We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Adobe (ADBE) Up 2.2% Since Last Earnings Report: Can It Continue?
Read MoreHide Full Article
A month has gone by since the last earnings report for Adobe Systems (ADBE - Free Report) . Shares have added about 2.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Adobe due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Adobe Q4 Earnings and Revenues Surpass Estimates
Adobe released fourth-quarter fiscal 2023 non-GAAP earnings of $4.27 per share, beating the Zacks Consensus Estimate by 3.4%. The figure improved by 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 a 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.
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 within $1.14-$1.16 billion.
Management expects non-GAAP earnings between $4.35 and $4.40 per share.
For fiscal 2024, Adobe projects total revenues between $21.30 billion and $21.50 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.53% due to these changes.
VGM Scores
Currently, Adobe has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Adobe has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Adobe belongs to the Zacks Computer - Software industry. Another stock from the same industry, Salesforce.com (CRM - Free Report) , has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
Salesforce.com reported revenues of $8.72 billion in the last reported quarter, representing a year-over-year change of +11.3%. EPS of $2.11 for the same period compares with $1.40 a year ago.
For the current quarter, Salesforce.com is expected to post earnings of $2.26 per share, indicating a change of +34.5% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Salesforce.com has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Adobe (ADBE) Up 2.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Adobe Systems (ADBE - Free Report) . Shares have added about 2.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Adobe due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Adobe Q4 Earnings and Revenues Surpass Estimates
Adobe released fourth-quarter fiscal 2023 non-GAAP earnings of $4.27 per share, beating the Zacks Consensus Estimate by 3.4%. The figure improved by 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.
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 a 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.
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 within $1.14-$1.16 billion.
Management expects non-GAAP earnings between $4.35 and $4.40 per share.
For fiscal 2024, Adobe projects total revenues between $21.30 billion and $21.50 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.53% due to these changes.
VGM Scores
Currently, Adobe has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Adobe has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Adobe belongs to the Zacks Computer - Software industry. Another stock from the same industry, Salesforce.com (CRM - Free Report) , has gained 5.5% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
Salesforce.com reported revenues of $8.72 billion in the last reported quarter, representing a year-over-year change of +11.3%. EPS of $2.11 for the same period compares with $1.40 a year ago.
For the current quarter, Salesforce.com is expected to post earnings of $2.26 per share, indicating a change of +34.5% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
Salesforce.com has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.