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Adobe had warned that results would be affected by several structural headwinds.
Dreamstime
Adobe
shares are trading lower in late trading after the software firm reported better-than-expected earnings but provided an outlook for the current quarter that fell shy of Wall Street estimates.
Adobe shares are down 1.8% in after hours trading, to $458. The stock had rallied 2.8% in the day’s regular session.
For the quarter ended March 4, the creative and marketing software provider reported revenue of $4.26 billion, up 9%. That was a bit ahead of both the company’s target of $4.23 billion and the Wall Street consensus of $4.24 billion. Profits on an adjusted, non-GAAP basis were $3.37 a share, also slightly better than both guidance at $3.35 a share, and the analyst estimate of $3.34 a share. GAAP profits were $2.66 a share, three cents above guidance.
Adobe CEO Shantanu Narayen noted in a statement that that company had record first-quarter revenue. CFO Dan Durn added that the results reflect “strong execution and resilience through unprecedented circumstances.”
“Our momentum, product innovation and immense market opportunity position us for success in 2022 and beyond,” Durn said.
Adobe repurchased 3.8 million shares in the quarter.
The company’s digital media segment revenue was $3.11 billion, up 9%, while digital experience segment revenue was $1.06 billion, up 13%. Adjusting for currency and a 13-week period, compared with 14 weeks a year ago, digital media revenue was up 17%, while digital experience was 20% higher. Digital media annualized recurring revenue was up $418 million, ahead of the company’s target of $400 million.
For the fiscal second quarter, Adobe sees revenue of $4.34 billion, with $440 million net new ARR from digital media. The company sees growth of 13% to 14% in digital media revenue on a constant currency basis, and 15% to 16% for digital experience revenue. Adobe projects profits for the quarter of $3.30 a share on a non-GAAP basis, or $2.44 a share under generally accepted accounting principles. Street consensus had called for $4.4 billion in revenue and non-GAAP profits of $3.35 a share.
Adobe also said that on March 4 the company halted all new sales of Adobe products and services in Russia and Belarus. The company said it is reducing its digital media annual recurring revenue balance by $75 million to reflect all existing business in those two countries. Adobe added that while it will continue to provide digital media services in Ukraine, the company reduced its stated ARR by $12 million to reflect its entire business there. The company expects those moves to reduce revenue in fiscal 2022 by $75 million.
In previewing the quarter, Citigroup analyst Tyler Radke had warned that the company could post “lower-than-typical” upside to the company’s net new ARR digital media metric, due to both “rising competition at the low end of the market and a slower digital marketing spending backdrop.” He notes that
Salesforce
(CRM), in its recent earnings report, showed some deceleration in its marketing cloud business.
Radke also had worried that operating margin expansion could slow as travel and entertainment expenses return with the reopening of the economy post-Covid and incremental investment in the business.
Write to Eric J. Savitz at [email protected]
George is Digismak’s reported cum editor with 13 years of experience in Journalism