UPDATED 14:50 EDT / DECEMBER 10 2020

CLOUD

Adobe leaps past forecasts to record quarterly revenue

Adobe Systems Inc. today posted fourth-quarter earnings that beat analyst expectations and paired the results with upbeat guidance for the 2021 fiscal year. 

The developer of Photoshop and other multimedia software delivered in as cloud services wrapped up the three months ended Nov. 27 with record revenues of $3.42 billion, 14% more than a year ago and 1.9% higher than what the Zacks Consensus Estimate had forecasted. The company’s sales for the full 2020 fiscal year rose 15%, to $12.87 billion.

Despite the outperformance, Adobe’s shares fell 1.4%, to $476.87 a share, after the report was released early this morning. But the stock was already up by some 47% on the year.

Adobe’s sales momentum in the fourth quarter was driven largely by its Digital Media business, which includes Photoshop, the company’s other creative applications and its cloud-based document management services for the enterprise. The $2.5 billion the business brought in during the quarter represents a 20% year-over-year increase.

The other major business in Adobe’s earnings reports is the Digital Experience segment. It comprises Adobe’s collection of cloud-based marketing tools and related analytics products for enterprises. Revenue was up 10%, to $819 million, in the fourth quarter, thanks partially to a 14% sales boost logged by the subscription software side of the business.

Profit excluding certain items was $2.81 per share, slightly more than what analysts were expecting. Adobe said it’s anticipating a profit of $11.20 a share on revenues of $15 billion in the 2021 fiscal year, above the $11.14 a share and $14.8 billion Wall Street was looking for. 

“As the undisputed leader in three growing categories — creativity, digital documents and customer experience management — we are well-positioned to capture the massive market opportunity ahead of us in 2021 and beyond,” Adobe Chief Executive Officer Shantanu Narayen said in a statement.

In an analyst presentation released today, Adobe executives shared some additional context about the opportunity outlined by Narayen. The company believes that Experience Cloud, the business comprising its marketing and analytics tools, will have a total addressable market of about $74 billion next year. That figure is expected to jump to $85 billion in 2023.

As for the company’s Creative Cloud business, which includes Photoshop and other creative applications, Adobe said its growth strategy includes a big focus on adding in more artificial intelligence automation features. The company’s  presentation also highlighted how it’s providing in-app learning features in its creative applications as a way of driving more software installations. Yet another element of the strategy is Behance, an Adobe-owned social media platform catering to creative professionals that the company today said has more than 25 million members. 

Adobe sees the total addressable market of Creative Cloud growing to $31 billion in 2021 and $41 million in 2023. Part of the expected market expansion is the result of Adobe’s efforts to grow its reach outside the enterprise, in the hobbyist segment, with consumer-friendly graphic design services such as the Lightroom photo editing app. 

Photo: Adobe MAX/Flickr

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