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Adobe Inc. (ADBE - Free Report) released first-quarter fiscal 2024 non-GAAP earnings of $4.48 per share, beating the Zacks Consensus Estimate by 2.3%. The figure improved 17.9% on a year-over-year basis.
Total revenues were $5.18 billion, which beat the Zacks Consensus Estimate of $5.13 billion. The figure grew 11% on a reported basis and 12% 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 $4.92 billion (accounting for 94.9% of the total revenues), up 12.4% on a year-over-year basis.
Product revenues totaled $119 million (2.3% of the total revenues), down 0.8% year over year.
Services & other revenues were $147 million (2.8% of the total revenues), decreasing 9.3% from the prior-year quarter.
Segmental Details
Digital Media: The segment generated revenues of $3.82 billion, which improved 12% on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate of $3.79 billion. The segment comprises Creative Cloud and Document Cloud. Digital Media’s annualized recurring revenues (“ARR”) increased to $15.76 billion, of which the net new ARR was $432 million.
Creative Cloud generated $3.07 billion in revenues, up 11% year over year. The figure beat the Zacks Consensus Estimate of $3.06 billion. Creative ARR was $12.78 billion. The company witnessed the solid adoption of Creative Cloud All Apps across various geographies and customer categories, which contributed well to subscription growth. Strength in Frame.io and Adobe Stock led to strong single-app customer demand in the Creative categories. The growing traction of Creative Cloud in the enterprise category was another plus. Strong adoption of Firefly-powered tools in Photoshop, Generative Fill and Generative Expand across desktop, web and iPad drove the results. Solid momentum in Adobe Express Web was another positive.
Document Cloud’s revenues were $750 million, up 18% from the prior-year quarter. The figure surpassed the consensus mark of $726 million. Document cloud ARR was $2.98 billion. Solid momentum across the Acrobat ecosystem was a positive. Rising Acrobat subscription demand across various markets and geographies contributed well. Strength in Acrobat Web due to growing demand for flagship products was a plus. Positive contributions from Microsoft Edge and Google Chrome integrations drove Adobe’s user momentum. Also, the company witnessed strong momentum among businesses of all sizes, which drove top-line growth.
Digital Experience: The segment generated revenues of $1.29 billion, up 10% on a year-over-year basis and beating the $1.28-billion consensus mark. Experience Cloud subscription revenues were $1.16 billion, rising 12% from the year-ago quarter. Strong demand for AEP and native apps contributed well. The growing adoption of Content, Campaign and Workfront solutions was a plus. Strong transformational deal wins across geographies and verticals remained another positive. Adobe witnessed strong customer retention within the segment in the reported quarter.
Operating Details
The gross margin was 88.6%, which expanded 80 basis points (bps) on a year-over-year basis.
Adobe incurred operating expenses of $3.7 billion, reflecting a 47.3% year-over-year increase. As a percentage of the total revenues, the figure expanded significantly to 71.1% from 53.7% in the year-ago quarter.
The adjusted operating margin was 47.6%, expanding 180 bps year over year.
Balance Sheet & Cash Flow
As of Mar 1, 2024, the cash and short-term investment balance was $6.8 billion, up from $7.8 billion as of Dec 1, 2023. Trade receivables were $2.06 billion, up from $2.22 billion in fourth-quarter fiscal 2023.
Long-term debt was $2.14 billion at the end of first-quarter fiscal 2024 compared with $3.63 billion at the end of fourth-quarter fiscal 2023.
Cash generated from operations was $1.2 billion in the reported quarter versus $1.6 billion in the previous quarter. Further, the company repurchased 3.1 million shares in the fiscal first quarter.
Guidance
For second-quarter fiscal 2024, Adobe projects total revenues between $5.25 billion and $5.30 billion. The Zacks Consensus Estimate for the same is pegged at $5.30 billion.
Adobe expects Digital Media revenues between $3.87 billion and $3.90 billion. The Digital Experience segment’s revenues are expected between $1.31 billion and $1.33 billion.
Net new ARR in the Digital Media segment is projected to be $440 million. Subscription revenues of Digital Experience are anticipated to be $1.165-$1.185 billion.
Management expects non-GAAP earnings per share between $4.35 and $4.40. The consensus mark for the same is pinned at $4.36.
Image: Shutterstock
Adobe (ADBE) Q1 Earnings & Revenues Beat Estimates, Rise Y/Y
Adobe Inc. (ADBE - Free Report) released first-quarter fiscal 2024 non-GAAP earnings of $4.48 per share, beating the Zacks Consensus Estimate by 2.3%. The figure improved 17.9% on a year-over-year basis.
Total revenues were $5.18 billion, which beat the Zacks Consensus Estimate of $5.13 billion. The figure grew 11% on a reported basis and 12% 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 surged 61.5% on a year-to-date basis, outperforming the industry’s growth of 51%.
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 $4.92 billion (accounting for 94.9% of the total revenues), up 12.4% on a year-over-year basis.
Product revenues totaled $119 million (2.3% of the total revenues), down 0.8% year over year.
Services & other revenues were $147 million (2.8% of the total revenues), decreasing 9.3% from the prior-year quarter.
Segmental Details
Digital Media: The segment generated revenues of $3.82 billion, which improved 12% on a year-over-year basis. The figure surpassed the Zacks Consensus Estimate of $3.79 billion. The segment comprises Creative Cloud and Document Cloud. Digital Media’s annualized recurring revenues (“ARR”) increased to $15.76 billion, of which the net new ARR was $432 million.
Creative Cloud generated $3.07 billion in revenues, up 11% year over year. The figure beat the Zacks Consensus Estimate of $3.06 billion. Creative ARR was $12.78 billion. The company witnessed the solid adoption of Creative Cloud All Apps across various geographies and customer categories, which contributed well to subscription growth. Strength in Frame.io and Adobe Stock led to strong single-app customer demand in the Creative categories. The growing traction of Creative Cloud in the enterprise category was another plus. Strong adoption of Firefly-powered tools in Photoshop, Generative Fill and Generative Expand across desktop, web and iPad drove the results. Solid momentum in Adobe Express Web was another positive.
Document Cloud’s revenues were $750 million, up 18% from the prior-year quarter. The figure surpassed the consensus mark of $726 million. Document cloud ARR was $2.98 billion. Solid momentum across the Acrobat ecosystem was a positive. Rising Acrobat subscription demand across various markets and geographies contributed well. Strength in Acrobat Web due to growing demand for flagship products was a plus. Positive contributions from Microsoft Edge and Google Chrome integrations drove Adobe’s user momentum. Also, the company witnessed strong momentum among businesses of all sizes, which drove top-line growth.
Digital Experience: The segment generated revenues of $1.29 billion, up 10% on a year-over-year basis and beating the $1.28-billion consensus mark. Experience Cloud subscription revenues were $1.16 billion, rising 12% from the year-ago quarter. Strong demand for AEP and native apps contributed well. The growing adoption of Content, Campaign and Workfront solutions was a plus. Strong transformational deal wins across geographies and verticals remained another positive. Adobe witnessed strong customer retention within the segment in the reported quarter.
Operating Details
The gross margin was 88.6%, which expanded 80 basis points (bps) on a year-over-year basis.
Adobe incurred operating expenses of $3.7 billion, reflecting a 47.3% year-over-year increase. As a percentage of the total revenues, the figure expanded significantly to 71.1% from 53.7% in the year-ago quarter.
The adjusted operating margin was 47.6%, expanding 180 bps year over year.
Balance Sheet & Cash Flow
As of Mar 1, 2024, the cash and short-term investment balance was $6.8 billion, up from $7.8 billion as of Dec 1, 2023. Trade receivables were $2.06 billion, up from $2.22 billion in fourth-quarter fiscal 2023.
Long-term debt was $2.14 billion at the end of first-quarter fiscal 2024 compared with $3.63 billion at the end of fourth-quarter fiscal 2023.
Cash generated from operations was $1.2 billion in the reported quarter versus $1.6 billion in the previous quarter. Further, the company repurchased 3.1 million shares in the fiscal first quarter.
Guidance
For second-quarter fiscal 2024, Adobe projects total revenues between $5.25 billion and $5.30 billion. The Zacks Consensus Estimate for the same is pegged at $5.30 billion.
Adobe expects Digital Media revenues between $3.87 billion and $3.90 billion. The Digital Experience segment’s revenues are expected between $1.31 billion and $1.33 billion.
Net new ARR in the Digital Media segment is projected to be $440 million. Subscription revenues of Digital Experience are anticipated to be $1.165-$1.185 billion.
Management expects non-GAAP earnings per share between $4.35 and $4.40. The consensus mark for the same is pinned at $4.36.
Zacks Rank & Other Stocks to Consider
Currently, Adobe carries a Zacks Rank #2 (Buy).
Some better-ranked stocks in the broader technology sector are CrowdStrike (CRWD - Free Report) , Badger Meter (BMI - Free Report) and AMETEK (AME - Free Report) , each carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of CrowdStrike have gained 28.7% in the year-to-date period. The long-term earnings growth rate for CRWD is 22.31%
Shares of Badger Meter have lost 1.4% in the year-to-date period. The long-term earnings growth rate for BMI is 12.27%.
Shares of AMETEK have gained 10.2% in the year-to-date period. The long-term earnings growth rate for AME is 9.19%.