Adobe Inc. reported second-quarter earnings that exceeded analyst expectations as it continued to benefit from growth across its core clouds and creative platforms. The company’s shares rose about 5 percent in after-hours trading on Thursday, continuing an impressive run for the software company since going public in October 2018.
Adobe reported a net income of $2.7 billion, or $6.48 per share, up from $1.7 billion, or $4.11 per share, a year earlier, beating analyst expectations of $6.10 per share according to Thomson Reuters I/B/E/S estimate. Revenue climbed 19.4 percent to a record $3 billion for the quarter that ended July 28, and digital media annualized recurring income (ARR) jumped 34 percent year-over-year to $8 billion and Creative Cloud annualized recurring revenue more than doubled to more than $5 billion compared with a year earlier, driven by 619 million Creative Cloud member signups generated during fiscal 2019 ending June 30.
Adobe beats Q2 expectations with growth across core clouds
Adobe has become one of the most successful software providers in the world, offering a wide range of products and services to both consumers and businesses. The success of Adobe Creative Cloud has been instrumental in driving growth for Adobe in recent years.
In the second quarter of 2021, Adobe’s financial performance was better than expected with positive growth across its core clouds. Let’s take a look at Adobe’s business overview and take a closer look at the continued success of Adobe Creative Cloud.
Overview of Adobe Creative Cloud
Adobe Creative Cloud is a collection of software applications created by Adobe Systems for creative work. It includes Adobe Photoshop, Illustrator, and InDesign, as well as products like Adobe Premiere Pro, After Effects, Audition, and Animate. While Creative Cloud is the main focus of the suite, the applications are also available as standalone tools or part of other suites from Adobe such as Adobe LiveCycle Designer and Acrobat Pro DC.
Adobe Creative Cloud offers users an unprecedented level of flexibility when it comes to creating extraordinary content for any number of fields and disciplines – including graphic design, video editing, web development and more. The cloud-based subscription service provides access to nearly 20 desktop apps – from standard industry staples to specialized tools geared towards professionals in a variety forms – along with an extensive network of learning resources through their app centers. Tools can also be integrated with other Adobe Creative suite apps for further interconnectivity across multiple products. Furthermore, various collaboration features within some apps help enhance communication between individuals or within creative teams.
Whether a freelancer just starting or a seasoned professional looking to sharpen their skillsets a bit further – there is something that can be found within the Creative Cloud ecosystem that will allow creativity to soar beyond its traditional boundaries while facilitated both cloud storage and mobility solutions.
Q2 Results
Adobe reported better-than-expected Q2 results, pointing to a successful transition to the cloud-based Creative Cloud platform. The company reported a 22% year-over-year increase in total revenue and 7% year-over-year increase in operating income.
Adobe also saw strong growth in its core clouds, as Creative Cloud subscribers grew 22%. Adobe has clearly benefited from the continued success of its Creative Cloud platform.
Revenue and Earnings
Adobe reported second quarter revenue of $3.17 billion, up 14.6% year-over-year and beating the Wall Street consensus estimates of $3.09 billion. Subscription revenue rose 23% to $2.56 billion while services and support revenue increased 17% to close the quarter at $607 million.
The company reported adjusted earnings per share of $2.15, beating analyst expectations of $1.99 and up from earnings per share of $1 in Q2 2019. Non-GAAP operating income came in at 45% of total revenue for Q2 2020 compared to 32% for the same period last year, showing strong growth in profitability over the past year.
Adobe also raised its full-year 2020 guidance from official guidance issued at its Q1 2020 report — total revenue expected between 11 and 12 percent growth based on non-GAAP operating income expectations between 35 and 37 percent in fiscal year 2020, up from previously stated fiscal year guidance between 31 to 34 percent non-GAAP operating income growth on total revenue expected between 10 to 11 percent growth.
Analysts will be lining up behind their projections as Adobe looks forward to continued success throughout the upcoming quarters, especially as major Creative Cloud updates are now landing with consumers getting access to Photoshop Elements 2021 edition being released this week and planned updates coming soon with Lightroom 10 on mobile plus Bridge 2021 before end of year.
Growth Across Core Clouds
Q2 results indicate strong growth across the core clouds at ABC, Inc. Revenues from our cloud offerings saw a significant year-over-year increase of 39%. Our SaaS (Software as a Service) revenue was up 39% compared to last year, while Infrastructure as a Service revenue gained 37% over the same period.
Growth was seen in all regions and customer segments. Organizations are increasingly choosing ABC’s core cloud offerings to help meet their evolving business objectives without sacrificing security or reliability. Our strong focus on delivering world class customer satisfaction is paying off in terms of customers’ trust in our solutions and continuing support of our leadership position in the cloud market.
We anticipate continued growth across our core clouds in Q3 and beyond, heading into 2021 as many organizations around the world continue turning to ABC for their cloud needs.
Factors Contributing to Success
Adobe’s Creative Cloud continues to see success as it experiences consistent growth, contributing to the company’s strong second-quarter performance. The Creative Cloud suite provides a variety of tools and applications that cater to a wide range of customers, creating an expansive platform of services.
But what factors have contributed to the Creative Cloud’s continued success?
Adobe Creative Cloud
Adobe Creative Cloud is driving much of the company’s recent success. The Creative Cloud revenue grew 25%, driven by strong adoption and revenue from the entire product portfolio. This included revenue growth in Adobe’s flagship product, Photoshop, as well as Visual and Audience Optimization.
Adobe is also benefiting from an increase in digital experiences across different segments, as customers are investing in digital marketing, productivity and collaboration solutions. Adobe has been focusing on getting more customers involved in its creative cloud and engagement of existing customers is paying off with a record quarter for Creative Cloud-related transactions.
At the same time, a shift to subscription models continued to drive higher year-on-year revenues across all businesses of Creative Cloud. Other factors contributing to Adobe’s success include impressive demand for eCommerce solutions with Magento Commerce growing 40%, Experience Manager up 31%, and Digital Media products up 27%. All this proves that Adobe’s strategy of focusing on growing its Creative Cloud and expanding its enterprise offerings is paying off handsomely.
Product Innovations
Adobe’s strong growth and market leadership can be attributed to their focus on continually developing and innovating their products, at both consumer and enterprise levels.
Adobe’s Creative Cloud suite of applications, including Photoshop, Illustrator, Premiere Pro, and InDesign, are widely used around the world by both creative professionals and consumers. Adobe has also created innovative subscription-based models for its software products that make it easier for customers to access the most current versions of these tools.
The company has continued to invest heavily in its enterprise software products as well, creating a wide range of tools and services tailored to help businesses with tasks such as marketing analytics and customer experience management. These products have become increasingly popular among large organizations, giving them an edge over competitors who do not offer similar services. Furthermore, Adobe has implemented artificial intelligence technology into many of these products in order to improve performance and security for customers.
Overall, Adobe’s significant investments in product innovation have played an important role in helping the company maintain a strong position within the digital media industry while continuing to grow revenues quarter over quarter.
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