Autodesk Inc

Autodesk, headquartered in Northern California, is the global industry standard for computer-aided design in the architecture, engineering, and construction industry. The company produces software that allows companies to design and model their products and projects, with millions of subscribers relying on its solutions. Autodesk's four segments include AEC, AutoCAD, Manufacturing, and Media and Entertainment, with AEC representing approximately 48% of net sales. We believe Autodesk offers a more compelling investment opportunity compared to other holdings, as its growth plan is well-positioned to capitalize on ongoing trends in design and modeling.

The construction industry is under pressure, driving meaningful change and innovation, particularly in software. Autodesk plays a critical role in how projects are designed, managed, and delivered, with software becoming increasingly embedded in workflows. This trend is reinforced by the observation that 'these systems are becoming more deeply embedded in workflows, not less.' The investment case for Autodesk is strong as the demand for digital solutions in construction grows, making it a key player in the industry's evolution.

Autodesk sold off during the period despite delivering strong quarterly results. The market reacted negatively to Autodesk’s announced acquisition of MaintainX, an industrial asset maintenance platform, on fears over the multiple paid and debt used to finance the deal. This reaction indicates concerns about the company's valuation and financial strategy, which may impact its future performance.

We have owned more of the latter types of companies, and that has not helped relative performance this year. The market is currently using (very) long-term thinking and expectations to justify short-term trades. Software leaders such as Autodesk are now trading on extraordinarily cheap valuations despite continued business momentum and genuine AI optionality within their own operations.

Autodesk makes the tools that architects and engineers use to design the physical world. The buildings, the bridges, the machines. This is a business protected by decades of professional habit, file formats, and training, and by the simple fact that when you are designing something that people will stand inside, you want the trusted tool. We held our position roughly steady.

We have consolidated positions in software and business service companies we view as having deep moats, such as Autodesk (ADSK). This reflects our confidence in Autodesk's strong competitive position and its ability to navigate market challenges effectively. The company's robust offerings and market presence suggest it will continue to perform well in the long term.

Autodesk is the kind of business that gets less credit than it deserves because it is not flashy. It makes software for architects, engineers, and construction professionals. It has been in the business for over forty years. But underneath the surface, Autodesk is one of the most durable software franchises in existence, and its transition over the past several years from a perpetual-license model to a subscription-based cloud platform has dramatically improved the predictability and quality of its earnings. The subscription transition is essentially complete. Free cash flow is growing. The company is beginning to layer AI capabilities — particularly in generative design and automated compliance checking — that should drive further expansion in average revenue per user.

The letter mentions Autodesk as part of a group of companies that fit a profile of established, trusted, incumbent SaaS software companies that may harness AI to deliver improved solutions for customers. However, there is no explicit directional argument made about Autodesk's future performance or investment potential.