Adobe Q1: Leadership In Digital Transformation Continues To Drive Growth

by Trefis Team
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Adobe (NASDAQ:ADBE) reported its fiscal Q1 earnings on Thursday, March 14, beating consensus revenue and EPS estimates. Adobe views its leadership position and the ability to help businesses transform on the content side as the key to its sustained momentum. As a testament to the strength in pricing, the company’s management increased its full-year EPS outlook by $0.05 to $7.80.

We currently have a price estimate of $256 per share for Adobe, which is slightly lower than the current market price. Our interactive dashboard on Adobe’s Price Estimate outlines our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see all of our technology company data here.

Q1 key takeaways are below:

  • Total revenue was $2.6 billion (+25% y-o-y) and non-GAAP EPS was $1.71.
  • Digital media grew to $1.78 billion (+22% y-o-y), with Creative revenue growing to $1.49 billion (+22% y-o-y) and Document Cloud growing to $282 million (+22% y-o-y).
  • Digital Experience grew to $743 million (+34% y-o-y) and exceeded an annual revenue run rate of $3 billion. The partnership with Microsoft exceeded management targets, with Marketo and Magento beginning to work well on Azure.
  • Publishing revenues grew to $81 million (+26% y-o-y)
  • For Q2, the company expects total revenues of $2.7 billion and non-GAAP EPS of $1.77.

While the company’s management did not break out the growth in its Digital Experience business by commerce and others, the progress on integration of Magento and Marketo seems to indicate that the segment is potentially benefiting from commerce solutions. In addition to the company’s ability to cross-sell solutions by way of its offering set, the commerce ability is fulfilling its promise of creating content, measuring and finally consummating through commerce.

Also notable was Adobe Photoshop and After Effects receiving Scientific and Engineering awards for their contributions to the filmmaking industry during this year’s Academy Awards. Meanwhile, on the margin front, as the loss of deferred revenue from the acquisitions of Magento and Marketo dissipates, management expects margins to improve over the rest of the year.

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