Adobe (Nasdaq: ADBE) recently reported another stellar quarter that surpassed the market’s forecast. But the Street has come to expect a lot more from Adobe. Its outlook failed to impress the market and the stock fell 5% post result announcement. But Adobe continues to remain an impressive example of a turn-around done right as it continues to build its cloud, SaaS, and PaaS offerings.
Adobe’s first quarter revenues grew 25% over the year to a record $2.6 billion, ahead of the market’s projections of $2.55 billion. Adjusted EPS of $1.71 were also significantly ahead of the Street’s forecast of $1.62.
For the quarter, Adobe’s Subscription revenues grew 29% to $2.3 billion and Product revenues fell 0.6% to $170.6 million. Services and Support revenues grew 10% to $125.4 million.
By segment, Digital Media grew 22% to $1.78 billion driven by growth in both the Creative Cloud and Document cloud segments. Creative Cloud revenues grew 22% to $1.49 billion and Document Cloud segment also grew 22% to $282 million. Revenues from the Digital Experience segment grew 34% to $743 million. Adobe includes revenues from Adobe Experience Cloud, Magento, and Marketo acquisitions.
Despite the strong quarter performance, Adobe’s outlook for the current quarter fell short of market’s expectations. Adobe forecast revenues of $2.7 billion and an adjusted EPS of $1.77 for the current quarter. The market was looking for revenues of $2.72 billion with an EPS of $1.88. Adobe expects to end the current year with revenues of $11.15 billion with an adjusted EPS of $7.80 which was in line with the market’s expectations.
Adobe’s Allegorithmic Acquisition
Adobe has been driving growth through product innovation, and last quarter was no different. It is bolstering its Creative Cloud offering with the acquisition of Auvergne, France-based Allegorithmic. Allegorithmic is a leading provider of tools for 3D material and texture creation for gaming and entertainment. Its products allow content developers to produce texture assets twice as fast as usual with file sizes that are 500-1000 times smaller than regular textures. Terms of the deal were not disclosed. Prior to the acquisition, Allegorithmic was privately held and had raised $1.9 million in funding from Sofimac Partners. Owler estimates its revenues at $2.6 million annually. The addition of Allegorithmic will help strengthen 3D content design for Adobe’s Creative Cloud.
Adobe has implemented a robust platform strategy to drive growth. It has built a strong ecosystem of plug-ins and integrations for its Creative, Experience, and Document Clouds. Within the Creative Cloud, Adobe offers more than a thousand extensions, plug-ins, and scripts that can enhance creativity and extend the functionality of Creative Cloud applications. For the Experience Cloud segment, Adobe offers a library of apps, extensions, and scripts that help customers manage their advertising, data analytics, campaign, and content management. Within the Document cloud, developers have built apps that help streamline document workflows and speed business with e-signatures.
Adobe has realized the importance of following a PaaS strategy to drive growth. I would like to know from Adobe what apps are driving the most traction on its platform?
Adobe may have made impressive moves so far, but the market is looking for a lot more. Its stock is currently trading at $262.27 with a market capitalization of $128.28 billion. It touched a 52-week high of $277.61 in September last year. Last year’s stock market turbulence had sent the stock to a 52-week low of $204.95.
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This segment is a part in the series : Cloud Stocks