Adobe Systems Forecasts Profit That Tops Analysts’ Estimates

Updated on
  • Company exceeds revenue estimates in fiscal third quarter
  • Software provider saw growth in key business lines in period

Adobe Systems Inc. forecast fiscal fourth-quarter profit that will exceed analysts’ estimates, strengthened by demand for the company’s marketing and design software delivered over the cloud with subscription services.

Key Points

  • The company forecast sales of $1.55 billion to $1.6 billion and adjusted earnings of 83 cents to 89 cents per share. That compares with the average analyst projections of $1.58 billion and 78 cents, respectively, according to data compiled by Bloomberg.
  • Fiscal third-quarter revenue climbed 20 percent to $1.46 billion, the company said Tuesday in a statement. Analysts’ estimated $1.45 billion.
  • Profit excluding certain items was 75 cents a share in the period ended Sept. 2. Analysts on average projected profit of 72 cents.
  • Shares rose as much as 5.9 percent to $106.54 in extended trading after the earnings were released. The stock has gained 7.1 percent this year.

The Big Picture

Chief Executive Officer Shantanu Narayen is doubling down on cloud-based products that let users access software without having to install it on their computers. The company, using a subscription model, provides tools that enable customers to edit digital photographs, employ a new marketing campaign or manage electronic signatures.

The Detail

  • Third-quarter net income increased to $270.8 million, or 54 cents a share, from $174.4 million, or 35 cents, a year earlier.
  • Marketing Cloud revenue gained 10 percent to $404 million.
  • Digital Media sales were up 29 percent to $909 million
  • Operating expenses increased 14 percent to $891.9 million.
  • The company expects Marketing Cloud revenue growth of about 30 percent in the current quarter.

CFO Interview

  • “We are in an explosive category,” said Mark Garrett, Adobe’s chief financial officer. “Everyone’s moving digital. Every company wants digital experiences for their customers.”
  • “We have seen consistent demand around the world,” he said. The vote in the U.K. to leave the European Union caused a “short-term impact,” but the company still performed to projections, he added.

Street Takeaways

  • “This is coming off a quarter where they disappointed somewhat, so I think this is getting back on track,” said Josh Olson, an analyst at Edward Jones & Co., after Adobe’s third-quarter sales forecast fell below analysts’ projections. “I do have to give management a lot of credit -- they have executed very well. They really are the kind of standard-bearer for this transition or pivot to the cloud.”