Subscription Revenues Help Adobe Beat Earnings, Post Record Revenues

by Trefis Team
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Adobe (NASDAQ:ADBE) announced Q1 earnings on March 15, reporting a 24% increase in net revenue to $2.1 billion. Growth came from subscription revenues, which were up nearly 30% on a y-o-y basis to $1.8 billion for the quarter. Comparatively, product revenues fell 6% y-o-y to $172 million while services revenues were roughly flat over the comparable prior year period at $114 million. Additionally, the company’s operating margin expanded 6 percentage points to 42% for the quarter. This trend is expected to continue in the coming quarters, particularly for Digital Experience offerings, according to Adobe’s management.

Going forward, Adobe’s subscription segment is likely to continue to grow rapidly. Adobe’s management expects net revenues to increase 25% to $2.2 billion in the second quarter, with subscription revenues expected to drive growth. We expect its operating margin and net income margin to remain high in order to sustain the 50-60% increase in net income and earnings per share. We have summarized our expectations for the company’s Q2 on our interactive dashboard platform. You can change expected revenue, operating margin and income margin figures for Adobe to gauge how changes will impact expected earnings for the current quarter. 

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