Adobe Strengthens Its Creative Cloud Portfolio And Gets Ready For The Metaverse

Adobe (Nasdaq: ADBE) recently reported its quarterly results that continued to outpace market expectations. The company is driving growth by focusing on creative products and catering to the emerging demands of content needed for videos and the metaverse.  

Adobe’s Financials

Adobe’s second-quarter revenues grew 15% to $4.39 billion, ahead of the market’s estimates of $4.34 billion. Adjusted EPS of $3.35 also beat analyst estimates of $3.31.

By segment, revenues from the Digital Media segment grew 16% to $3.2 billion with Creative revenue growing to $2.61 billion and Document Cloud growing to $595 million. Revenues from the Digital Experience segment were $1.1 billion.

Digital Media Annualized Recurring Revenue (ARR) grew to $12.95 billion exiting the quarter, a quarter-over-quarter increase of $464 million. Creative ARR grew to $10.82 billion, and Document Cloud ARR grew to $2.13 billion.

Adobe expects to end the third quarter with revenues of $4.43 billion and non-GAAP EPS of $3.33. The market was looking for revenues of $3.85 billion and an EPS of $2.90.

For the year, Adobe expects revenues of $17.65 billion and non-GAAP EPS of $11.20. Revenue from Digital Media is expected to grow 12% and Digital Experience is expected to grow 14%, and Digital Experience subscription is expected to grow 15%.

Adobe’s Product and Partner Growth

Recently, Adobe announced its partnership with Crooked Media. The partnership allows Crooked Media to leverage Adobe Premiere Pro’s Speech to Text technology, allowing it to caption popular content. By leveraging Text to Speech in Premiere Pro, Crooked Media is able to use AI and machine learning to automate the creation of transcriptions and captions, speeding up the tedious and time-consuming process, allowing the team to get high-quality, precise captions for video podcasts and social media channels quickly, making content more engaging and accessible without missing a beat.

Adobe Creative Cloud continued to deliver strong growth on account of significant product upgrades. Adobe is integrating collaboration capabilities directly into its flagship applications to enable creative teams to collaborate with each other and with stakeholders. It expanded its creative offerings to include Adobe Express, a new template based easy-to-use web and mobile product that creates an opportunity to serve a broader base of communicators who need lightweight task-based tools to create social media posts, logos and flyers, party invitations, and posters for their personal needs. Within imaging, it launched powerful new capabilities in Photoshop, including Photo Restoration neural filter that detects and restores damaged photos using AI capabilities.

The growing demand of video content is being met through Premiere Pro that remains a leader in video creation, editing, and has now collaborated with The new integration between Frame and Premiere Pro and After Effects is streamlining review and collaboration workflows across stakeholders. The impact of these upgrades was visible as the net new creative cloud ARR reached $357 million and revenues grew 14% to $2.61 billion.

They are also seeing the emergence of 3D as customers demand metaverse-ready content. Its Substance 3D had its strongest quarter ever. Adobe recently added native Apple hardware support for painter, designer and sampler enabling creators to work faster. The Substance team also delivered a new SDK for developers who want to integrate 3D capabilities into their applications.

Its stock is currently trading at $368.5 with a market capitalization of $174.1 billion. It touched a 52-week high of $699.54 in November last year and a 52-week low of $338.00 earlier this month.

Disclosure: All investors should make their own assessments based on their own research, informed interpretations, and risk appetite. This article expresses my own opinions based on my own research ...

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