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Market Insights

Adobe posts record revenues

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Adobe beat analyst estimates on pretty much every metric in their latest earnings report. They also posted record revenues for the first fiscal quarter of the year.

But the initial reaction was negative. Adobe shares were trading slightly lower at 452 in pre-market, down a little over 3% from the 466.45 close.

Along with a lot of software stocks, Adobe’s share price has been trending lower for the past few months.

Adobe Systems one day price trend

The recent rally and upturn in risk sentiment has seen the price bounce from lows of 407. All eyes on the resistance level above and the 50 day moving average around the 480 zone.

Key stats from the report:

  • Revenue $4.26 billion, +9.1% y/y, estimate $4.24 billion
  • Subscription revenue $3.96 billion, +10% y/y, estimate $3.95 billion
  • Product revenue $145 million, -6.5% y/y, estimate $133.8 million
  • Digital media annualised recurring revenue (ARR) $12.57 billion, +18% y/y, estimate $12.52 billion
  • Creative ARR $10.54 billion, +16% y/y, estimate $10.51 billion
  • Document cloud ARR $2.03 billion, +29% y/y, estimate $2.01 billion
  • R&D expenses $701 million, +13% y/y, estimate $678.8 million
  • Adjusted operating income $1.99 billion, +9% y/y, estimate $1.95 billion

“Adobe achieved record Q1 revenue as Creative Cloud, Document Cloud and Experience Cloud continue to be pivotal in driving the digital economy,” said Shantanu Narayen, chairman and CEO, Adobe.

So, they beat estimates and the CEO’s chuffed. What’s the next step?

Adobe laid out their Q2 targets:

  • Total Adobe revenue of approximately $4.34 billion;
  • Net new Digital Media ARR of approximately $440 million;
  • Digital Media segment revenue growth of approximately 13 percent year over year
  • Digital Experience segment revenue growth of approximately 15 percent year over year
  • Digital Experience subscription revenue growth of approximately 17 percent year over year

As always, there are question marks over how Adobe will maintain their leading position in the marketplace. The launch of products such as Creative Cloud Express aimed at a wider audience; “those with no prior design experience” have also caught the eye.

Concerns that rising competition at the low end of the market will couple with a slower digital marketing spending backdrop have been voiced too.

Perhaps it’s a question of timeframes. In the near term, there’s an idea that the digital world will give way to more demand for the physical world. Travel, experiences, eating out and so on.

Over the long term, Adobe’s intent is clear:

We are witnessing the digitization of everything, and Adobe’s products offer customers access to a digital future, underpinning how they live and work. Our investment in products, marketing and a data driven operating model are continuing to drive Adobe’s growth.

Dan Durn, executive vice president and CFO, added:

“Adobe’s Q1 results reflect the company’s strong execution and resilience through unprecedented circumstances. “Our momentum, product innovation and immense market opportunity position us for success in 2022 and beyond.”

Not investment advice. Past performance does not guarantee or predict future performance.

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