It has been about a month since the last earnings report for Autodesk (ADSK Quick QuoteADSK - Free Report) . Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Autodesk due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Autodesk’s Q2 Earnings Beat, Raised Guidance

Autodesk reported second-quarter fiscal 2024 non-GAAP earnings of $1.91 per share, way higher than the Zacks Consensus Estimate of $1.72 per share. The bottom line improved 15.8% year over year.

The company reported revenues of $1.35 billion, which also surpassed the consensus mark of $1.32 billion. The figure grew 9% year over year on a reported basis and 12% on a constant-currency basis. The upside was driven by resilient subscription renewal rates, new business growth and a strong competitive performance.

Top-Line Details

Autodesk’s subscription revenues (94.4% of the total revenues) increased 9% year over year (up 13% on a constant-currency basis) to $1.27 billion. Maintenance revenues (1.1% of the total revenues) declined to $14 million compared with $17 million in the year-ago quarter. Other revenues (4.5% of the total revenues) increased slightly to $61 million from $60 million in the year-ago quarter.

Our estimate for subscription, maintenance and other revenues were pegged at $1.23 billion, $15.7 million and $74 million, respectively.

Recurring revenues contributed 98% to Autodesk’s second-quarter fiscal 2024 revenues. The net revenue retention rate was within the company’s 100-110% targeted range.

Region-wise, revenues from the Americas (43.8% of revenues) increased 14% from the year-ago quarter’s levels to $589 million. Revenues from the EMEA, which accounted for 37.6% of revenues, climbed 7% to $506 million. Revenues from the Asia-Pacific (18.6% of revenues) remained flat at $250 million.

Billings of $1.1 billion declined 8% year over year in the reported quarter.

Product Top-Line Details

Autodesk offers primarily four product families — Architecture, Engineering and Construction (“AEC”), AutoCAD and AutoCAD LT, Manufacturing (“MFG”), and Media and Entertainment (M&E).

AEC (46.6% of revenues) revenues increased 11% year over year to $627 million. AutoCAD and AutoCAD LT (27.1% of revenues) revenues rose 6% to $364 million. MFG (19 % of revenues) revenues increased 6% to $256 million. M&E (7.3% of revenues) revenues climbed 13% to $98 million.

Our model estimate for AEC, AutoCAD and AutoCAD, MFG and M&E second-quarter revenues were pegged at $587.7 million, $369.7 million, $264.4 million and $77.8 million, respectively.

Operating Results

The company’s gross profit increased to $1.22 billion from $1.12 billion in the year-ago quarter. The gross profit margin expanded 20 basis points to 90.6%.

Autodesk reported a non-GAAP operating income of $489 million, up 10.1% year over year. The non-GAAP operating margin remained flat at 36%.

Balance Sheet & Cash Flow

As of Jul 31, 2023, Autodesk had cash and cash equivalents (including marketable securities) of $2.07 billion compared with $2.13 billion as of Apr 30, 2023.

Deferred revenues increased 14% year over year to $4.23 billion. Unbilled deferred revenues at the end of the fiscal second quarter were $991 million, up from $904 million in the previous quarter.

The total remaining performance obligation (RPO) of $5.22 billion and the current RPO of $3.51 billion increased 11% and 12%, respectively. Our estimate for total RPO was pegged at $4.95 billion.

Cash flow from operating activities was $135 million, while free cash flow was $128 million in the reported quarter. In the first half of fiscal 2024, the company generated operating and free cash flows of $858 million and 842 million, respectively.

Raised Fiscal 2024 Guidance

Buoyed by the stronger-than-expected second-quarter performance, Autodesk raised its guidance for fiscal 2024. The company now projects fiscal 2024 revenues between $5,405 million and $5,455 million, up from the previous guidance range of $5,355-5,455 million, indicating 8-9% growth. Billings are now estimated in the $5,075-$5,175 million range instead of the $5,025-$5,175 million band projected earlier.

Non-GAAP earnings per share are now expected between $7.30 and $7.49, up from the earlier guidance range of $7.07-$7.41. Free cash flow is now anticipated in the $1,170-$1,250 million range instead of the $1,150-$1,250 billion band forecast previously. However, ADSK still expects the non-GAAP operating margin to be flat year over year.

For the third quarter of fiscal 2024, Autodesk expects revenues between $1,380 million and $1,395 million. Non-GAAP earnings are anticipated in the range of $1.97-$2.03 per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Autodesk has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Autodesk has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Autodesk is part of the Zacks Computer - Software industry. Over the past month, Synopsys (SNPS Quick QuoteSNPS - Free Report) , a stock from the same industry, has gained 1.9%. The company reported its results for the quarter ended July 2023 more than a month ago.

Synopsys reported revenues of $1.49 billion in the last reported quarter, representing a year-over-year change of +19.2%. EPS of $2.88 for the same period compares with $2.10 a year ago.

For the current quarter, Synopsys is expected to post earnings of $3.04 per share, indicating a change of +59.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Synopsys. Also, the stock has a VGM Score of C.