Adobe Misses Earnings Estimates, But Investors Don’t Care
Adobe Systems (NASDAQ:ADBE) closed Tuesday’s regular trading session flat at $48.14 per share, but jumped as much as 4 percent in post-market trading after reporting fiscal third quarter earnings. Revenue fell 7.9 percent on the year to $995.1 million, missing the average analyst estimate of $1.01 billion but falling within Adobe’s guidance of between $975 million and $1.025 billion. Adjusted earnings per share fell 44.8 percent on the year to 32 cents per share, missing the average analyst estimate of 34 cents.
While the top and bottom line miss was somewhat underwhelming, Adobe reported that it left the quarter with more than 1 million Creative Cloud subscriptions, an increase of 331,000 on the quarter, representing stronger-than-expected growth. Adobe also completed its acquisition of Neolane, adding, as CEO Shantanu Narayen put it in the press release, “a critical cross-channel campaign management solution to the Adobe Marketing Cloud, which will further extend our leadership position in digital marketing.”
Mark Garret, executive VP and CFO, added that during the quarter, “41 percent of our revenue was recurring and we exited the quarter with record deferred revenue on our balance sheet. These results are building a stronger, more predictable revenue model for Adobe which will drive higher long-term growth.”
Broken down by segment, Digital Media has accounted for 66 percent of revenues this year to date while Digital Marketing accounted for 29 percent and Print & Publishing accounted for 5 percent. By geography, the Americas accounted for 52 percent of revenue, Europe, the Middle East, and Africa accounted for 27 percent, and Asia accounted for 21 percent.
Looking ahead to the fourth quarter, Adobe is forecasting revenue in a range between $1 billion and $1.050 billion. Earnings are expected to fall in a range between 28 cents and 34 cents. Analysts are slightly more optimistic, estimating on average revenue of $1.08 billion and earnings of 41 cents per share.
Here are the slides from Adobe’s earnings call:
Adobe agreed to purchase privately held Neolene, a French digital-marketing company, for $600 million in June. Neolane will join up with Adobe’s Marketing Cloud product line to bolster Adobe’s visibility. The company makes tools that help marketers connect with consumers via the Internet, email, mobile devices, and direct mail by providing a platform to manage and automate marketing across the web. “Neolane brings critical cross-channel campaign management capabilities [to Adobe],” Brad Rencher, an Adobe senior vice president, said.
The move follows similar pushes by Adobe’s competitors as companies look to add social media advertising to their marketing strategy. Salesforce.com Inc. (NYSE:CRM) agreed to buy ExactTarget Inc. (NYSE:ET) for $2.5 billion last month. Oracle Corp. (NASDAQ:ORCL) purchased Eloqua Inc. last year for $871 million while Teradata Corp. (NYSE:TDC) bought Aprimo Inc. in 2010 for $525 million.
Salesforce.com reported earnings at the end of August that helped send shares to all-time highs. Revenue increased 30.8 percent on the year to $957 million, beating the average analyst estimate of $939.25 million. Adjusted earnings fell 18.18 percent on the year to 9 cents per share, beating the average analyst estimate of 7 cents per share. Salesforce.com — one of the fastest-growing tech companies on the market — competes with Adobe via its enterprise cloud computing business, providing marketing services.
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