Adobe (ADBE, Financial) has been steadily growing while also finding its niche in the technology industry. On June 21, the company reported its second quarter earnings which were on target with both revenue and earnings expectations from analysts.
The company reported expected second quarter revenue of $1.4 billion, which was an increase of 20.7% from the comparable quarter. EPS for the quarter was 71 cents, beating analysts’ estimates by 3 cents and increasing 48% from the comparable quarter.
The technology industry’s growing demand for cloud solutions was a leading factor helping revenue for Adobe in the second quarter. According to the firm’s second quarter report, digital media revenue grew 26% from the comparable quarter to $943 million. In digital media, Creative Cloud and Document Cloud were the lead revenue drivers. The two products supported annualized recurring revenue for digital media in the second quarter of $3.41 billion. This growth in digital media helped the company’s subscription products to increase by 40% from the comparable quarter at $1.084 billion, accounting for 77.5% of the firm’s total revenue.
Cloud subscriptions and products will continue to be a leading growth focus for the firm as it continues to see continued demand from consumers and businesses. According to the firm’s chief executive officer, Shantanu Narayen, “Adobe’s cloud solutions are powering digital transformation at the world’s biggest brands, educational institutions and government agencies.”
Priced at $92, shares of Adobe are down 1.85% year-to-date as most industry analysts see the stock as fully priced in the current market. It has a PE of 52.08 in comparison to Microsoft’s price to earnings of 38. Its price to sales ratio is also slightly high in comparison to Microsoft (MSFT, Financial). Adobe is reporting a price to sales ratio of 9.62 versus 4.19 for Microsoft. Overall, many hedge fund managers are still holding the stock, though it seems that it may have further to fall in the current market given its price comparison versus other technology peers.
In a CNBC interview following Adobe’s second quarter earnings, Narayen had the following comments about the firm’s second quarter.
Disclosure: I do not own any shares of any stocks included in this article.
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