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Adobe Systems (ADBE) to Report Q3 Earnings: What's in Store?

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Adobe Systems Inc. (ADBE - Free Report) is set to report fiscal third-quarter 2019 results on Sep 17. In the last reported quarter, the software giant delivered a positive earnings surprise of 2.81%.

Notably, the surprise history has been decent in Adobe Systems’ case. The company surpassed estimates in three out of the last four quarters, with average positive surprise of 2.18%.

Notably, it has been able to create a niche for itself in the cloud software market. The to-be-reported quarter’s results will likely be driven by strong demand for the company’s innovative solutions and products, strength across geographies, along with growing subscription for cloud application.

Adobe Systems Incorporated Price and EPS Surprise

 

Strength in Digital Media Business

Revenues from Digital Media Solutions should further increase in the fiscal third quarter. Impressive growth in Creative Cloud and Document Cloud business lines should lead to strong Digital Media ARR (Annualized Recurring Revenues) in the to-be-reported quarter.

Markedly, the segment comprises Creative Cloud and Document Cloud (DC). Net new subscriptions, adoption of enterprise services and focus on high-potential segments like education are likely to drive Creative ARR in the fiscal third quarter.

DC ARR is expected to increase in the quarter to be reported, driven by solid enterprise adoption of Acrobat and Document Cloud services, as well as strong performance of Adobe Sign.

Strength in Digital Marketing Business

Within the Digital Marketing segment, Adobe Experience Cloud revenues are anticipated to grow in the quarter to be reported. Adobe Experience Cloud includes Adobe Marketing Cloud, Adobe Analytics Cloud and Adobe Advertising Cloud. New capabilities in Adobe Target will further enhance customer recommendation and targeting, optimize experiences, as well as automate the delivery of personalized offers, thereby expanding revenues from this segment.

Guidance

For third-quarter fiscal 2019, Adobe expects year-over-year revenue growth of 20% and 34% from Digital Media and Digital Experience segments, respectively. Based on a share count of 491 million, management expects GAAP and non-GAAP earnings to be $1.40 and $1.95 per share, respectively.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Currently, Adobe Systems has a Zacks Rank #3 and an Earnings ESP of 0.00%, indicating that the company is unlikely to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

You may consider the following stocks with a positive Earnings ESP and a favorable Zacks Rank:

Alliance Data Systems Corporation has an Earnings ESP of +13.19% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Micron Technology, Inc. (MU - Free Report) has an Earnings ESP of +7.76% and a Zacks Rank #2.

Advanced Micro Devices, Inc. (AMD - Free Report) has an Earnings ESP of +0.94% and a Zacks Rank #3.

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