The Street Reviews Adobe's 2019: 'Record Year'

The Street Reviews Adobe's 2019: 'Record Year'

Adobe Inc ADBE reported fourth-quarter results Thursday that were highlighted by record quarterly revenue of $2.99 billion and record annual revenue of $11.17 billion. Here's how the Street reacted. 

Adobe's Quarter In Review

Adobe reported "excellent" a quarter that shows management is "executing well," Oppenheimer analyst Brian Schwartz said in a Friday note.

The four main positive takeaways from the quarter are as follows, the analyst said: 

  • Total remaining performance obligation rose 12% from last quarter to $9.82 billion.
  • Creative annual recurring revenue rose 23% year-over-year to $7.25 billion.
  • Document cloud revenue growth accelerated from 24% last quarter to 31%.
  • Free cash flow of $1.28 billion came in $38 million better than expected.

Schwartz had four negative takeaways:

  • Digital Experience revenue growth decelerated from 34% last quarter to 24.5%.
  • EMEA growth slowed due to foreign exchange woes.
  • Subscription revenue growth slowed from 26% last quarter to 23%.
  • PF gross margins fell for the fifth straight quarter to 85.4%.

Morgan Stanley Sees Momentum In Digital Experience

The Digital Experience business showed encouraging signs in Thursday's report, which should "lift investor sentiment," Morgan Stanley Keith Weiss said in a Friday note. 

The business is actually gaining momentum, as $859 million in revenue beat expectations, while Adobe's commentary on Marketo was "much more constructive" and the Adobe Experience Platform is seeing "significant interest" from large customers, the analyst said. 

Adobe CEO Shantanu Narayen suggested a new leader for the Digital Experience segment could be named in the coming weeks, Weiss said, adding that this is an encouraging sign, as the executive previously said a new leader would be named only once "the house was in order."

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