It was six months ago that 3D-design software leader Autodesk (NASDAQ:ADSK) announced the launch of its Forge developer platform, a move intended to facilitate its transition into a cloud-based company. Forge provides a means for developers to extend Autodesk's suite of cloud-based solutions, which in turn is expected to fuel CEO Carl Bass' efforts to boost recurring revenue via subscription sales and fend off fast-growing competitors, including France-based Dassault Systemes (OTC:DASTY).
Based on Autodesk's fiscal first-quarter 2017 results, announced May 19, subscription sales, recurring revenue, and deferred sales all performed admirably. However, while peers like Dassault were reporting top- and bottom-line growth, Autodesk's transformation initiatives have taken a near-term toll on sales: dropping 21% to $511 million last quarter.
The answer, as per Bass, is Autodesk's Forge platform, along with investments in new, fast-growing markets via its $100 million investment fund. And it's wasting no time in getting its transition and investments in tech upstarts into full swing.
If the recently completed Forge developers conference is any indication, Autodesk's emphasis on cloud-based product offerings is off to a strong start. The company said it hosted more than 1,000 cloud developers during the conference, held June 15 and 16 in San Francisco. That's not a bad showing just six months after it introduced Forge to the dev world.
There was no shortage of new product and development announcements, including expanding the Forge platform to assist developers in building new 3D-printing features, improving data management capabilities, and transforming 3D images into usable information, all delivered via the cloud. That's great stuff and should give developers everything they need to expand Autodesk's suite of services.
But the Forge platform developments took a backseat to news of Autodesk's investments in a few upstarts that are on the leading edge of the drone and Internet of Things markets.
The future begins now
In the next five years, sales of drones are expected to grow by 50% to $12 billion, largely due to commercial and government enterprises, including military applications, and the construction, telecom, and energy industries. That's a lot of upside, and explains why Autodesk announced at its Forge gathering that it had invested an undisclosed sum in leading drone maker 3D Robotics.
3D Robotics is already using the Forge system to capture data and images from its drones and transform that information into engineering data. Autodesk and its 3D design software is ideal for data-collecting drones, and its recent commitment to 3D Robotics, though likely small-ish -- remember, Autodesk committed "just" $100 million for its entire investment fund -- opens the doors to a world of revenue-generating opportunities.
Another of Autodesk's intriguing investments is in Seebo, a software-as-a-service (SaaS) platform designed to transform "simple," everyday objects into IoT "smart" technologies. Everything from toys to fashion are made "smart" by simply dragging and dropping connected components including sensors, bluetooth, and GPS, into a product design framework.
As is the case with 3D Robotics, Seebo is already an avid Forge system developer. The combination of Seebo's SaaS solutions with Autodesk is designed for "manufacturers to tap into the world of IoT simply, securely and cost effectively."
This year is expected to see some 6.4 billion IoT connected "things" in use, a 30% jump from 2015. And depending on which market estimate you choose to believe, the revenue possibilities are seemingly endless, with some suggesting IoT will grow into a trillion-dollar -plus opportunity. Autodesk's IoT forays are in their early stages to be sure, but with so much upside, even a slice of such a huge revenue pie will move the needle.
Despite Autodesk's drop in revenue, which was particularly painful given one of its primary competitors, Dassault, reported a 6% jump in sales, its 132,000 sequential jump in subscriptions is nothing short of spectacular. As was Autodesk's 9% increase in annualized recurring revenue to $1.44 billion and 32% jump in deferred sales to $1.52 billion.
The transformation is picking up steam, and as Autodesk's recent investments indicate, its future is no longer tied to desktop software, and that bodes well for growth investors with some patience.