Adobe (ADBE) Misses Q4 Earnings Estimates, Beats Revenues

Adobe Systems Incorporated (ADBE - Free Report) reported fourth-quarter fiscal 2018 non-GAAP earnings of $1.83 per share, missing the Zacks Consensus Estimate of $1.88. However, the figure increased 5.8% sequentially and 45.2% on a year-over-year basis.

Adjusted revenues also increased 23% year over year to $2.46 billion, beating the Zacks Consensus Estimate of $2.43 billion. Excluding the acquisition of Marketo, revenues in the fiscal fourth quarter were 2.44 billion.

The growth was driven by contribution from Marketo acquisition, strong demand for the company’s innovative solutions and products, strength across geographies, along with growing subscriptions for its cloud application.

Notably, shares of Adobe have returned 40.4% on a year-to-date basis, outperforming the industry’s rally of 20.1%.

Top Line in Detail

Adobe reports revenues in three categories — Subscription, product and services & support.

Subscription revenues came in at $2.18 billion (88.6% of its total revenues), up 28.8% on a year-over-year basis.

Product revenues totaled $150.4 million (6.1% of revenues), decreasing 22% year over year.

Services & support revenues came in at $130 million (5.3% of revenues), increasing 10.5% year over year.

Segment Details

The company operates in two reportable segments — Digital Media and Digital Experience.

Digital Media — This segment generated revenues of $1.71 billion, which increased 23% on a year-over-year basis. The segment comprises Creative Cloud and Document Cloud. Additionally, Digital Media ARR increased by $430 million to $6.83 billion.

Creative Cloud (CC) generated $1.45 billion of revenues, reflecting 26% year-over-year growth. Additionally, Creative ARR increased by a record $373 million. The growth drivers in the quarter were strong net new subscriptions across user segments and geographies, driven by robust traffic and customer acquisition on Adobe.com. Black Friday and Cyber Monday sales also aided the results. Moreover, new product introductions, strong demand for online video creation and improving average revenue per user (ARPU) across key offerings were other positives.

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