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

What happened

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."

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.