Will Autodesk's 3-D Migration Help Drive Growth?

Autodesk (ADSK) has reported impressive revenue and earnings growth over a multi-year period. However, their financial model is on the cusp of a transition that will augur in a period where revenue growth is less consistent and less certain.

ADSK has used ingenious operating strategies and business model changes to grow revenue. The most important recent growth driver has been the switch to a subscription (or annual maintenance) model. Looking ahead, migration to subscription will be supplanted by migration to the company’s 3-D products as the key revenue growth driver and this transition represents increased risk. ADSK has also used pricing levers within its distribution model, varying discounts to resellers and raising prices and managing rebates to customers to drive quarterly results.

Subscription adoption among ADSK users has had an outsize impact on the company’s overall growth having boosted reported growth by 49% from fiscal 2002 through fiscal 2007. That will change going forward with increased penetration of the installed base. That puts the focus on the 2-D to 3-D migration to achieve growth goals, which increases risk as predicting new 3-D sales will be more difficult than forecasting subscription adoption among existing customers.