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And now I will turn the call over to Andrew.

Andrew Anagnost -- President and Chief Executive Officer, and Director

Thank you, Simon, and welcome, everyone, to the call. We finished the second quarter and first half of the year strongly, delivering 13% revenue growth in constant currency in both periods, and have raised guidance for the full year, reflecting the sustained momentum of the business and the smooth launch of the new transaction model in North America in June and expected launch in Western Europe in September. Once again, opportunity, resilience, and discipline underpinned our performance. In March last year, we laid out the secular growth trends in our markets from accelerating digital transformation in architecture, engineering and construction, or AEC, to the transition to the cloud in Manufacturing and Media and Entertainment.

These secular trends are driving customers to break down siloed workloads and seamlessly connect data end to end. Real-world experiences from remote collaboration to supply chain disruption and AI are reinforcing these trends. We are aggressively pursuing our strategy to benefit from these secular trends, including the development of next-generation technology and services, end-to-end digital transformation, and unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries. Our investments in cloud, platform, and AI in pursuit of these growth opportunities and ahead of our peers enable Autodesk to provide its customers with ever more valuable and connected solutions and to support a much broader customer and developer ecosystem and marketplace.

While macroeconomic policy, geopolitical, and one-off factors like the Hollywood strikes have impacted industry growth, Autodesk subscriptions model and diversified product and customer portfolio have proven resilient. The underlying momentum of the business and key performance indicators remain consistent with previous quarters as evidenced by increased product usage, record bid activity on BuildingConnected, and cautious optimism from our channel partners. We realized the significant benefits of this strategy for shareholders through our disciplined and focused execution and capital deployment throughout the economic cycle. These investments mitigate the risk of expensive catch-up investments in the future and support sustained revenue, margin, and free cash flow growth.

To support our growth initiatives and margin improvement, we have been modernizing our go-to-market approach to create more durable and direct relationships with our customers and to serve them more efficiently. And we are transforming our platform to enable greater engineering velocity and efficiency to support a broader customer and developer ecosystem and marketplace. We have already seen significant benefits from initiatives like these, and there's more to come. Stripping out the effects of margins from FX and the new transaction model, we expect to be toward the midpoint of our fiscal '26 non-GAAP operating margin target of 38% to 40% in fiscal '25, a year ahead of schedule and representing about 300 basis points of improvement since fiscal '23. We are confident we will make further improvements in fiscal '26 on the same basis.

Once complete, we expect the new transaction model and subsequent go-to-market optimization to increase sales and marketing efficiency and deliver GAAP margins among the best in the industry. Non-GAAP operating profit, including stock-based compensation costs, will become a key metric to track as we make this transition. Attractive long-term secular growth market, a focused strategy delivering ever-more valuable and connected solutions to our customers, and a resilient business model are generating strong and sustained momentum both in absolute terms and relative to peers. Disciplined execution and capital deployment is driving even further operational velocity and efficiency within Autodesk and will underpin the mechanical build of revenue and free cash flow over the next few years and GAAP margins among the best in the industry.

We expect the pace of buybacks to buy forward dilution will pick up into fiscal '26 as our free cash flow builds from the fiscal '24 trough. We expect this to result in a further reduction in shares outstanding over time, continuing the capital return trend of the last few years. In combination, we believe these factors will deliver sustainable shareholder value over many years. I'd like to welcome Betsy and thank her for stepping in as interim CFO and will now turn the call over to her to take you through the details of our quarterly financial performance and guidance for the year.

I'll then come back and to provide an update on our strategic growth initiatives.

Betsy Rafael -- Interim Chief Financial Officer

Thanks, Andrew. Q2 was a strong quarter. We generated broad-based growth across products and regions in AEC and Manufacturing, which was partly offset by softness in Media and Entertainment, primarily due to the lingering effect of the Hollywood strike. Our Make business continues to enhance growth driven by ongoing strength in Construction and Fusion.

Overall, macroeconomic policy and geopolitical challenges and the underlying momentum of the business were consistent with the last few quarters and included strong renewal rates but softer business -- new business in China and Korea. The new transaction model did not make a material contribution to our second-quarter results. In his opening remarks, Andrew discussed the benefits we expect to derive from our go-to-market initiatives, which support our growth and ongoing margin improvement. Before I discuss revenue, billings, deferred revenue, RPO, and free cash flow, let me remind you of how these metrics naturally and mechanically evolved during the shift to annual billings for most multiyear contracts as well as the new transaction model.

The shift to annual billings for most multiyear contracts moved billed deferred revenue into unbilled deferred revenue in our financial reporting. Unbilled deferred revenue would then not be included in deferred revenue on our balance sheet but would be included in our remaining performance obligations disclosure. Initially, this reduces billings, deferred revenue, and free cash flow, as you saw in fiscal '24, but is gradually becoming a tailwind to billings and free cash flow as our annually billed multiyear cohorts rebuild. Metrics that include unbilled deferred revenues, like RPO, give a better view of performance during our transition to annual billings for most multiyear contracts.

And as we have said before, we will continue to offer multiyear contracts billed upfront in certain circumstances, such as in emerging countries where there is increased credit risk if not received upfront; on the Autodesk store until we enable system changes to offer annual billing; and, of course, on an exception basis, when it is driven by customer preference such as for our non-cloud enabled offerings. Just to give you some context on scale, multiyear contracts billed upfront incrementally contributed less than 5% of total billings in the second quarter. The new transaction model also has mechanical and timing impacts on billings, deferred revenue, revenue, and operating cost. The amount of impact is determined by the pace of the model rollout.

In addition, channel partner and customer behavior can also impact the results. The mechanical impact is due to the way channel partner payments are recognized and accounted for in the P&L. Under the old or the buy/sell model, channel partner payments are deducted from gross billings and revenue. We then report net billings and net revenue.

Conversely, in the new transaction model, we record channel partner payments in sales and marketing expense. So, as we shift from the old model to the new, there is an increase in billings, deferred revenue, revenue, and sales and marketing expense. That increase in revenue and operating cost, resulting from the change in the way the channel partner payments are recognized and accounting for, flows ratably through revenue and cost in the P&L over time. And the overall pace of that transition is determined by when we launched the new transaction model into each geography.

In the short term, moving the P&L geography at channel partner payments from contra revenue to sales and marketing expense creates a headwind to the operating margin percentage, but it's really broadly neutral to operating profit and free cash flow dollars. But over the long term, we expect that this transition to the new transaction model will enable us to further optimize our business, which we anticipate will provide a tailwind to revenue and deliver GAAP margins among the best in the industry on mechanically higher revenue and despite mechanically higher costs. Channel partner and customer behavior during the rollout of the new transaction model are much harder to predict and model. For example, with channel partners better prepared ahead of launch, more customers in North America and Australia co-termed their contract expirations to align the timing of renewals across their business.

This had a negative impact on the timing of billings and deferred revenue. And as we've seen many times before, co-termed contracts actually create an opportunity for larger contracts on renewal as we elevate our relationship with customers from subsidiaries to companywide. Along with more self-service functionality, it also enabled us to reduce administrative costs and serve our customers more efficiently. While activity in the second quarter was probably more tactical in nature, co-terming is one of the expected benefits of the new transaction model and will be one of the drivers of our margin momentum over the coming years.

As I'll discuss, this creates timing headwinds but is not a change in the underlying momentum of the business. We'll give you much more details about the impact of the new transaction model on fiscal '25 results and the expected impact on fiscal '26 when we report our full-year results next February. So now let's move on to the results. Total revenue grew 12% and 13% in constant currency.

By product in constant currency, AutoCAD and AutoCAD LT revenue grew 8%, AEC revenue grew 15%, Manufacturing revenue grew 17% and in the low teens excluding upfront revenue, M&E grew 5%. Revenue grew 13% in all regions on a constant currency basis. Direct revenue increased 21% and represented 40% of total revenue, up three percentage points from last year, benefiting from strong growth in both EBAs and the Autodesk Store. Net revenue retention rate remained within the 100% to 110% range at constant exchange rate.

Billings increased 13% in the quarter, reflecting a modest tailwind from the prior year's shift to annual billings for most multiyear contracts and a mechanical tailwind of approximately 2% from the transition to the new transaction model. Billings were also negatively impacted by more co-terming. Total deferred revenue decreased 13% to $3.7 billion and was again impacted by the transition from upfront to annual billings for multiyear contracts. Total RPO of $5.9 billion and current RPO of $3.9 billion grew 12% and 11%, respectively.

Turning to margins. GAAP and non-GAAP gross margins were broadly level, while GAAP and non-GAAP operating margins increased by four and one percentage points, respectively. At current course and speed, the ratio of stock-based compensation as a percentage of revenue peaked in fiscal '24, will fall by more than a percentage point in fiscal '25, and will be below 10% over time. Free cash flow for the quarter was $203 million.

As we said might happen back in February, some channel partners in North America booked business earlier in the quarter ahead of the transition to the new transaction model to derisk Month 1 after the transition. This accelerated free cash flow to the second quarter, which was partially offset by the negative impact of more co-terming. Turning to capital allocation. We continue to actively manage capital within our framework and deploy it with discipline and focus through the economic cycle to drive long-term shareholder value.

During the second quarter, we purchased approximately 471,000 shares for $115 million, which is an average price of approximately $245 per share. We do expect the pace of buybacks to pick up during the second half of the year as we had very minimal purchases in the first half. We will also continue to deploy capital to offset dilution into fiscal '26 as our free cash flow grows from the fiscal '24 trough generated by the transition from upfront to annual billings, again, from most multiyear contracts. We will continue to buy forward dilution, which we expect to result in a further reduction in shares outstanding over time, continuing capital return trend of the last few years.

We have reduced our share count by about 5 million shares over the last three years with an average percentage reduction of about 70 basis points per year. Now, let me finish with guidance. As we said in February, the pace of the rollout of the new transaction will create noise in billings and the P&L so we think free cash flow is the best measure of our performance. Taking out that noise, the underlying momentum in the business remains consistent with the expectations embedded in our guidance range for the full year.

Our sustained momentum in the second quarter and the smooth launch of the new transaction model in North America reduced the likelihood of our more cautious forecast scenarios. Given that, we're raising the midpoint of our billings, revenue, earnings per share, and free cash flow guidance ranges. Let me give you a little bit more detail. The underlying momentum of billings is in line with our expectations, but two of our modeling assumptions have changed.

First, the new transaction model is expected to launch in Western Europe in September rather than in early fiscal '26, which was our modeling assumption at the start of fiscal '25. This is a tailwind to our reported billings. Second, more customers have co-termed contracts in North America than we modeled, and we have assumed the same thing will happen in Western Europe. This timing effect is a headwind to reported billings in fiscal '25.

The net effect of these is a five to six percentage point tailwind to billings from the new transaction model in fiscal '25, which includes a three to four percentage point tailwind from North America, specifically. We've raised our fiscal '25 billings guidance to a range between $5.88 billion and $5.98 billion. The underlying momentum of revenue is also in line with our expectations. The $40 million increase to the top end of revenue guidance reflects the expected launch of the new transaction model in Western Europe in September as well as acquisitions and think about those in roughly equal measures.

The $90 million increase to the bottom end of the guidance range includes that $40 million, with the remainder an underlying increase due to the reduced likelihood of our more cautious forecast scenarios. At the midpoint, we are increasing revenue guidance by $65 million or $25 million excluding the impact of acquisitions and the new transaction model. Our fiscal '25 guidance range is now between $6.08 billion and $6.13 billion, translating into revenue growth of around 11% at the midpoint when compared to fiscal '24 and includes one to one and a half percentage points from the new transaction model. Underlying margins are slightly better than our previous guidance, and that enables us to offset higher expected costs from the earlier launch of the new transaction model in Western Europe.

While we still expect non-GAAP operating margins between the range of 35% and 36% in fiscal '25, that now includes a one to one-and-a-half point underlying margin improvement that is broadly offset by the margin headwinds from the new transaction model and the incremental investments in people, processes, and automation. The underlying momentum of free cash flow is in line with our expectations as well. The headwind to billings from co-terming that I mentioned earlier is largely being offset by faster collections and improved underlying markets. We've raised the lower end of our fiscal '25 free cash flow guidance, resulting in a range between $1.45 billion and $1.5 billion.

We expect strong free cash flow growth in fiscal '26 because of the return of our largest multiyear renewal cohort, a natural mechanical stacking of multiyear contracts billed annually, and a larger overall EBA cohort. With our current trajectory, we still estimate free cash flow in fiscal '26 to be around $2.05 billion at the midpoint. While the transition to annual billing for multiyear contracts and the deployment of the new transaction model create noise in billings and the P&L, they do provide a natural tailwind to revenue and free cash flow over the next few years. Combined with a resilient business model and sustained competitive momentum, Autodesk has enviable sources of visibility and certainty, given the context of significant macroeconomic, geopolitical, policy, health, and climate uncertainty.

We continue to manage our business using a Rule of 40 framework with a goal of reaching 45% or more over time. We are taking significant steps to our goal this year and next. We think this balance between compounding revenue growth and strong free cash flow margins, captured in the Rule of 40 framework, is the hallmark of the most valuable companies in the world, and we intend to remain one of them. The slide deck on our website has more details on modeling assumptions for both Q3 and full fiscal year '25.

Andrew, back to you.

Andrew Anagnost -- President and Chief Executive Officer, and Director

Thank you, Betsy. Let me finish by updating you on our strong progress in the second quarter. We continue to see good momentum in AEC, particularly in infrastructure and construction, fueled by customers consolidating onto our solutions to connect and optimize previously siloed workflows through the cloud. The cornerstone of that growing interest is our comprehensive end-to-end solutions encompassing design, pre-construction, field execution, through handover, and into operations.

This breadth of connected capability enables us to extend our footprint further into infrastructure and construction and also expand our reach into the mid-market. As a sign of that growing momentum, our construction business had another strong net new customer quarter as the benefits of our end-to-end solution became more apparent. Let me give you a few examples. Thornton Tomasetti is an internationally recognized engineering design and analysis firm, which uses Revit and other advanced technologies to enable it to deliver projects at all scales and levels of complexity.

We have been a proud partner as it has transformed its business to excellence and interoperability in BIM. The transition from BIM 360 to Autodesk Construction Cloud has optimized project workflows and cloud collaboration. Autodesk virtual reality tools have reimagined its visualization workflows, and Dynamo and Generative Design have enabled its team to focus on high-value creative work. During the quarter, Thornton Tomasetti renewed its EBA with Autodesk and expanded it by more than 50%.

To address challenges of a fragmented ecosystem and siloed working environment, a European consortium of nine public water operators serving millions of residents across numerous municipalities decided to expand its relationship with Autodesk by adding BIM Collaborate and BIM Collaborate Pro, and an upgraded premium plan to its existing AutoCAD, Docs, AEC collections and InfoWorks subscription. With these expanded capabilities, it will continue its digital transformation, accelerating its transition from 2D to 3D and its ability to manage all assets in a Common Data Environment across all consortium members. In the quarter, a leading single-source specialty subcontractor based in the Midwest of the United States began looking to replace point solutions that no longer supported custom workflow. With the help of a channel partner, after a 45-day evaluation, the subcontractor chose to adopt Autodesk Build, which complements its virtual construction and design capabilities, streamlines communication between design and construction teams, and importantly, gives it control over and ownership of its own data.

Again, these stories have a common theme: managing people, processes, and data across the project life cycle to increase efficiency and sustainability while decreasing risk. Over time, we expect the majority of all projects we manage this way, and we remain focused on enabling that transition through our industry cloud. Moving on to Manufacturing. We made excellent progress on our strategic initiatives.

Customers continue to invest in their digital transformation and consolidate on our Design and Make platform. In automotive, we continue to strengthen and expand our partnerships, both within and beyond the design studio. In the second quarter, a leading European manufacturer renewed and expanded its EBA to accelerate its time to market and help drive its business transformation initiatives. In addition to Alias for concept design, it will leverage VRED for virtual prototypes and Flow Production Tracking for project management.

These solutions democratize visualization across the organization, reducing the reliance on physical prototypes, improving design collaboration, and speeding up the product development process. Additionally, as the manufacturer moves to build new battery factories, it is exploring the adoption of integrated factory modeling to reduce costs and increase collaboration across suppliers and contractors throughout the project life cycle. Meissner, a global leader in complex tool and plant construction, is leveraging Autodesk solutions to adapt more quickly to a fast-moving automotive industry. It is driving business growth through improved production cycle times while meeting high-quality reliability standards at reduced costs.

To achieve this, Meissner has adopted PowerMill for complex, simultaneous, five-axis milling, PowerInspect for programming 3D measurement inspection routines of machine parts, and PowerShape to produce blow-molded plastic hollow parts while leveraging Fusion for its collaboration capabilities. Fusion remains one of the fastest-growing products in the manufacturing industry. As customers seek to drive innovation and growth at lower cost, Fusion extension attached rates are increasing, which is helping to drive the average sales price higher. In education, we are preparing future engineers to drive innovation through next-generation design, analysis, and manufacturing solutions.

Three years ago, Bochum University, a public research university in Germany, evaluated Fusion for its mechanical engineering department but determined the solution didn't fulfill existing requirements. In the second quarter, impressed with Fusion's significantly expanded capabilities in Electronics and PCB design, Configurations, Drawing Automation, and collaboration, Bochum decided to replace a high-end competitive solution with Fusion for all mechanical engineering courses. With the Fusion platform, Bochum's students can now acquire end-to-end workflow skills from simulation in the cloud through data management with just one installation, enabling better collaborative learning and employability for students while saving time and administration costs for the university. And finally, we continue to leverage unique growth enablers such as business model evolution, customer experience evolution, and convergence between industries to grow our market opportunity.

For example, Mercury Engineering is a European leader in construction solutions. The company builds and manages complex engineering and construction projects for the world's leading corporations across a range of sectors, including data centers, semiconductor, and life sciences. To support its Digital Edge initiative and the ability to deliver large-scale projects wherever its clients operate, Mercury increased its investment in Flex during the quarter. Using Flex to access solutions such as Navisworks, Revit, ReCap, AutoCAD, and Plant 3D, coupled with Account Based Autodesk Construction Cloud, Mercury enjoys frictionless consumption, limitless cloud access, the ability to rapidly scale up new projects with the right tools and the ability to collaborate across its ecosystem.

I know many of you pay close attention to the American Institute of Architects' data, and we do too, but maybe not always to the same data. In 2022, the AIA said that almost half of architecture firms' total billings came from reconstruction and renovation projects, up from about a third 20 years ago, with the rest coming from newbuild. In commercial and industrial and institutional subsectors, reconstruction and renovation accounted for more than 60% of billings. From infrastructure exceeding its design life to regulations mandating greater efficiency, with climate change making action more urgent, renovation and reconstruction are growing trends, both in the United States and worldwide.

For buildings and infrastructure, Autodesk is a leader in BIM and digital technologies across the project life cycle that underpin these reconstruction and renovation efforts. That's why we're delighted to be named as the Official Design and Make Platform of the LA28 Olympic and Paralympic Games to support LA28's no new permanent venues plan and commitment to build LA28's footprint by adapting existing or building temporary infrastructure, Autodesk will support LA28's more than $1 billion temporary overlay and construction plan, including retrofitting more than 40 venues across the Los Angeles Metro Area. Over the next four years, LA28 will use Autodesk's software and Building Information Modeling, BIM tool, to bring to life an ambitious venue plan, consultative support to help LA28 meet its delivery and sustainability plan, and Autodesk Construction Cloud as a central tool to facilitate better collaboration with thousands of critical stakeholders on the design, development and ultimate delivery of the venue. Autodesk technology is used every day to design and make a better world, and we're thrilled to be LA28's official Design and Make Platform.

Before I open the call for questions, I'd like to quickly update you on our CFO search. We have some excellent candidates and are making good progress. Once our new CFO is up to speed and we've launched the new transaction model in all developed markets, we'll set out our plans in more detail. We'll update you when we have more to say.

Operator, we would now like to open the call up for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] One moment for questions. Our first question comes from Saket Kalia with Barclays. You may proceed.

Saket Kalia -- Analyst

OK, great. Hey, Andrew. Hey Betsy. Thanks for taking my questions here.

Andrew, since you last reported, Starboard Value has issued a couple of letters and a slide deck. Just maybe for the benefit of the group, I was wondering if you had any high-level thoughts that you wanted to share with us.

Andrew Anagnost -- President and Chief Executive Officer, and Director

I'll do it, Saket. All right. Look, first off, we listen to all of our investors, and we listen carefully. We've met with Starboard several times.

They came and presented to our board. And I'll tell you, one thing we are very much aligned with them on is there is a lot more shareholder value to be created from Autodesk for our investors, OK? And I think it's important to kind of talk about, OK, what should we be excited about? Today's results, we delivered in a pretty tough environment. We've seen macro impacts. We've had one-off impacts from Russia, from China, from writers and actors strikes.

And still, you're seeing the kind of results that we delivered this quarter. Revenue is up, free cash flow is up, the guide's up 1% at the midpoint. Those things come from work and discipline. How did we get here? There's a couple of things I want to make sure we remember and highlight, OK? About two years ago, we began this journey to move away from multiyear contracts billed upfront to multiyear contracts billed annually.

I know that created some clouds for all of you on the outlook of Autodesk for 18 months. But look at the results, OK? Two years ago, the number of multiyear contracts billed upfront was measured in the billions. Today, you heard from Betsy, it's immaterial, right? Now, the great thing about that is that billions from the past come back to you, but it comes back to you in a nice smooth buildup over time. It's math.

I love math. More than that, it's simple math and we all love simple math. That money is coming and it's building up. So, one, that's something to be excited about ongoing value from Autodesk.

Another thing I want to talk about. It was really important. Last year, we started this journey on the new transaction model. And when we told you about the new transaction model, what did we tell you we were doing it for? We were doing it to get more control and visibility over our sales and marketing costs.

And that is the mission going forward here. We see line of sight to increasing productivity and effectiveness in our sales and marketing motion and driving some of those costs down on a per-deal basis, which is great because that's how we see line of sight to margin growth. Now, why should you believe me? Why should you believe us? All right? Let's look at what's going to happen this year. This year, we are going to achieve the non-GAAP targets on an apples-to-apples basis that we set up two years ago, a year ahead of target.

So, I think you can trust that we're focused on this and that we're going to deliver. So, we agree with Starboard that there is a lot more value creation coming out of Autodesk. And I'm really excited about it going forward and the results that we've delivered this quarter are just the first step in that journey.

Saket Kalia -- Analyst

Yeah, absolutely. That was super helpful, Andrew. Maybe for my follow-up for you as well, maybe just moving to the business. You gave some nice examples of construction wins in the quarter.

Could we just go one level deeper into Autodesk Construction Cloud? Maybe talk about sort of the overall construction backdrop that you're seeing and how you feel about ACC competitively.

Andrew Anagnost -- President and Chief Executive Officer, and Director

Yeah. That's a great question, all right? And look, first off, one of the things I'm really excited about in our Construction business is that we're maintaining momentum in a really tough competitive environment where others are having challenges maintaining momentum. But we're maintaining momentum, and there's a couple of key reasons why we're maintaining momentum. One, there is still a large backlog in construction.

Backlog matters, all right? And that backlog is still there, and construction professionals are still interested in digitization. That, in addition to our value proposition, is becoming more resonant with customers. One, the portfolio of Construction Cloud is competitive. People like it.

They like our value proposition of going from design to construction. They like the flexibility of the business models we bring to them. They're looking to either move to Construction Cloud net new, or they're looking to move from older solutions, competitive solutions to our solutions. The other thing is in the mid-market in the U.S., we see our competition more and we win more.

And that's because of the strengthening of this value proposition. And the last bit I think is worth talking about is the international growth for Autodesk. This is a place where Autodesk has a superpower, and we're going to continue to grow internationally. We saw strong growth internationally.

We're going to continue to see strong growth internationally. And long term, that's going to continue to kind of be accretive to our construction business. So, a lot going on there, but I do want people to remember there's a backlog and we're definitely maintaining momentum.

Saket Kalia -- Analyst

Very helpful, guys. Thank you.

Operator

Thank you. Our next question comes from Jay Vleeschhouwer with Griffin Securities. You may proceed.

Jay Vleeschhouwer -- Analyst

Thank you. Good evening. Andrew, with regard to the new engagement or transactional model, the new channel compensation arithmetic is very readily understandable. But I'd like to ask more about the division of labor under the new model, which is to say your inside sales, your customer success investments, and the like versus the channel.

So, how do you see the role of your inside and other direct sales capacities versus that of the channel, particularly when it comes to renewals and/or upselling? How do you see the role of the eStore versus the channel under the new model? Then my follow-up.

Andrew Anagnost -- President and Chief Executive Officer, and Director

Jay, you're asking some very specific questions. Let me kind of answer it in a very general way. With this new transaction model, with the ability to drive clear divisions of labor, there are opportunities to drive efficiencies and productivity moving forward in sales and marketing, right? So absolutely, you're highlighting some things with regards to our partners and with regards to us that we are going to continue to perfect over time. And that is where some of this margin growth is going to come from, most of this margin growth is going to come from over the next couple of years.

So, you're definitely talking around some of the areas that are important to discuss.

Jay Vleeschhouwer -- Analyst

OK. Second question with regard to the billings co-terming effects, the model effects, and the like. Perhaps we can parse that to get at the organic effects of the business, which is to say, how are you thinking about your license volume and mix expectations? In other words, how are you thinking near term and long term with regard to the volume assumptions that you've previously spoken about in your overall P times Q framework?

Andrew Anagnost -- President and Chief Executive Officer, and Director

So, look, let me just start here for -- if Betsy wants to add anything. I think the important thing to get about the co-terming is that what it does is it takes some billings out of the current renewal cycle and move them forward. And more importantly, it creates efficiency in our renewal process, all right? So, we're going to get much more efficiency in our renewal process. A co-term contract is much more easy to wrangle at renewal time than another contract.

It's also much more easy to do cross-sell, upsell, and expansion at renewal time. So, you're going to get some efficiencies from this. So, co-terming is good, even though it has some puts and takes on where the billings show up. So, I think that's kind of the important piece to take away from that.

The rest of that detail's a little harder to address directly.

Betsy Rafael -- Interim Chief Financial Officer

The only thing I would add is with fewer contracts to manage, you also drive efficiency from the -- inside the company.

Jay Vleeschhouwer -- Analyst

Great. Thank you.

Operator

Thank you. Our next question comes from Adam Borg with Stifel. You may proceed.

Adam Borg -- Analyst

Awesome. And thanks so much for taking the questions. Just maybe for Andrew just going back to the new transactional model, it's great to hear that things are going smoothly so far in North America. I was hoping you could maybe go a step deeper on what that exactly means.

And importantly, what's given the confidence to roll out -- accelerate the rollout into Europe and Japan ahead of expectations, especially given the additional complexities you've talked about rolling out internationally?

Andrew Anagnost -- President and Chief Executive Officer, and Director

Yeah, it's a good question. So, remember, let's just recount the incremental journey we've taken here, right? We started with Australia. Really stressed and tested the system in that environment. We always like to stress and test things in smaller markets on smaller pools.

And we have essentially completed the entire rollout in the U.S. And during that time, we've had no major issues. No major issues came up with regards to disruption to the business as we get there. Now, of course, there's all sorts of quality-of-life issues.

There's been a backlog of issues that people want more functionality. They want more capabilities to do X, Y, and Z. And what we're doing is we're working that backlog, and we gave ourselves a little bit of extra time to clear that backlog. Some of that backlog is specific to test runs that we've done in Europe as well.

So, given what we learned in Australia, given how the U.S. went even smoother than Australia, and we had a much shorter recovery time as we rolled out in Australia, given that we're probably going to see the same kind of pull forward in Europe that we saw in the U.S., which buffers things as we move forward, we're very confident about the cascade here and how this is going to roll out.

Betsy Rafael -- Interim Chief Financial Officer

And the only thing that's different in Western Europe from North America is really that it's different currencies and there's different legal, regulatory laws in place. But I think that we've learned from each step along the way and so are very, very comfortable with the plan for the full fiscal year.

Adam Borg -- Analyst

That's super helpful. And maybe just as a quick follow-up, Andrew, obviously, U.S. election coming up in a few months. I was hoping you could talk a little bit more about what you're seeing in the end market demand environment.

Are the AEC or Manufacturing industry making any changes in their decision-making process, either accelerating or slowing down decision-making ahead of the election in a few months? Thanks again.

Andrew Anagnost -- President and Chief Executive Officer, and Director

Yeah. The good thing here is that the issues that affect our customers are bipartisan issues, all right? Infrastructure, manufacturing, go U.S.A., everything across the world, they are bipartisan issues. So, I think whoever wins, there may be all sorts of other puts and takes. But with regards to the things that affect our customers' end markets, I see little impact.

And we're not hearing a lot of trepidation from our customers on that.

Adam Borg -- Analyst

Incredibly helpful. Thanks again.

Operator

Thank you. Our next question comes from Jason Celino with KeyBanc Capital Markets. You may proceed.

Jason Celino -- KeyBanc Capital Markets -- Analyst

Great, thanks for taking my questions. I kind of wanted to kind of dig into the -- just the performance of the quarter. Obviously, you beat margins nicely. You're keeping kind of the margin framework the same for the year, even though you're absorbing some of these incremental headwinds from the transition.

So, internally, did you do anything to drive leverage or sources of leverage with that?

Andrew Anagnost -- President and Chief Executive Officer, and Director

No, we did nothing unusual to do this, right? This is all the rate and pace of the business. Betsy, do you want to comment a little bit more?

Betsy Rafael -- Interim Chief Financial Officer

I think that we did see underlying improvement in the margins, and that was intentional, knowing that we were going to get some headwinds from some of these transitions.

Jason Celino -- KeyBanc Capital Markets -- Analyst

OK. Great. And then maybe just a little more pointed on the free cash flow side. So, it is a $10 million raise.

Nice to see, obviously, the transition timelines have no impact to free cash flow. So, I know you said some customers signed earlier in 2Q. So, is the raise on free cash flow just a function of timing or more a function like the core business? Thank you.

Betsy Rafael -- Interim Chief Financial Officer

So, I think a lot of it is a timing issue because we originally estimated that -- we didn't anticipate the significance of people buying ahead of the launch in North America. And so, our original assumption for free cash flow for FY '25 was that roughly two-thirds of it would take place in the back half of the year. Our current modeling assumption is one-half of that will take place in the back half of the year.

Jason Celino -- KeyBanc Capital Markets -- Analyst

Excellent. Thank you.

Operator

Thank you. Our next question comes from Elizabeth Porter with Morgan Stanley. You may proceed.

Elizabeth Porter -- Analyst

Great. Thank you so much for the question. I wanted to ask a bit on the pricing environment. I believe that one of the things we picked up was the move to the transactional model should allow you to have some more control on discounting behavior and help narrow some of the price differentials you've seen.

So, I wanted to ask, is this a lever you expect to use? And is it something you're doing today or a future opportunity? And how we could think about that going forward?

Andrew Anagnost -- President and Chief Executive Officer, and Director

Yeah. So, the plans where that has the biggest impact is with our partners, quite frankly. What our best partners really like about the new transaction model is it prevents a less confident, less value-added partner coming in and undermining them on price on a big deal where they're trying to really add value. So, for our partners, this is definitely going to allow them to sell to the value they're delivering.

For us moving forward, it's all about the efficiencies of the process. So, for us, it's not so much about the price. The partners are definitely going to benefit from that. What we're going to benefit is the ability to get the efficiencies and the cost out of the environment as we move forward.

And I think that's where you want to look at for us. So, the partners, definitely a price advantage for our best partners. For us, a cost advantage as we drive productivity.

Betsy Rafael -- Interim Chief Financial Officer

And enhance those strategic relationships directly with customers.

Elizabeth Porter -- Analyst

Great. And then just as a follow-up, I appreciate the comments on the overall demand environment. I was hoping you could unpack a little bit more around the new business trends. Understanding the macro remains challenging, anything you're picking up from a new business standpoint in the quarter or how that outlook is changing?

Andrew Anagnost -- President and Chief Executive Officer, and Director

Yeah. So, let me talk about that a little bit. Generally, broadly, OK, we're seeing the same kind of trends that we've seen in previous quarters. There are absolutely some headwinds in new business, but there's different puts and takes here as we look at this quarter.

Now, our moving forward metrics like monthly active usage and bids on BuildingConnected, those show the same kind of positive forward momentum that we've seen in the past. But if you look at the market, obviously, AEC continues to do well. This has a lot to do with construction growth helping in there as well as other things like driving Revit and the backlog associated with that. Manufacturing did well.

It beat a lot of our competitors in the market. The drag was Media and Entertainment still coming out of the effects of those strikes, OK? And that will continue to take time. Geographically, a few puts and takes here, OK? Most of the world was strong, but China and Korea were drags on our business geographically, right? And that gives you kind of a lay of the land for what we see. But one of the things that you got to take away from this is Autodesk is an incredibly resilient business.

There's puts and takes in one part of the business. You might be off on certain types of projects but you're up on other types of projects. One geography is down, another geography is up. This is the magic of Autodesk and are very distributed and resilient business.

And that's what you're seeing as a result here.

Elizabeth Porter -- Analyst

Great. Thank you very much.

Operator

Thank you. Our next question comes from Joe Vruwink with Baird. You may proceed.

Joe Vruwink -- Robert W. Baird and Company -- Analyst

Hi. Great. Hi, everyone. Going back, Andrew, to your Manufacturing comments.

So, growth in the upper teens there or low teens for just the ratable business. Those numbers definitely stand out relative to what we've been hearing throughout the summer, I think particularly at the high end, where there's been some commentary about more deal lumpiness at enterprise. I mean, you have exposure to mid-market and enterprise. You gave anecdotes about both segments.

I'm wondering if you're ultimately seeing maybe more share movement, and that's ultimately explaining the strength there.

Andrew Anagnost -- President and Chief Executive Officer, and Director

We are definitely seeing share movement, right? Look, we feel like we're out in front on a lot of things. Fusion did well in the quarter, and seat count growth was consistent with previous quarters. And more importantly, we continue to drive ASPs up for Fusion with attach rates of extensions and other actions in the Fusion base. So, you are absolutely seeing a share shift.

Joe Vruwink -- Robert W. Baird and Company -- Analyst

OK. And then on the slide showing underlying margin improvement that's taken place since FY '23, how much-weighted investment is still being absorbed in that normalized 39%? So, you talked about making investment in cloud platform, AI, those investments so you're ahead of peers and not needing to make up some future catch-up investment. I mean, another way to say is you're spending some amount, and you haven't matched it against revenues yet. So, just wondering if it's possible to quantify what that is because that would seem to be an area of future improvement in addition to what you're doing with the transaction model.

Andrew Anagnost -- President and Chief Executive Officer, and Director

So, there's always a delay in R&D investment and return on R&D investment, OK? So, there's always a shift. We're definitely in a time of great technological advancement here. We're definitely in an environment where share shift is starting to happen. So, there's always a shift in those areas, OK? And I think we should expect that there's this delay between the actual value creation and the investment.

That's very natural in technology like this. That's why I want you to understand that we're very focused on that sales and marketing productivity moving forward because that's how we're going to drive the margin growth over the next couple of years as the investments in these new and emerging technologies start to really pick up.

Joe Vruwink -- Robert W. Baird and Company -- Analyst

OK. Thank you.

Operator

Thank you. Our next question comes from Ken Wong with Oppenheimer and Co. You may proceed.

Kenneth Wong -- Analyst

Fantastic. I wanted to maybe dig into the margins a little bit. You mentioned being ahead of schedule on the margin profile. Also, confident you can make further improvements in fiscal '26.

I guess, how should we think about where that could go? We're at a point where you haven't even optimized for sales and marketing. What's the right way to think about that trajectory?

Andrew Anagnost -- President and Chief Executive Officer, and Director

So, it's a little early for me to say. I'm not going to give you the guide for next year. So, there's a couple of things that are gating here, OK? One, we want to complete the rollout of the new transaction model. We want to hire a new CFO and get their fingers on this.

And then what we'll do is we'll start giving you more color on the specifics for next year. But suffice it to say, what I'm trying to do is give you confidence that, one, we're not only paying attention to this, but we've got line of sight, just like we did in the move to annualized billings. Look at the results that we're delivering now as a result of that, OK? That was two years ago. Look at the results we're delivering.

Now, I'm telling you we have line of sight on other productivity improvements associated with sales and marketing and the new transaction model. So, I want you to know we see it, and you need to believe in it.

Betsy Rafael -- Interim Chief Financial Officer

And as we've said before, the P&L is going to be noisy as we continue to transition to the new transaction model. And that's why we anchored you on the FY '26 free cash flow target to give you a sense of what to expect. And with our current trajectory, we still estimate that the free cash flow in fiscal '26 to be around $2.05 billion at the midpoint. And as I said earlier, we have our largest multiyear cohort renewing.

We have a large EBA cohort, and we have kind of a natural transition to annual billings from upfront billings.

Kenneth Wong -- Analyst

OK. Perfect. We will await anxiously for these details. Maybe second, just thinking about the -- we talked a lot about the potential economics and kind of the partner activity on the transaction model.

Like what are you guys hearing from customers? And do they even care? Do they even notice? Like is there some sort of a benefit on their side that they might be seeing that we're, maybe on the analyst world, not quite as cognizant of?

Andrew Anagnost -- President and Chief Executive Officer, and Director

Yeah. So, look, for most customers, it's a nonevent, all right? Because they're just finding themselves buying differently. Some are happier. Some would prefer to go through a third party.

Notice that some are taking the opportunity to true-up contracts, right? What they're doing right there, they're saying, "Oh, I have a chance to clean up my relationship with Autodesk. That's going to give me more power from the renewal cycle." So, they actually see advantages with cleaning up their relationship with us and making sure that they have visibility in their company. So, that's good for them. But for the most part, it's not a big customer issue, positive or negative.

Kenneth Wong -- Analyst

OK, perfect. Thank you for the insights, guys.

Operator

Thank you. Our next question comes from Tyler Radke with Citi. You may proceed.

Tyler Radke -- Citi -- Analyst

Yes. Thank you for taking the question. I guess just to start off on the free cash flow number for next year. I guess that's one piece of guidance or at least a target that you've given.

Can you just talk about the confidence behind that? And as you think about being ahead of plan in terms of some of these margin optimizations, like how much margin and cost optimizations is built into that number?

Betsy Rafael -- Interim Chief Financial Officer

Well, again, we're obviously not going to be giving you detailed guidance for fiscal '26 at this point. But what we will do at the end of the fiscal year is we'll give you a lot more details about the impact of the new transaction model, both on fiscal '25 as well as what we expect it -- how we expect it to impact fiscal '26. And right now, we're focused on the rollout in North America as well as Western Europe in September. What I can say is the tailwind to revenue growth will be greater in fiscal '26 than in '25.

And all else being equal, the greater the tailwind to revenue in '26, the greater the headwind to margins. And again -- but we are very focused on managing that. Again, based upon this change in the geography on the balance sheet and the P&L, we're still largely focused on being able to manage to margins that are better than they are today. And again, going back to the free cash flow number of the $2.05 billion at the midpoint.

Obviously, that's up significantly from where it is this year. And I mentioned earlier, the largest multiyear cohort is renewing next year. We have a large EBA cohort. And again, this natural transition from annual billing -- from the upfront to the annual billings will also help us from a cash flow perspective.

Tyler Radke -- Citi -- Analyst

Great. And for Andrew, the make revenue in the quarter was particularly strong, I think the strongest sequential growth in a number of years despite sort of having the leap year last quarter. Was there any one-time factors there? Is that sort of a function of share gains in some of the reorg that you've done in that organization to sort of accelerate growth?

Andrew Anagnost -- President and Chief Executive Officer, and Director

Yeah. So, first off, the core underlying momentum of the make businesses is intact. There was one one-time factor the acquisition of Payapps is in there as well, all right, which is an important piece of it. But the underlying momentum in the Construction and Fusion business, that is solid and consistent with previous quarters with a little kick from the Payapps business, OK? Makes sense?

Tyler Radke -- Citi -- Analyst

Yeah, yeah. Any way to quantify the Payapps in the quarter?

Andrew Anagnost -- President and Chief Executive Officer, and Director

No.

Tyler Radke -- Citi -- Analyst

OK. Thank you. Thought I'd try.

Andrew Anagnost -- President and Chief Executive Officer, and Director

It's always worth trying. Always ask.

Operator

Thank you. That is all the time we have for Q&A today. I would now like to turn the call back over to Simon Mays-Smith for any closing remarks.

Simon Mays-Smith -- Vice President, Investor Relations

Thanks, everyone, for attending. We look forward to seeing many of you on the road over the coming weeks and/or at AU at the end of October. Please just ping me if you have any questions in the meantime. Otherwise, we'll catch up on next quarter's call toward the end of November.

Thanks very much.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Simon Mays-Smith -- Vice President, Investor Relations

Andrew Anagnost -- President and Chief Executive Officer, and Director

Betsy Rafael -- Interim Chief Financial Officer

Saket Kalia -- Analyst

Jay Vleeschhouwer -- Analyst

Adam Borg -- Analyst

Jason Celino -- KeyBanc Capital Markets -- Analyst

Elizabeth Porter -- Analyst

Joe Vruwink -- Robert W. Baird and Company -- Analyst

Kenneth Wong -- Analyst

Ken Wong -- Analyst

Tyler Radke -- Citi -- Analyst

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Autodesk (ADSK) Q2 2025 Earnings Call Transcript was originally published by The Motley Fool