Adobe: quietly creating a new world
Big Tech stock coverage often focuses on the giants like Apple, Microsoft, Tesla, Facebook, Amazon & Google.
And it makes sense. Average Joe sees and uses their products every day.
OK, Maybe Tesla isn’t so widely-used, but they have a Galaxy-Brain headline grabbing CEO to make up for that.
Point is, they’re always ‘in view’ (and the biggest US companies) so they get a lot of media attention.
One stock that receives relatively little coverage is Adobe.
Yet it’s the 17th largest US company and the 8th largest firm in the Nasdaq 100 (9th if you count Google’s dual listing) with a market cap of $318 billion (as at 1st December 2021).
The past year has been a monster too. Some highlights from the Q3 earnings report:
- Record revenue of $3.94 billion in Q3 of fiscal year 2021: 22% year-over-year growth.
- Digital Media segment revenue was $2.87 billion: 23% year-over-year growth.
- Creative revenue grew to $2.37 billion: 21% year-over-year growth.
- Document Cloud revenue was $493 million: 31% year-over-year growth.
- Adobe repurchased approximately 1.7 million shares during the quarter.
Investors have been well rewarded. Since the March 2021 low of ~$420 the price has surged to nearly $700, a gain of over 65%!
And they expect to keep the strong growth going into Q4, projecting
- Total revenue ~$4.07 billion
- Digital Media segment revenue ~20% year-over-year growth
- Digital Media annualized recurring revenue (ARR) ~$550 million of net new ARR
- Digital Experience segment revenue ~22% year-over-year growth
- Digital Experience subscription revenue ~26% year-over-year growth
How does Adobe make money?
Digital Media: Subscriptions to Creative Cloud (Photoshop, Illustrator, Premiere Pro, Lightroom CC, InDesign, Adobe XD) and Document Cloud (Adobe Acrobat, Adobe Sign and Adobe Scan).
Digital Experience: Subscriptions to Adobe Experience Cloud, a cross-channel marketing optimization tool that includes analytics, targeting, campaign management, content delivery and commerce enablement.
The 2013 pivot from large up-front purchases to a subscription-based model has been key to their success.
The SAAS (Software as a Service) model has delivered serious revenue growth to Adobe and other software providers, while also benefiting customers who were fed up with forking out wads of cash each year for a software package that would soon become obsolete.
The CEO is delighted with the performance so far...
Shantanu Narayen, Adobe president and CEO:
“Adobe had another outstanding quarter as Creative Cloud, Document Cloud and Experience Cloud continue to transform storytelling, learning and conducting business in a digital-first world,”
“Our talented employees, category-defining innovation and product leadership uniquely position us for continued momentum and success.”
Thanks Mr Narayen… But what does the future hold for Adobe?
In the near term, more online collaboration on creative shared projects, a new area for shared creativity:
“If you're working on a spreadsheet or working on a Word document, it's probably a more normalized skill set.”
“The number of stakeholders that exist in the creative process -- whether you're an agency or a marketer or a design professional or an executive who needs to approve a particular campaign — the skill set associated with the multiple people collaborating, it is different,”
Adobe is launching Creative Cloud Spaces, a shared space for teams to organize files, libraries and links, and Creative Cloud Canvas, which lets people display their design work to review with others who are part of the project.
Adobe will also test web versions of Photoshop and Illustrator for online collaborations.
And then… The Metaverse, Augmented & Virtual Reality
Check out this video from the 2019 Adobe MAX event that highlights the overall concept.
“New media types are coming,”
“The secular trends associated with the number of people who want to create, the new devices on which people are going to create, the dramatic advances in computing power — those are all tailwinds that will be growth drivers for us.”
As society continues to shift exponentially towards a digital world, it’s hard to disagree.
Not investment advice. Past performance does not guarantee or predict future performance.
Ever since US inflation came in hot and the Fed surprisingly beefed up their rate hike to 75bps, there’s been a LOT of a...
Elon Musk recently appeared on a podcast interview with Tesla Owners of Silicon Valley. Musk’s comments reveal the chall...