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Mayank Marwah
Mayank Marwah
Articles (940) 

Adobe's 3rd-Quarter Earnings Edge Past Expectations

The company saw revenue growth year over year

September 16, 2020 | About:

Adobe Inc. (NASDAQ:ADBE) released its third-quarter results after the market closed on Sept. 15. The software provider posted strong results, surpassing earnings and revenue expectations.

Earnings highlights

Adobe registered adjusted earnings per share of $2.57 in the third quarter, which grew 25% on a year-over-year basis. Analysts had anticipated earnings of $2.41 per share. Revenue of $3.23 billion inched up 14% from the prior-year quarter and beat expectations of $3.16 billion. 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, President and CEO Shantanu Narayen said:

"Adobe delivered the best Q3 in our history in a challenging macroeconomic environment, demonstrating the global demand for our innovative solutions. We are confident that our leadership in the creative, document and customer experience management categories will drive continued momentum in 2020 and beyond."

Segment performance

The Digital Media segment saw revenue grow 19% in the reported quarter to $2.34 billion. Within the segment, the Creative Cloud division's sales grew to $1.96 billion, while Document Cloud sales came in at $375 million (up 22%). The annualized recurring revenue, a metric that shows the value of a subscription-based company's subscriber base, for digital media group climbed to $9.63 billion.

In the Digital Experience segment, revenue of $838 million surged 2% on a year-over-year basis. The segment also includes Adobe Experience Cloud, which witnessed subscription revenue growth of 7% to $729 million.

The company reported revenue in three categories, namely subscription, product and services and support. Subscription revenue climbed 17.8% to $3 billion. However, product revenue was down 30.6% to $109 million and service and support revenue plummeted 10.8% to $116 million.

Financials and share repurchases

The company exited the quarter with cash and short-term investment balance of a combined $5.26 billion. That compares with balance of $4.35 billion in the prior-year quarter.

The company bought back 1.5 million worth of shares in the reported quarter.

Looking forward

Adobe said that Creative Cloud and Adobe Sign will continue to play an active role in the near term, given that the Covid-19 pandemic and the resulting lockdowns has compelled businesses across the U.S. to do more work online.

For the fourth quarter, the company anticipates total revenue of $3.35 billion and adjusted earnings per share of $2.64.

Disclosure: I do not hold any positions in the stocks mentioned.

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About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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