Autodesk (ADSK 0.35%), a leader in software design for the architecture, engineering, and construction industry (AEC), reported its fourth-quarter and full-year earnings on Feb. 25. The company's headline numbers were better than analysts expected, but guidance was weak, leading the stock to sell off after the report was released.

While weak guidance is not great, this sell-off shouldn't worry you if you're a long-term investor. In fact, you should be as excited as ever for Autodesk's future.

Two people wearing hard hats and reflective vests surveying a construction site

Image source: Getty Images.

Earnings results

For fiscal 2021 (ended Jan. 31, 2021), total revenue increased 16% to $3.79 billion with 97% of that number now coming from subscriptions. Operating income was $629 million, almost doubling from the year before. All good, right? Well, not exactly. Since Autodesk is a subscription business with a lot of multi-year contracts, it has to recognize its revenue over the life of these agreements, even if it collects the majority of the revenue upfront. 

Billings, which show how much money Autodesk actually collected from customers in a given period, were down 1% in fiscal 2021 to $4.14 billion. This isn't shocking as management was likely lenient in collecting from customers during the year due to the pandemic, but it shows that the business did not really grow as the GAAP numbers suggest.

However, even though revenue and earnings guidance was worse than what Wall Street analysts expected, management guided for billings growth of 17% to 20% in the current year. This is the number investors should watch, and in this case, Autodesk thinks it can get back to growth in fiscal 2022. Management is also guiding for free cash flow of at least $1.58 billion, up from $1.35 billion last year.

What the future holds

All right, with the financial talk over, let's get to the meat of the report with updates on Autodesk's new cloud-based product suites. BIM 360, a workflow management platform for the construction industry, saw usage almost double in the fiscal fourth quarter. Fast growth is important for BIM 360 and other Autodesk Construction Cloud products as it looks to win projects versus start-ups like Procore and other platforms in the race to digitize the construction industry.

The company also launched Autodesk Build last quarter, a product that combines BIM 360 and another Autodesk product called PlanGrid. Management is investing heavily into construction software and for good reason. The industry is supposed to grow at a 13% rate over the next seven years, hitting $2.1 billion in annual spend by 2027. That is a lot of dollars that Autodesk can go after.

Let's not forget Fusion 360, Autodesk's flagship product for bringing engineering design to the cloud. Customers grew from 120,000 in the third quarter to 140,000 at the end of the fiscal year. Investors should expect steady subscriber growth from Fusion 360 as a clear signal that Autodesk is winning versus its competitors in the engineering design market.

$1 billion acquisition

Lastly, we can't forget Autodesk's announcement that it had reached an agreement to acquire Innovyze for $1 billion. The latter is a simulation and modeling software solution for water infrastructure. Management thinks this purchase can help the company win projects from public agencies by selling Innovyze in a bundle with Civil 3D, Revit, Infraworks, and its Construction Cloud product suite. Economists estimate that over $2 trillion will need to be spent to improve America's failing infrastructure from now until 2025. With the acquisition of Innovyze, Autodesk has set itself up with the most comprehensive product offering to win the hundreds of projects that would come with the trillions of new spending.

When actually digging into the results, investors should see that Autodesk is more than just its reported revenue and earnings numbers. If you're an investor with a long-term mindset, seeing the growth in Construction Cloud, Fusion 360, and the acquisition of Innovyze should have you excited about Autodesk's prospects over the next decade.