Adobe Notches Beat Again With Sales Outlook on Cloud Demand
(Bloomberg) — Adobe Systems Inc. racked up another quarterly report that beat analysts’ estimates for sales and profit, proving again that a bet on switching to a cloud-based subscription model for its digital media and marketing software is paying off.
The San Jose, California-based company also forecast revenue in the current quarter that topped the average analyst estimate. Adobe demonstrated strength across the company with growth for its traditional products and newer areas as well.
Chief Executive Officer Shantanu Narayen — having faced down stiff resistance from some clients after a move to a cloud-based model in 2012 — is making investments and striking partnerships to attract more spending from customers. Late last year, the company acquired video-advertising service TubeMogul for about $500 million. That followed the unveiling of a deal with Microsoft Corp. to help sell more of its business marketing products.
The earnings reflect “just this sort of steady execution that kind of has become the standard in the industry for a cloud transition story,” said Josh Olson, an analyst at Edward Jones & Co. “Overall, really strong results.”
Adobe’s shares have risen about 350 percent in the past five years and reached an all-time peak on June 7 of $143.62, making it a high-flier even in the healthy technology market. The stock rose as much as 4.4 percent in extended trading Tuesday after the results were announced.
“Digital transformation continues to be the burning agenda” for creative professionals, governments and businesses, Narayen said Tuesday in a statement accompanying the earnings.
Fiscal second-quarter revenue climbed 27 percent to a record $1.77 billion, the company said in the statement. Analysts estimated $1.73 billion. Profit excluding certain items was $1.02 a share in the period ended June 2, compared with analysts’ projections of 95 cents.
In the current quarter, Adobe projected revenue of about $1.82 billion. That compared with analysts’ average estimate of $1.8 billion, according to data compiled by Bloomberg. Adjusted earnings per share are expected to be about $1, the company said, beating analysts’ average projection of 97 cents. Adobe also raised its annual sales forecast to 23 percent growth. Analysts estimated a 22 percent increase in revenue.
The biggest piece of its business — Digital Media — had revenue of $1.21 billion, with sales from its Creative segment growing to a record $1.01 billion. Adobe Experience Cloud, which includes marketing and advertising, posted a 29 percent sales increase to $495 million from a year earlier.
“We’ve had a really strong, strategic direction for the company that’s been in place for a number of years now and hasn’t wavered,” Chief Financial Officer Mark Garrett said in an interview. “We have a great lineup of products.”