Computer software company Adobe System is expected to release its first quarter earnings report for fiscal 2017 on Thursday (March 16), being among the first companies to report in the Q1 bucket. After four-quarter record of posting impressive record revenues, most analysts are awaiting the results of the tech company’s performance during the first quarter of the year.
Last fourth quarter earnings, Adobe posted strong growth both for earnings and revenues, surpassing analyst estimates. Its revenue climbed 9.9% during the quarter and saw a 23.1% boost year-over-year.
Adobe’s continuous strong performance quarter-on-quarter was largely attributed to the success of its Creative Cloud adoption. Still, the company saw challenges to the weaker demand for its core products and services, and expects to see further slow growth or could even decline.
Adobe Earnings and Performance Preview
Last January 9, Adobe released its forecast for the first quarter and full year report for fiscal 2017, providing an optimistic outlook for its investors.
For Q1, Adobe expects to see a revenue growth at $1.64 billion, higher by 19% from the same quarter a year ago, with non-operating expenses at $13 million. The tech company targets Earnings per share of $0.87 (Non-GAAP), $0.71 (GAAP). Adobe also expects to achieve an approximate new net Digital Media ARR of $225 million, with a growth of 19% for the Digital Media segment’s year-over-year revenue growth. The Adobe Marketing Cloud is predicted to grow around 24% year-over-year on revenues.
Meanwhile, full year fiscal 2017 is expected to report total Adobe revenue at $7.09 billion, with a 20% YoY growth for Digital Media segment revenue, 25% growth for Digital Media ARR, more than 25% increase under the Adobe Marketing Cloud revenue, and a 30% increase in Adobe Marketing Cloud Annual Subscription value. Earnings per share are expected to grow around $3.75 for FY2017.
Analysts speculate that Adobe will see most growth under its Creative Cloud segment, which previously also reported the largest part of Adobe’s 2016 revenue by 53.4%. The Creative Cloud comprises around 50% of Adobe’s operating segment, with its products reported at 18.6 million. CC could increase up to $235 million in ARR, higher than the Adobe guidance provided.
The Creative Cloud has had a strong run for the past year as Adobe’s clients continue to receive the products with a strong demand while Adobe continuously adds more products and function to its portfolio. At present, CC has a new function that allows the use for mobile devices.
Adobe’s second largest segment, the Cloud Marketing division, is also set to report impressive growth, seeing that the sector grew by 28% over the last five years. In Q4 2016, the segment generated a total of $465 million and $1.63 billion for the full year. The division makes up around 27% of Adobe’s value at present.
In December of last, Adobe acquired advertising software company TubeMogul, which could further improve Adobe’s lead in the digital marketing industry. At present, the marketing cloud sector offers a $10 billion+ opportunity for businesses.
Adobe’s stock (NASDAQ: ADBE) traded quietly on the previous trading session, down by $0.36 or 0.3% to $121.44 per share. Although the stock declined a bit in the previous session, it still held its ‘Buy’ and ‘Strong Buy’ rating from most analysts. At present, it has an RSI value of 58.739 with a ‘Buy’ rating.
Since 2017, ADBE has already surged more than 18% in the market, and has gained around 42% over the past 12 months, now trading at its 52-week highs, exhibiting only an upward motion and has been in the bull market mostly. In September 21 of last year, ADBE spiked after impressive Q3 earnings, up by 7.1% from $100.62 to $108.22 following the release of the earnings report.
With the quarter-over-quarter earnings beat Adobe has exhibited, the stock is believed to climb even higher in the future, as many analysts suggest to invest in the stock, as it Adobe exhibits that it has more room to grow. In anticipation for the upcoming release of the earnings report, several big analysts upgraded their rating on the stock from ‘sell’ to ‘buy’ rating, as most are bullish towards the outcome.
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