Adobe Inc. (ADBE, Financial) released its first-quarter results after the market closed on March 12. The software provider posted strong results, surpassing earnings and revenue expectations.
Earnings highlights
Adobe registered adjusted earnings per share of $2.27 in the first quarter, which grew 33% on a year-over-year basis. Analysts had anticipated earnings of $2.27 per share. Revenue of $3.09 billion inched up 19% from the prior-year quarter and beat expectations by 1.5%. The robust growth in the metric was due to strong demand for the company’s Adobe Document Cloud and Adobe Experience Cloud products. In addition, strong growth in the cloud application drove the increase.
Reflecting on the company’s performance, vice president and Chief Financial Officer John Murphy said:
“Adobe delivered strong revenue, earnings and cash flow during the quarter. Our recurring revenue model and the real-time visibility we have into our business uniquely positions Adobe to manage through an uncertain environment.”
Segment performance
The Digital Media sector witnessed revenue growth of 22% in the reported quarter to $2.17 billion. Within the segment, the company’s Creative Cloud segment saw revenue growth of 22% to $1.82 billion, while Document Cloud segment revenue was up 24% to $351 million.
In the Digital Experience segment, revenue of $858 million surged 15% on a year-over-year basis. The segment also includes Adobe Experience Cloud, which witnessed subcription revenue growth of 21% to $759 million.
The company reported revenue in three categories, namely subscription, product and services and support. Subcription revenue climbed 22.6% to $2.83 billion. However, product revenue was down 16.4% to $143 million and service and support revenue plummeted 1.6% to $123 million.
Insights
Adobe's key creative platform, Photoshop, has been quite instrumental in taking photography to graphic designing. The company's mobile applications such as Photoshop on iPad, Lightroom and Photoshop Express have been continuously witnessing growing demand. The application for handheld devices is coming out to be one of the company's strong offerings with a solid pipeline. During the quarter, the company saw 35 million new Adobe IDs.
Looking forward
For the second quarter, the company sees total revenue of about $3.175 billion and adjusted earnings per share of $2.35.
The company could see a deferment in enterprise booking decisions, a fall in marketing spending and a delay in the execution of consulting services. At the same time, consumers have also cut down on their spending due to the global uncertainty caused by the Covid-19 situation, which may impact future earnings.
Disclosure: I do not hold any positions in the stocks mentioned.
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