UPDATED 20:17 EDT / MARCH 23 2021

CLOUD

Adobe smashes earnings targets with double-digit cloud growth

Adobe Inc. ended its first quarter in a strong way, posting record sales, easily beating market expectations on earnings and revenue and raising its targets for the full year.

The design software company today reported a profit before certain costs such as stock compensation of $3.14 per share on revenue of $3.91 billion, up 26% from the same period a year ago. That came in well ahead of Wall Street’s forecast of $2.78 per share in earnings on $3.76 billion in revenue.

The company also logged double-digit growth in its three core cloud services, namely Creative, Document and Experience.

Adobe President and Chief Executive Shantanu Narayen (pictured) said the company drove record first-quarter revenue and is raising its full year targets based on what he called a “tremendous opportunity” for its business and its confidence in its ability to execute on that.

Adobe said its Digital Media business unit accounted for the bulk of its revenue during the quarter, with $2.86 billion in sales, up 32% from a year ago. Within that segment, Creative Cloud revenue came to $2.38 billion, up 31%, while Document Cloud added $480 million, up 37%.

The Digital Media business saw its annualized recurring revenue rise to $10.69 billion, up $435 million from the previous quarter. Creative Cloud saw its ARR rise to $9.12 billion, while Document Cloud ARR increased to $1.57 billion.

Adobe’s other main business, Digital Experience, didn’t stand still either. It reported revenue rose 24% from a year ago, to $934 million. Within that segment, subscription revenue rose 27%, to $812 million.

Assessing Adobe’s performance, Constellation Research Inc. analyst Holger Mueller told SiliconANGLE that the company has shown itself to be among a growing class of “pandemic winners.”

“It was good to see that its product innovation is paying off, focused on creative digital transformation,” Mueller said. “It shows that digital transformation overall is accelerating and that people need creative assets to achieve that.”

The analyst said Adobe had done well on the cost management side too, increasing its research and development budget while cutting back on its general and administrative expenses. “That led to 50%-plus growth in operating income, which is the mother milk of all software companies,” he said.

The only real concern investors may have with Adobe is the news that Chief Financial Officer John Murphy has announced he’s planning to retire later this year to spend more time with family and friends and focus on philanthropy. Adobe said it’s evaluating internal and external candidates to replace him. Murphy said he will stay on to help ensure an orderly transition.

For the next quarter, Adobe has set itself a target of $2.81 a share in earnings on sales of $3.72 billion, above Wall Street’s forecast of $2.70 in earnings and $3.7 billion in revenue. For the full year, Adobe is targeting $15.45 billion in revenue, versus Wall Street’s consensus of $15.2 billion.

Photo: Adobe MAX/Flickr

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