The Market Expects A Lot More From Adobe

Earlier this week Adobe (Nasdaq: ADBE) reported its quarterly results that outpaced market expectations. But a weak outlook failed to impress the market and its stock fell 3% post result announcement.

Photo Credit: midiman/Flickr.com

Adobe’s Financials

For the third quarter of the year, Adobe’s revenues grew 23.7% to a record $2.83 billion, ahead of the market’s projections of $2.81 billion. Adjusted EPS of $1.61 was also significantly ahead of the Street’s forecast of $1.42. The robust performance was attributed to the strength of Adobe Creative Cloud, Document Cloud, and Experience Cloud.

For the quarter, Adobe’s Subscription revenues grew 26% to $2.55 billion and Product revenues grew 5.5% to $157.3 million. Services & support revenues grew 8% to $130.2 million.

By segment, Digital Media grew 22% to $1.96 billion and Digital Experience revenues grew 34% to $821 million. Within the Digital Media segment, Creative Cloud grew 22% over the year to $1.65 billion with Creative ARR coming in at $6.87 billion. Adobe saw significant growth in Lightroom, which reported a 130% growth in its monthly active user base. Document Cloud’s revenues climbed 16% to $307 million. Within Digital Experience, Adobe Experience Cloud subscriptions grew 37% to $679 million.

Despite the strong performance in the reported quarter, Adobe failed to deliver a stronger outlook. For the fourth quarter of the year it forecast revenues of $2.97 billion with an EPS of $2.25, which was lower than the market’s estimate of revenues of $3.02 billion with an EPS of $2.97. Adobe attributed the weak outlook to slow growth in the mid-market segment for its subscription bookings growth for Marketo and delays in Analytics Cloud subscription and consulting services bookings associated with the launch of the Adobe Experience Platform. Adobe is increasing its focus and investment on demand generation and inside sales to rectify the issue.

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Sramana Mitra is the founder of One Million by One Million (1M/1M), a global virtual incubator that aims to help one million entrepreneurs ...

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