Photo Credit: midiman/Flickr.com

Earlier this week, Adobe (ADBE) reported its quarterly results that continued to outpace market expectations. Adobe is looking at expanding its presence within the video content segment through acquisitions to help drive growth.

Adobe’s Financials

Adobe’s third quarter revenues grew 22% to $3.94 billion, ahead of the market’s estimates of $3.56 billion. Adjusted EPS of $3.11 also beat analyst estimates of $3.02.

By segment, revenues from the Digital Media segment grew 23% to $2.87 billion, with Creative revenue growing to $2.37 billion and Document Cloud growing to $493 million. Revenues from the Digital Experience segment were $985 million.

Creative Annualized Recurring Revenue (ARR) grew to $9.87 billion, and Document Cloud ARR grew to $1.79 billion. Digital Media Digital Media ARR grew to $11.67 billion, a q-o-q increase of $455 million. Net new ARR additions exceeded the guidance of $440 million, but were short of the market’s expectations of $480-500 million.

Also, while Adobe did manage to beat the metric compared with its guidance by 3%, it had delivered far stronger results in previous quarters, when it beat the guidance by 15% in Q2 and by 6% in Q1. The management attributed steep summer seasonality as the reason for the slowdown and anticipates things to pick back up in the fourth quarter.

Adobe expects to end the fourth quarter with revenues of $4.07 billion and non GAAP EPS of $3.18. The market was looking for revenues of $3.89 billion with an EPS of $3.01.

Adobe’s Acquisition

Adobe recently announced the acquisition of New York-based Frame.io for an estimated $1.275 billion. Founded in 2104 by Emily Wells and John Traver, Frame.io is a cloud-based video collaboration platform that allows users to upload source media and assets into private workspaces.

Frame.io has over a million users across media and entertainment companies, agencies, and global brands, and helps them streamline the video production process by enabling video editors and key project stakeholders to seamlessly collaborate using cloud-first workflows.

By enabling real-time footage upload, access, and in-line stakeholder collaboration in a secure environment across platforms, Frame.io eliminates the inefficiencies of video workflows. It helps deliver a collaborative workflow environment that accelerates the development of video content.

The acquisition will allow Adobe to combine its creative software, including Premiere Pro and After Effects video editing products, with Frame.io’s review and approval functionality to deliver a collaboration platform to power the video editing process. Prior to the acquisition, Frame.io had raised $90.2 million in five rounds of funding led by investors including FirstMark, Shasta Ventures, Accel, Insight Partners, and SignalFire.

Adobe stock has been recently trading at around $622.71 with a market capitalization of $300.5 billion. It touched a 52-week high of $673.88 in September. It was trading at a 52-week low of $420.78 in March.