Will Adobe Continue Top Line Growth In FY 2020?

by Trefis Team
+8.90%
Upside
317
Market
345
Trefis
ADBE
Adobe
Rate   |   votes   |   Share

Yes, as per Trefis estimates Adobe (NASDAQ:ADBE) will see a Top line growth of nearly 19.6% for FY 2020 (ended November 2020). Adobe’s Digital Media business, consisting primarily of revenue from subscription, is expected to contribute $9.1 billion to Adobe’s 2020 revenues, making up 68.1% of Adobe’s $13.4 billion in expected revenues for 2020. The Digital Media segment contribution is more than twice that from the Digital Experience business. Adobe is expected to add $7.5 billion in revenue between 2016 to 2020, out of which the Digital Media segment is expected to provide $5.2 billion, that is 68.7% of the total expected increase. This Digital Media revenue growth has been key to Adobe’s nearly 300% price appreciation since 2016, further helped by increasing margins. We discuss Adobe’s valuation analysis in full, separately.

Below we discuss Adobe’s business model, followed by sections that review past performance and 2020 expectations for Adobe’s revenue drivers and competitive comparisons of its revenue with Salesforce and SAP.

You can look at our interactive dashboard analysis ~ Adobe Revenues: How Does Adobe Make Money? ~ for more details.

Adobe’s Business Model:

What Need Does It Serve?

  • Adobe makes money by selling software for creative content and marketing purposes, with a focus on user experience. The company’s products are offered as subscription and through licenses.

Has 3 Operating Segments

  • Digital Media: Segment revenue is derived from the sale of subscriptions to Creative Cloud (Photoshop, Illustrator, Premiere Pro, Lightroom CC, InDesign, Adobe XD etc) and Document Cloud (Adobe Acrobat, Adobe Sign, and Adobe Scan).
  • Digital Experience: Segment revenue is derived from the sale of subscriptions to Adobe Experience Cloud, a cross-channel marketing optimization tool that includes analytics, targeting, campaign management, content delivery, and commerce enablement.
  • Publishing: Segment revenue is derived from the sale of licenses to legacy products such as eLearning, technical document publishing, web conferencing etc to OEMs.

What Are The Alternatives?

  • Adobe competes with Apple, Autodesk, Avid, Corel, Microsoft, Affinity, Quark in its Digital Media, and Google, IBM, Oracle, salesforce.com, SAP, SAS, Teradata, Shopify in its Digital Experience segment. In the Publishing segment, the company primarily faces competition from large-scale publishing systems and XML-based publishing companies.

 

Revenue growth of about $5.3 billion over three years driven primarily by Digital Media segment:

  • Total Revenue has grown at a high pace from $5.9 billion in 2016 to $11.2 billion in 2019 primarily pushed by the Digital Media segment. Trefis estimates further growth in Revenue to around $13.4 billion in 2020.
  • Digital Media segment has seen the highest increase in absolute terms in Revenue and also contributes the maximum to Total revenue. It increased from $3.9 billion in 2016 to $7.7 billion in 2019. Trefis estimates further growth in Revenue to around $9.1 billion in 2020.
  • Digital Experience segment is the fastest growing segment as revenue doubled over the last 3 years. It increased from $1.6 billion in 2016 to $3.2 billion in 2019. Trefis estimates further growth in Revenue to around $4 billion in 2020.
  • Publishing business has seen a fall in revenue growth over the years. Revenue fell from $282 million in 2016 to $258 million in 2019. Trefis estimates Revenue to remain flat at around $258 million in 2020.

 

Further, the Trefis estimate for Adobe’s Valuation points to an downside estimate while Salesforce’s Valuation looks higher than the current market price.

 

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!