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Adobe (ADBE) Earnings and Revenues Beat Estimates in Q2
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Adobe Systems Incorporated (ADBE - Free Report) reported second-quarter fiscal 2018 non-GAAP earnings of $1.66 per share, beating the Zacks Consensus Estimate of $1.54 The figure increased 7% sequentially and 63% on a year-over-year basis.
Adjusted revenues also increased 6% sequentially and 23.9% year over year to $2.20 billion, beating the Zacks Consensus Estimate of $2.15 billion.
The year-over-year growth was driven by strong demand for the company’s innovative solutions and products, strength across geographies, and growing subscriptions for its cloud application.
Following the results, its share price declined 2.94% in after-hours trading due to weaker-than-expected sales forecast. Shares have returned 82.2% over a year, outperforming the industry’s rally of 25.9%.
Top Line in Detail
Adobe reports revenues in three categories — Subscription, product and services & support.
Subscription revenues came in at $1.92 billion (88% of total revenues), up 29.6% on a year-over-year basis.
Product revenues totaled $151 million (6.9% of revenues) and decreased 12% year over year.
Services & support revenues came in at $121.2 million (5.5% of revenues), increasing 3.7% year over year.
Segment Details
The company operates in two reportable segments — Digital Media and Digital Experience.
Digital Media — This segment generated revenues of $1.55 billion, which increased 28% on a year-over-year basis. The segment comprises Creative Cloud and Document Cloud. Additionally, Digital Media ARR increased $343 million to $6.06 billion. This was attributed to the transition made on Adobe.com from using U.S. dollar to local currency in certain markets.
Creative Cloud (CC) generated $1.30 billion of revenues, reflecting 29% year-over-year growth. Additionally, Creative ARR increased $296 million to $5.37 billion. The year-over-year growth was driven by robust performance of Adobe Stock and Stock and collaboration services. Moreover, improving average revenue per user (ARPU) across key offerings and increasing net new subscriptions drove the top line of CC. Additionally, the company entered into various creative agreements in the reported quarter and most of them included service offering that drove the creative ARR.
Document Cloud (DC) generated $243million of revenues, up 22% from the year-ago quarter. Moreover, Document ARR came in at $694 million. This was driven by strong performance of Adobe Sign and growing adoption of Acrobat. The company experienced robust growth in Acrobat units on a year-over-year basis.
Moreover, the company experienced robust bookings across various platforms such as Adobe Marketing Cloud, Adobe Analytics Cloud and Adobe Advertising Cloud.
Digital Experience — This segment generated revenues of $586 million, which increased 18% on a year-over-year basis. The segment includes Adobe Experience Cloud. The company witnessed 24% growth in subscription revenues within the segment. Further, robust Analytics Cloud, Marketing Cloud and Advertising Cloud offerings, coupled with emerging solutions such as Audience Manager, Campaign, Target, and Media Optimizer solutions drove the top line. Experience Cloud data transactions grew to 97 trillion in the quarter, with 60% of Analytics transactions driven by mobile-device usage.
Operating Details
Gross margin was 87.2% in the quarter, expanding70 basis points (bps) on a year-over-year basis. The gross margin expansion was attributed to strong subscription revenues.
Adobe incurred operating expenses of $1.20 billion, reflecting an increase of 18.7% year over year. As a percentage of total revenues, sales & marketing and general & administrative expenses decreased, while research & development costs increased slightly.
Adjusted operating margin was 33%, reflecting an expansion of 280 bps year over year.
Balance Sheet & Cash Flow
As of Jun 1, 2018, cash and investments balance was $6.33 billion, up from $6.14 billion in the prior quarter.
Trade receivables were $1.07 billion, up from $1.06 billion recorded in the previous quarter. Deferred revenues were $2.5 billion, down from the quarter-ago figure of $2.6 billion.
In the reported quarter, cash generated from operations was $976.4 million, down from $989.6 million in the previous quarter.
During the quarter, Adobe repurchased approximately 2.6 million shares for $586 million.
Guidance
For third-quarter fiscal 2018, the company projects total revenues of $2.24 billion.The Zacks Consensus Estimate for revenues is pegged at $2.21 billion.
Further, Adobe expects year-over-year revenue growth of 25% and 15% from the Digital Media and Digital Experience segments, respectively.
Based on a share count of 498 million, management expects GAAP earnings and non-GAAP earnings of $1.27 and $1.68 per share, respectively. The Zacks Consensus Estimate is pegged at $1.59 for the third quarter.
Adobe Systems Incorporated Price, Consensus and EPS Surprise
Long-term earnings growth for Groupon, PetMed and Expedia is currently projected to be 6.5%, 10% and 14.5%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Adobe (ADBE) Earnings and Revenues Beat Estimates in Q2
Adobe Systems Incorporated (ADBE - Free Report) reported second-quarter fiscal 2018 non-GAAP earnings of $1.66 per share, beating the Zacks Consensus Estimate of $1.54 The figure increased 7% sequentially and 63% on a year-over-year basis.
Adjusted revenues also increased 6% sequentially and 23.9% year over year to $2.20 billion, beating the Zacks Consensus Estimate of $2.15 billion.
The year-over-year growth was driven by strong demand for the company’s innovative solutions and products, strength across geographies, and growing subscriptions for its cloud application.
Following the results, its share price declined 2.94% in after-hours trading due to weaker-than-expected sales forecast. Shares have returned 82.2% over a year, outperforming the industry’s rally of 25.9%.
Top Line in Detail
Adobe reports revenues in three categories — Subscription, product and services & support.
Subscription revenues came in at $1.92 billion (88% of total revenues), up 29.6% on a year-over-year basis.
Product revenues totaled $151 million (6.9% of revenues) and decreased 12% year over year.
Services & support revenues came in at $121.2 million (5.5% of revenues), increasing 3.7% year over year.
Segment Details
The company operates in two reportable segments — Digital Media and Digital Experience.
Digital Media — This segment generated revenues of $1.55 billion, which increased 28% on a year-over-year basis. The segment comprises Creative Cloud and Document Cloud. Additionally, Digital Media ARR increased $343 million to $6.06 billion. This was attributed to the transition made on Adobe.com from using U.S. dollar to local currency in certain markets.
Creative Cloud (CC) generated $1.30 billion of revenues, reflecting 29% year-over-year growth. Additionally, Creative ARR increased $296 million to $5.37 billion. The year-over-year growth was driven by robust performance of Adobe Stock and Stock and collaboration services. Moreover, improving average revenue per user (ARPU) across key offerings and increasing net new subscriptions drove the top line of CC. Additionally, the company entered into various creative agreements in the reported quarter and most of them included service offering that drove the creative ARR.
Document Cloud (DC) generated $243million of revenues, up 22% from the year-ago quarter. Moreover, Document ARR came in at $694 million. This was driven by strong performance of Adobe Sign and growing adoption of Acrobat. The company experienced robust growth in Acrobat units on a year-over-year basis.
Moreover, the company experienced robust bookings across various platforms such as Adobe Marketing Cloud, Adobe Analytics Cloud and Adobe Advertising Cloud.
Digital Experience — This segment generated revenues of $586 million, which increased 18% on a year-over-year basis. The segment includes Adobe Experience Cloud. The company witnessed 24% growth in subscription revenues within the segment. Further, robust Analytics Cloud, Marketing Cloud and Advertising Cloud offerings, coupled with emerging solutions such as Audience Manager, Campaign, Target, and Media Optimizer solutions drove the top line. Experience Cloud data transactions grew to 97 trillion in the quarter, with 60% of Analytics transactions driven by mobile-device usage.
Operating Details
Gross margin was 87.2% in the quarter, expanding70 basis points (bps) on a year-over-year basis. The gross margin expansion was attributed to strong subscription revenues.
Adobe incurred operating expenses of $1.20 billion, reflecting an increase of 18.7% year over year. As a percentage of total revenues, sales & marketing and general & administrative expenses decreased, while research & development costs increased slightly.
Adjusted operating margin was 33%, reflecting an expansion of 280 bps year over year.
Balance Sheet & Cash Flow
As of Jun 1, 2018, cash and investments balance was $6.33 billion, up from $6.14 billion in the prior quarter.
Trade receivables were $1.07 billion, up from $1.06 billion recorded in the previous quarter. Deferred revenues were $2.5 billion, down from the quarter-ago figure of $2.6 billion.
In the reported quarter, cash generated from operations was $976.4 million, down from $989.6 million in the previous quarter.
During the quarter, Adobe repurchased approximately 2.6 million shares for $586 million.
Guidance
For third-quarter fiscal 2018, the company projects total revenues of $2.24 billion.The Zacks Consensus Estimate for revenues is pegged at $2.21 billion.
Further, Adobe expects year-over-year revenue growth of 25% and 15% from the Digital Media and Digital Experience segments, respectively.
Based on a share count of 498 million, management expects GAAP earnings and non-GAAP earnings of $1.27 and $1.68 per share, respectively. The Zacks Consensus Estimate is pegged at $1.59 for the third quarter.
Adobe Systems Incorporated Price, Consensus and EPS Surprise
Adobe Systems Incorporated Price, Consensus and EPS Surprise | Adobe Systems Incorporated Quote
Zacks Rank &Stocks to Consider
Currently, Adobe carries a Zacks Rank #3 (Hold).Some better-ranked stocks in the broader technology sector are Groupon (GRPN - Free Report) , PetMed Express (PETS - Free Report) and Expedia (EXPE - Free Report) . While Groupon sports a Zacks Rank #1 (Strong Buy), PetMed and Expedia both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth for Groupon, PetMed and Expedia is currently projected to be 6.5%, 10% and 14.5%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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