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Adobe Inc. (ADBE - Free Report) released fourth-quarter fiscal 2023 non-GAAP earnings of $4.27 per share, beating the Zacks Consensus Estimate by 3.4%. The figure improved 18.6% on a year-over-year basis.
Total revenues were $5.05 billion, which beat the Zacks Consensus Estimate of $5.01 billion. The figure was up 12% on a reported basis and 13% on a constant currency basis from the year-ago quarter.
Top-line growth was driven by the strong performances of Adobe Creative Cloud, Document Cloud and Experience Cloud. Accelerating subscription revenues also contributed well.
Adobe reports revenues under three categories — subscription, product and services & support.
Subscription revenues were $4.76 billion (accounting for 94.3% of total revenues), up 12.5% on a year-over-year basis.
Product revenues totaled $114 million (2.3% of total revenues), down 0.9% year over year.
Services & other revenues were $171 million (3.4% of total revenues), decreasing 3.9% from the prior-year quarter.
Segmental Details
Digital Media: The segment generated revenues of $3.72 billion, which improved 13% on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate of $3.68 billion. The segment comprises Creative Cloud and Document Cloud. Digital Media’s annualized recurring revenues (ARR) increased to $15.2 billion, of which the net new ARR was $569 million.
Creative Cloud generated $3 billion in revenues, up 12% year over year. The figure came ahead of the Zacks Consensus Estimate of $2.98 billion. Creative ARR was $12.37 billion. This was driven by strong momentum across Firefly and Express offerings. The solid momentum of Creative Cloud All Apps subscription across various geographies and emerging markets contributed well. Also, strong sales of Creative Cloud single apps, including imaging photography, were positive. Strength in Frame.io and Adobe Stock was a plus. The company witnessed growing migrations to full-priced offerings by graduating students and back-to-school purchasing owing to rising demand in education.
Document Cloud’s revenues were $721 million, up 16% from the prior-year quarter. The figure came ahead of the consensus mark of $699 million. Document ARR was $2.81 billion. Solid momentum across the Acrobat ecosystem was a positive. Rising Acrobat subscription demand across various markets and geographies contributed well. The growing adoption of PDF link sharing and Sign was another positive. Strength in Acrobat mobile was a plus.
Digital Experience: The segment generated revenues of $1.27 billion, up 10% on a year-over-year basis and ahead of the $1.26 billion consensus mark. Experience Cloud subscription revenues were $1.12 billion, rising 12% from the year-ago quarter. Strong demand for AEP and native apps contributed well. Also, growing bookings across solutions, especially in North America, was a positive. Solid momentum across Data & Insights, Content and Workfront solutions drove top-line growth within the segment. Also, the pipeline for the new GenStudio solution remained a tailwind.
Operating Details
The gross margin was 87.4%, which remained flat on a year-over-year basis.
Adobe incurred operating expenses of $2.7 billion, reflecting an 8.9% year-over-year increase. As a percentage of the total revenues, the figure contracted 130 bps to 52.9%.
The adjusted operating margin was 46.4%, expanding 170 bps year over year.
Balance Sheet & Cash Flow
As of Dec 1, 2023, the cash and short-term investment balance was $7.8 billion, up from $7.5 billion as of Sep 1, 2023. Trade receivables were $2.22 billion, up from $1.85 billion in the fiscal third quarter.
Long-term debt was $3.634 billion at the end of the fiscal fourth quarter compared with $3.633 billion at the end of the fiscal third quarter.
Cash generated from operations was $1.6 billion in the fiscal fourth quarter versus $1.9 billion in the fiscal third quarter. In the reported quarter, the company repurchased 1.8 million shares.
Guidance
For first-quarter fiscal 2024, Adobe projects total revenues between $5.10 billion and $5.15 billion. The Zacks Consensus Estimate for the same is pegged at $5.09 billion.
Adobe expects Digital Media revenues between $3.77 billion and $3.80 billion. The Digital Experience segment’s revenues are expected to be between $1.27 billion and $1.29 billion.
Net new ARR in the Digital Media segment is projected to be $410 million. Subscription revenues of Digital Experience are anticipated to be between $1.14 and $1.16 billion.
Management expects non-GAAP earnings between $4.35 and $4.40 per share. The consensus mark for the same is pinned at $4.24.
For fiscal 2024, Adobe projects total revenues between $21.30 billion and $21.50 billion. The Zacks Consensus Estimate for the same is pegged at $21.62 billion.
Adobe expects Digital Media revenues between $15.75 billion and $15.85 billion. The Digital Experience segment’s revenues are expected to be between $5.275 billion and $5.375 billion.
Net new ARR in the Digital Media segment is projected to be $1.90 billion. Subscription revenues of Digital Experience are anticipated to be within $4.75-$4.80 billion.
Management expects non-GAAP earnings between $17.60 and $18.00 per share. The consensus mark for the same is pinned at $17.86.
Image: Shutterstock
Adobe (ADBE) Q4 Earnings & Revenues Beat Estimates, Rise Y/Y
Adobe Inc. (ADBE - Free Report) released fourth-quarter fiscal 2023 non-GAAP earnings of $4.27 per share, beating the Zacks Consensus Estimate by 3.4%. The figure improved 18.6% on a year-over-year basis.
Total revenues were $5.05 billion, which beat the Zacks Consensus Estimate of $5.01 billion. The figure was up 12% on a reported basis and 13% on a constant currency basis from the year-ago quarter.
Top-line growth was driven by the strong performances of Adobe Creative Cloud, Document Cloud and Experience Cloud. Accelerating subscription revenues also contributed well.
Growing generative artificial intelligence efforts contributed well.
ADBE has gained 85.5% on a year-to-date basis, outperforming the industry’s growth of 56.2%.
Adobe Inc. Price, Consensus and EPS Surprise
Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. Quote
Top Line in Detail
Adobe reports revenues under three categories — subscription, product and services & support.
Subscription revenues were $4.76 billion (accounting for 94.3% of total revenues), up 12.5% on a year-over-year basis.
Product revenues totaled $114 million (2.3% of total revenues), down 0.9% year over year.
Services & other revenues were $171 million (3.4% of total revenues), decreasing 3.9% from the prior-year quarter.
Segmental Details
Digital Media: The segment generated revenues of $3.72 billion, which improved 13% on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate of $3.68 billion. The segment comprises Creative Cloud and Document Cloud. Digital Media’s annualized recurring revenues (ARR) increased to $15.2 billion, of which the net new ARR was $569 million.
Creative Cloud generated $3 billion in revenues, up 12% year over year. The figure came ahead of the Zacks Consensus Estimate of $2.98 billion. Creative ARR was $12.37 billion. This was driven by strong momentum across Firefly and Express offerings. The solid momentum of Creative Cloud All Apps subscription across various geographies and emerging markets contributed well. Also, strong sales of Creative Cloud single apps, including imaging photography, were positive. Strength in Frame.io and Adobe Stock was a plus. The company witnessed growing migrations to full-priced offerings by graduating students and back-to-school purchasing owing to rising demand in education.
Document Cloud’s revenues were $721 million, up 16% from the prior-year quarter. The figure came ahead of the consensus mark of $699 million. Document ARR was $2.81 billion. Solid momentum across the Acrobat ecosystem was a positive. Rising Acrobat subscription demand across various markets and geographies contributed well. The growing adoption of PDF link sharing and Sign was another positive. Strength in Acrobat mobile was a plus.
Digital Experience: The segment generated revenues of $1.27 billion, up 10% on a year-over-year basis and ahead of the $1.26 billion consensus mark. Experience Cloud subscription revenues were $1.12 billion, rising 12% from the year-ago quarter. Strong demand for AEP and native apps contributed well. Also, growing bookings across solutions, especially in North America, was a positive. Solid momentum across Data & Insights, Content and Workfront solutions drove top-line growth within the segment. Also, the pipeline for the new GenStudio solution remained a tailwind.
Operating Details
The gross margin was 87.4%, which remained flat on a year-over-year basis.
Adobe incurred operating expenses of $2.7 billion, reflecting an 8.9% year-over-year increase. As a percentage of the total revenues, the figure contracted 130 bps to 52.9%.
The adjusted operating margin was 46.4%, expanding 170 bps year over year.
Balance Sheet & Cash Flow
As of Dec 1, 2023, the cash and short-term investment balance was $7.8 billion, up from $7.5 billion as of Sep 1, 2023. Trade receivables were $2.22 billion, up from $1.85 billion in the fiscal third quarter.
Long-term debt was $3.634 billion at the end of the fiscal fourth quarter compared with $3.633 billion at the end of the fiscal third quarter.
Cash generated from operations was $1.6 billion in the fiscal fourth quarter versus $1.9 billion in the fiscal third quarter. In the reported quarter, the company repurchased 1.8 million shares.
Guidance
For first-quarter fiscal 2024, Adobe projects total revenues between $5.10 billion and $5.15 billion. The Zacks Consensus Estimate for the same is pegged at $5.09 billion.
Adobe expects Digital Media revenues between $3.77 billion and $3.80 billion. The Digital Experience segment’s revenues are expected to be between $1.27 billion and $1.29 billion.
Net new ARR in the Digital Media segment is projected to be $410 million. Subscription revenues of Digital Experience are anticipated to be between $1.14 and $1.16 billion.
Management expects non-GAAP earnings between $4.35 and $4.40 per share. The consensus mark for the same is pinned at $4.24.
For fiscal 2024, Adobe projects total revenues between $21.30 billion and $21.50 billion. The Zacks Consensus Estimate for the same is pegged at $21.62 billion.
Adobe expects Digital Media revenues between $15.75 billion and $15.85 billion. The Digital Experience segment’s revenues are expected to be between $5.275 billion and $5.375 billion.
Net new ARR in the Digital Media segment is projected to be $1.90 billion. Subscription revenues of Digital Experience are anticipated to be within $4.75-$4.80 billion.
Management expects non-GAAP earnings between $17.60 and $18.00 per share. The consensus mark for the same is pinned at $17.86.
Zacks Rank & Stocks to Consider
Currently, Adobe carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Badger Meter (BMI - Free Report) , Arista Networks (ANET - Free Report) and NVIDIA (NVDA - Free Report) . While Badger Meter currently sports a Zacks Rank #1 (Strong Buy), Arista Networks and NVIDIA each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Badger Meter have gained 37.8% in the year-to-date period. BMI’s long-term earnings growth rate is currently projected at 20.39%.
Shares of Arista Networks have surged 75.9% in the year-to-date period. The long-term earnings growth rate for ANET is currently projected at 19.77%.
Shares of NVIDIA have gained 167.4% in the year-to-date period. NVDA’s long-term earnings growth rate is currently projected at 13.5%.