Adobe Tops Estimates on Digital Media Business Momentum

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Adobe Tops Estimates on Digital Media Business Momentum
Highlights
  • Adobe topped analysts' estimates for the eighth straight quarter
  • Company expects third-quarter revenue of $2.24 billion
  • Adobe agreed to buy Magento Commerce last month

Adobe Systems topped analysts' profit and revenue estimates for the eighth straight quarter driven by strength in its digital media business, which houses its flagship product Creative Cloud.

Adobe's shares, which have gained over 47 percent so far this year, fell 3.5 percent at $249 (roughly  Rs. 17,000) in extended trading after the company forecast third-quarter revenue nearly in line with estimates.

The maker of image-editing software Photoshop said it expects third-quarter revenue of $2.24 billion (roughly Rs. 15,200 crores) and adjusted earnings of $1.68 (Rs. 114) per share. This compares with analysts' estimate of a revenue of $2.22 billion and adjusted earnings of $1.61 per share.

"The third-quarter guidance looks to be an in-line guide, which we would expect them to beat given how strong the business is. But, it is nothing we are worried about," said Christopher Rossbach, chief investment officer at private investment firm J Stern, which holds a position in Adobe.

Last month, in a move to bolster its Experience Cloud business, Adobe agreed to buy e-commerce services provider Magento Commerce from private equity firm Permira for $1.68 billion (roughly Rs. 11,400 crores).

"We expect the closing of Magento to be slightly dilutive to our Q3 GAAP earnings per share target", Chief Financial Officer John Murphy said on a conference call with analysts.

Adobe's second-quarter net income rose to $663.2 million (roughly Rs. 4,500 crores), or $1.33 per share (Rs. 90), from $374.4 million, or 75 cents per share, a year earlier.

The company's digital media business, that includes Creative Cloud, posted revenue of $1.55 billion (roughly Rs. 10,500 crores), compared with $1.21 billion, a year earlier.

Revenue in Adobe's Experience Cloud business, which provides services including analytics, advertising and marketing, rose to $586 million (roughly Rs. 4,000 crores), above estimates of $570.4 million.

Adobe's quarterly revenue rose to $2.2 billion (roughly Rs. 15,000 crores) from $1.77 billion, beating analysts' estimate of $2.16 billion.

Excluding certain items, Adobe earned $1.66 per share (Rs. 113), beating analysts' estimate of $1.54 per share.

© Thomson Reuters 2018

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