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Adobe Inc. (ADBE - Free Report) released first-quarter fiscal 2023 non-GAAP earnings of $3.80 per share, beating the Zacks Consensus Estimate by 3.8%. The figure improved 12.8% on a year-over-year basis.
Total revenues were $4.66 billion, which beat the Zacks Consensus Estimate of $4.61 billion. The figure was up 9% on a reported basis and 13% on a constant currency basis from the year-ago quarter.
Top-line growth was driven by the strong performance of Adobe Creative Cloud, Document Cloud and Experience Cloud. Further, accelerating subscription revenues contributed well.
Top Line in Detail
Adobe reports revenues under three categories — Subscription, Product and Services & support.
Subscription revenues were $4.4 billion (accounting for 93.9% of total revenues), up 10.5% on a year-over-year basis.
Product revenues totaled $120 million (2.6% of total revenues), down 17.2% year over year.
Services & support revenues were $162 million (3.5% of total revenues), increasing 1.9% from the prior-year quarter.
Digital Media: The segment generated revenues of $3.4 billion, which improved 9% on a year-over-year basis. The segment comprises Creative Cloud and Document Cloud. Notably, Digital Media’s annualized recurring revenues (ARR) increased to $13.67 billion, of which the net new ARR was $410 million.
Creative Cloud generated $2.76 billion in revenues, up 8% year over year. Creative ARR was $11.3 billion. The rising demand for Photoshop, Lightroom and Premier Pro contributed well. Solid momentum across Adobe Express platform remained a positive. Strong growth in top-of-funnel traffic also contributed well. Strengthening Adobe Stock business on the back of growing demand for imaging, vector, video and 3D content was another positive. Strength across Substance 3D and Frame.io was a tailwind.
Document Cloud’s revenues were $634 million, up 13% from the prior-year quarter. Document ARR was $2.4 billion. Growing demand for PDF capabilities in the browser was a tailwind. Solid momentum across the Acrobat ecosystem drove top-line growth. Rising monthly active users for Acrobat Web remained a positive. Further, strength in Adobe Sign also contributed well.
Digital Experience: The segment generated revenues of $1.18 billion, up 11% on a year-over-year basis. The segment comprises Adobe Experience Cloud. Experience Cloud subscription revenues were $1.04 billion, which rose 12% from the year-ago quarter. Strong momentum across the Experience Cloud platform drove top-line growth for the segment. Strength in Workfront contributed well. Further, strong momentum in applications like Real-Time CDP, Adobe Journey Optimizer and Consumer Journey Analytics was another positive.
Operating Details
The gross margin was 87.8%, which contracted 10 basis points (bps) on a year-over-year basis.
Adobe incurred operating expenses of $2.5 billion, reflecting a 15.2% year-over-year increase. As a percentage of the total revenues, the figure expanded 280 bps to 53.7%.
The adjusted operating margin was 45.8%, contracting 100 bps year over year.
Balance Sheet & Cash Flow
As of Mar 3, 2023, the cash and short-term investment balance was $5.6 billion compared with $6.1 billion as of Dec 2, 2022. Trade receivables were $1.8 billion compared with $2.1 billion recorded in the fiscal fourth quarter.
Long-term debt was $3.63 billion at the end of the fiscal first quarter compared to $3.629 billion at the end of the fiscal fourth quarter.
Cash generated from operations was $1.7 billion in the fiscal first quarter versus $2.3 billion in the fiscal fourth quarter. In the reported quarter, the company repurchased 5 million shares.
Guidance
For second-quarter fiscal 2023, Adobe projects total revenues between $4.75-$4.78 billion. The Zacks Consensus Estimate for revenues is pegged at $4.74 billion.
Adobe expects Digital Media revenues between $3.45 billion and $3.47 billion. The Digital Experience segment’s revenues are expected to be between $1.21 and $1.23 billion.
Net new ARR in the Digital Media segment is projected at $420 million. Subscription revenues of Digital Experience are anticipated to be within $1.06-$1.08 billion.
Management expects non-GAAP earnings between $3.75 and $3.80 per share. The Zacks Consensus Estimate for the same is pegged at $3.76.
For fiscal 2023, Adobe projects net new ARR in the Digital Media segment at $1.7 billion.
Management expects non-GAAP earnings between $15.30 and $15.60 per share. The Zacks Consensus Estimate for the same is pegged at $15.27.
Image: Bigstock
Adobe (ADBE) Q1 Earnings & Revenues Beat Estimates, Rise Y/Y
Adobe Inc. (ADBE - Free Report) released first-quarter fiscal 2023 non-GAAP earnings of $3.80 per share, beating the Zacks Consensus Estimate by 3.8%. The figure improved 12.8% on a year-over-year basis.
Total revenues were $4.66 billion, which beat the Zacks Consensus Estimate of $4.61 billion. The figure was up 9% on a reported basis and 13% on a constant currency basis from the year-ago quarter.
Top-line growth was driven by the strong performance of Adobe Creative Cloud, Document Cloud and Experience Cloud. Further, accelerating subscription revenues contributed well.
Top Line in Detail
Adobe reports revenues under three categories — Subscription, Product and Services & support.
Subscription revenues were $4.4 billion (accounting for 93.9% of total revenues), up 10.5% on a year-over-year basis.
Product revenues totaled $120 million (2.6% of total revenues), down 17.2% year over year.
Services & support revenues were $162 million (3.5% of total revenues), increasing 1.9% from the prior-year quarter.
Adobe Inc. Price, Consensus and EPS Surprise
Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. Quote
Segmental Details
Digital Media: The segment generated revenues of $3.4 billion, which improved 9% on a year-over-year basis. The segment comprises Creative Cloud and Document Cloud. Notably, Digital Media’s annualized recurring revenues (ARR) increased to $13.67 billion, of which the net new ARR was $410 million.
Creative Cloud generated $2.76 billion in revenues, up 8% year over year. Creative ARR was $11.3 billion. The rising demand for Photoshop, Lightroom and Premier Pro contributed well. Solid momentum across Adobe Express platform remained a positive. Strong growth in top-of-funnel traffic also contributed well. Strengthening Adobe Stock business on the back of growing demand for imaging, vector, video and 3D content was another positive. Strength across Substance 3D and Frame.io was a tailwind.
Document Cloud’s revenues were $634 million, up 13% from the prior-year quarter. Document ARR was $2.4 billion. Growing demand for PDF capabilities in the browser was a tailwind. Solid momentum across the Acrobat ecosystem drove top-line growth. Rising monthly active users for Acrobat Web remained a positive. Further, strength in Adobe Sign also contributed well.
Digital Experience: The segment generated revenues of $1.18 billion, up 11% on a year-over-year basis. The segment comprises Adobe Experience Cloud. Experience Cloud subscription revenues were $1.04 billion, which rose 12% from the year-ago quarter. Strong momentum across the Experience Cloud platform drove top-line growth for the segment. Strength in Workfront contributed well. Further, strong momentum in applications like Real-Time CDP, Adobe Journey Optimizer and Consumer Journey Analytics was another positive.
Operating Details
The gross margin was 87.8%, which contracted 10 basis points (bps) on a year-over-year basis.
Adobe incurred operating expenses of $2.5 billion, reflecting a 15.2% year-over-year increase. As a percentage of the total revenues, the figure expanded 280 bps to 53.7%.
The adjusted operating margin was 45.8%, contracting 100 bps year over year.
Balance Sheet & Cash Flow
As of Mar 3, 2023, the cash and short-term investment balance was $5.6 billion compared with $6.1 billion as of Dec 2, 2022. Trade receivables were $1.8 billion compared with $2.1 billion recorded in the fiscal fourth quarter.
Long-term debt was $3.63 billion at the end of the fiscal first quarter compared to $3.629 billion at the end of the fiscal fourth quarter.
Cash generated from operations was $1.7 billion in the fiscal first quarter versus $2.3 billion in the fiscal fourth quarter. In the reported quarter, the company repurchased 5 million shares.
Guidance
For second-quarter fiscal 2023, Adobe projects total revenues between $4.75-$4.78 billion. The Zacks Consensus Estimate for revenues is pegged at $4.74 billion.
Adobe expects Digital Media revenues between $3.45 billion and $3.47 billion. The Digital Experience segment’s revenues are expected to be between $1.21 and $1.23 billion.
Net new ARR in the Digital Media segment is projected at $420 million. Subscription revenues of Digital Experience are anticipated to be within $1.06-$1.08 billion.
Management expects non-GAAP earnings between $3.75 and $3.80 per share. The Zacks Consensus Estimate for the same is pegged at $3.76.
For fiscal 2023, Adobe projects net new ARR in the Digital Media segment at $1.7 billion.
Management expects non-GAAP earnings between $15.30 and $15.60 per share. The Zacks Consensus Estimate for the same is pegged at $15.27.
Zacks Rank & Stocks to Consider
Currently, Adobe carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Salesforce (CRM - Free Report) and Analog Devices (ADI - Free Report) . While Arista Networks and Salesforce sport a Zacks Rank #1 (Strong Buy), Analog Devices carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks shares have gained 23.8% in the past year. The long-term earnings growth rate for ANET is currently projected at 14.17%.
Salesforce shares have lost 11% in the past year. CRM’s long-term earnings growth rate is currently projected at 16.75%.
Analog Devices shares have gained 15.4% in the past year. The long-term earnings growth rate for ADI is currently projected at 12.25%.