Is the 15% Sell-Off of Autodesk, Inc. Shares Overblown?

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What happened

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Shares of Autodesk, Inc. (NASDAQ: ADSK), a software corporation that makes software for the architecture, engineering, construction, and media industries, among others, are down 15% Wednesday as of 10:45 a.m. EST, after investors reacted to restructuring news and guidance in the company's fiscal third-quarter 2018 report.

So what

Autodesk announced it would reduce headcount by 13%, or roughly 1,150 jobs, as it continues to transition to a subscription-based model. The kicker, and driving force behind the stock's decline Wednesday, was reduced full-year guidance for subscription additions: from 625,000-675,000 to 625,000-650,000. In terms of the top and bottom lines, Autodesk grew revenue and narrowed its adjusted loss. Revenue increased 5% to $515 million, compared to the prior year's third quarter, and was up 6% on a constant-currency basis. The company's adjusted net loss per share checked in at $0.12, compared to an adjusted net loss of $0.18 per share during the corresponding period last year. Autodesk's results managed to top analysts' estimates calling for a loss of $0.13 per share on revenue of $514 million. 

Now what

"We are pleased with another solid quarter of execution and progress on our business model transition," said Andrew Anagnost, Autodesk's president and CEO, in a press release. "We're experiencing healthy trends in several key transition metrics, including ARR and deferred revenue growth, as customers continue to embrace our new subscription offerings."

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One of the metrics mentioned above, annualized recurring revenue (ARR), jumped 24% to $1.9 billion, indicating that management's move to a subscription model is working. But the transition will take some time and involve restructuring, which is causing investors to be cautious. Keeping the long-term perspective in mind, this wasn't nearly as bad a quarter as the 15% decline suggests. 

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.