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Cloud Stocks: Adobe’s Relentless Growth Continues

Posted on Wednesday, Sep 23rd 2020

Adobe (NASDAQ: ADBE) recently reported its quarterly results that revealed record breaking performance. The company’s digital focus helped it deliver its best third quarter in its history despite the current pandemic conditions.

Adobe’s Financials
Adobe’s third quarter revenues grew 14% to a record $3.2 billion, surpassing the market’s projections of $3.16 billion. Remaining Performance Obligation (RPO) exiting the quarter grew 18% to $10.34 billion. Adjusted EPS of $2.57 was also significantly ahead of the Street’s forecast of $2.41.

Adobe’s Subscription revenues grew 17.8% to $3 billion and Product revenues fell 30.6% to $109 million. Services & support revenues declined 10.8% to $116 million.

By segment, Digital Media segment revenue grew 19% to $2.34 billion. Creative revenue grew to $1.96 billion and Document Cloud revenue was $375 million. Digital Media Annualized Recurring Revenue (ARR) grew to $9.63 billion. Creative ARR grew to $8.29 billion, and Document Cloud ARR grew to $1.34 billion. Digital Experience segment revenues grew 5% to $838 million. Digital Experience subscription revenue grew 2% to $729 million. Digital Experience subscription revenue, excluding Advertising Cloud revenue, grew 14%.

Adobe forecast revenues of $3.35 billion and an adjusted EPS of $2.64 for the fourth quarter, compared with the market’s forecast of revenues of $3.36 billion with an EPS of $2.64. Adobe has also withdrawn the annual fiscal 2020 targets that were issued in December 2019.

Adobe’s Product and Partner Growth

Last quarter, Adobe launched new capabilities allowing marketers to accelerate data collection across channels to enable faster experiences on real-time insights. It announced the general availability of Data Governance capabilities in its Real-Time Customer Data Platform as well as early traction with its Customer Journey Analytics service, providing customers with a full view of the Customer Journey both online and offline.

Adobe recently entered into a strategic tie-up with IBM and Red Hat to drive real-time data security for its enterprise customers in regulated industries. The partnership will help accelerate digital transformation and enable companies to deliver more personalized experiences across the customer journey, driving improved engagement, profitability, and loyalty. Initially the partnership will focus on deployment flexibility with hybrid cloud to enable brands to manage and deliver their content and assets within any hybrid cloud environment, from multiple public clouds to on-premise data centers.

As part of the agreement, Adobe will join IBM’s partner ecosystem as a strategic partner and will provide CX solutions for the IBM Cloud for Financial Services. IBM will also extend Adobe Experience Manager to professionals in this industry to help them meet their security and regulatory requirements. Finally, IBM iX, the business design arm of IBM Services, will extend their offerings across all of Adobe’s core enterprise applications to accelerate how global brands use data to design, implement and scale personalized customer experiences to instill trust across every aspect of their business.

Digital Signature Growth

The current remote working and living conditions have given a strong boost to the digital signature market. According to a recent report, the global digital signature market was expected to grow from $1.5 billion in 2019 to $23.9 billion by 2030, translating to a 29% growth rate. The growth has certainly accelerated during the recent months due to the increased adoption of these services by smaller organizations as well.

Adobe has been addressing this market with its Adobe Sign offering, a part of the Adobe Document Cloud family of apps. The service is well-integrated with other enterprise-related apps and uses a cloud-based system for signatures and document management. Adobe Sign offers a web-based platform along with mobile apps that allows users to scan, sign, and send their documents from anywhere.

Adobe’s e-signature capabilities are very similar to those offered by DocuSign. But Adobe Sign offers a lot of their integration options only with its enterprise level plan, thus making it difficult for SMBs to leverage Sign. DocuSign, on the other hand, has an extensive integration library that is available to its users without having to sign up for an enterprise price tier. DocuSign has managed to build a product that outshines Adobe Sign on account of integration and flexibility.

The market is pleased with Adobe. Its stock is currently trading at $486.78 with a market capitalization of $233.5 billion. It touched a 52-week high of $536.88 in August. It was trading at a 52-week low of $255.13 in October last year.

Photo Credit: midiman/Flickr.com

This segment is a part in the series : Cloud Stocks


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