesk best days are ahead of us. And today, you'll see how we're building the future and the path to get there, unlocking our next phase of value creation for both our customers and investors.

Before we get to the main event, I want to start with a retrospective. Autodesk has been continuously evolving its business to not only get ready for the future, but to thrive in it. We led our industry to move to subscription and presented ourselves to the world as a modern SaaS provider, driving cloud integration across our entire portfolio.

We led our industry to introduce term consumption models and have built a wealth of knowledge and practices over the years on how to leverage the models for landing new business and expanding in existing accounts. We led our industry to bring consumption to the mass market, and we did this well ahead of the rest of our peers, understanding its importance to AI. We modernized our billings practices to industry standards to deliver smoother and more predictable free cash flow that you see in our financials today.

We shifted away from buy-sell models by going direct to customers to drive efficiency and unlock cross-sell opportunities that simply weren't possible before. We're building out self-service to make it easier to do business with Autodesk. We're moving to monetize API and MCP server access so that we can create value with our current and future IP wherever and however it is used. And finally, we'll offer outcome-based pricing to capture value with systems-level AI capabilities. This work will be a source of future value creation.