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Adobe Making Big Moves in the Martech Industry

Posted on Tuesday, Sep 25th 2018

Last quarter we were searching for answers to what Adobe (Nasdaq: ADBE) was looking to acquire with its $6 billion cash reserve. This quarter it answered that question by making some big acquisitions. But first, the financials.

Adobe’s Financials
Adobe’s third quarter revenues grew 24% over the year to $2.29 billion, ahead of the market’s projections of $2.25 billion. Net income was $666.3 million, or $1.34 a share, compared with $419.6 million, or $0.84 a share a year ago. Adjusted EPS of $1.73 was also ahead of the Street’s estimated $1.69 per share for the quarter.

By segment, revenues from Digital Media segment came in $1.61 billion with Creative revenue growing to $1.36 billion and Document Cloud growing 21% to $249 million. Digital Media Annualized Recurring Revenue grew to $6.40 billion, growing by nearly $340 million over the previous quarter. Digital Experience segment revenue grew 21% to $614 million with Digital Experience subscription revenue growing 25% over the year.

For the current quarter, Adobe is looking for revenues of $2.42 billion with an EPS of $1.87. The market was looking for revenues of $2.41 billion with an EPS of $1.86.

Adobe’s Acquisitions

Adobe recently made a few big acquisitions. In May this year, it announced the $1.7 billion acquisition of Magento Commerce. Magento’s Commerce Cloud brings digital commerce and order platforms for both physical and digital goods. Its Platform integrates digital commerce, order management, and predictive intelligence into a single commerce platform across a wide range of industries. Its partner ecosystem provides thousands of pre-built extensions, including payment, shipping, tax, and logistics.

The acquisition of the Magento Commerce Cloud will enable Adobe to deliver a seamlessly integrated commerce solution into the Adobe Experience Cloud. It will be able to cater to both B2B and B2C customers globally.

Magento was founded in 2008 and prior to the acquisition had raised $272.5 million in funding from investors including Hillhouse Capital and eBay. Magento’s financial details are not known, but Adobe expects its revenues to be nearly $150 million for the year. The acquisition is expected to help Adobe compete with players like BigCommerce and Shopify.

But the biggest news for Adobe has been the $4.75 billion acquisition of Marketo. Marketo was founded in 2006. It provides a complete range of marketing automation software solution that can be utilized by both SMBs and global enterprises. Its platform helps brands track their customers’ activities online to help deliver more personalized advertising. Marketo listed on the Nasdaq in 2013, but two years ago, it went private when it was taken over by Vista Equity Partners for $1.8 billion.

Marketo’s acquisition is expected to add to Adobe’s marketing-technology capabilities and will help expand its B2B platform while improving its customer experience across B2C and B2B. Over the past few years, it has been building up its MarTech arsenal with significant acquisitions. It started in 2009, when it picked up Omniture for $1.8 billion to include Web analytics, measurement and optimization technologies that would help it driven experiences and e-commerce across all digital media. In 2013, it added Paris-based Neolane Inc. for an estimated $600 million. Neolane was known for its marketing automation and cross-channel campaign management software and services that help B2B and B2C marketers. Its solutions enable customers to offer personalized campaigns through direct mail and digital contact, including e-mail, SMS and MMS. 

I would like to hear from users how this acquisition changes their world? Adobe is clearly making big moves in the marketing sector. According to recent research, the spending on digital marketing grew by 44% last year in the United States and Britain to $52 billion. Adobe’s acquisitions are turning it into a single-stop shop for all of the marketer needs. What other capabilities do you think Adobe needs to add to its platform?

The market is very pleased with Adobe’s bold moves. Its stock is currently trading at $260.88 with a market capitalization of $127.7 billion. It touched a 52-week high of $277.61 earlier this month. It has been climbing throughout the year from the 52-week low of $143.95 that it was trading at a year ago.

Photo Credit: midiman/Flickr.com

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