Adobe (Nasdaq: ADBE) is one company that has truly pivoted itself to adapt to the modern subscription economy. The transition has benefited the company significantly. Since 2015, it has reported more than 20% year-on-year revenue growth for each quarter. It is also the eighth consecutive quarter that the stock has delivered double digit growth. And with the current initiatives, it doesn’t look like the growth is slowing down.
Adobe’s second quarter revenues grew 25% over the year to a record $2.74 billion, ahead of the market’s projections of $2.7 billion. Adjusted EPS of $1.83 was also ahead of the Street’s forecast of $1.78.
For the quarter, Adobe’s Subscription revenues grew 28% to $2.46 billion and Product revenues grew 1% to $152.8 million. Services & support revenues grew 12% to $135.37 million.
By segment, Digital Media revenues grew 22% to $1.89 billion with creative revenue growing to $1.59 billion and document cloud accounting for the remaining $296 million. Digital Media Annualized Recurring Revenue (ARR) grew by $406 million to $7.47 billion. Creative ARR grew to $6.55 billion, and Document Cloud ARR grew to $921 million.
Digital Experience segment revenue grew 34% over the year to $784 million.
Its outlook was not as impressive though. Adobe forecast revenues of $2.8 billion and an adjusted EPS of $1.95 for the current quarter, compared with the market’s forecast of revenues of $2.83 billion with an EPS of $2.05.
Adobe’s Product Growth
To continue to grow market adoption, Adobe has been focusing on mobile usage. Some of the newer products released with this focus include Adobe Reader for mobile and Adobe Scan, which allow users to capture documents, forms, whiteboard sketches, and even business cards to turn them into high-quality PDFs. The capability is available for both the iOS and Android environments.
It is continuing to integrate the acquisitions of Magento and Marketo into its offerings. Recently, it announced the availability of Adobe Commerce Cloud, which has been built on the Magento Commerce platform. It has deep integrations across Adobe Analytics Cloud, Marketing Cloud, and Advertising Cloud.
Adobe also announced a new partnership with Amazon to create Magento Commerce branded stores for Amazon sellers. The service will allow merchants the ability to seamlessly manage their business across both Amazon.com and their own storefront.
Adobe is leveraging Marketo to deepen the integration between Adobe Marketing Cloud and Marketo Engage. It is leveraging Adobe Sensei to allow companies to deliver the right experiences to the right people at the right time. As part of this effort, it recently entered into a partnership with LinkedIn that will empower B2B marketers and sellers to easily identify, understand, and engage B2B customer buying teams.
Recently, Adobe also announced the global availability of Adobe Experience Platform, the first of its kind real-time platform for Customer Experience Management. Experience Platform will provide the ability to integrate data from across the enterprise to create real-time customer profiles and help in the activation and delivery of extremely personalized experiences.
The market is impressed with Adobe’s meaningful partnerships and product focus. Despite the weaker outlook, its stock is currently trading at $300.97 with a market capitalization of $146.1 billion. It touched a 52-week high of $304 last month soon after result announcement. It was trading at a 52-week low of $204.95 in December last year, when most tech stocks had taken a beating.
Photo Credit: midiman/Flickr.com
This segment is a part in the series : Cloud Stocks