Adobe Inc. (Nasdaq: ADBE) reported better-than-anticipated fiscal 2022 second-quarter earnings and estimates. However, the multimedia software products company issued a lower-than-anticipated Q3 and FY 2022 outlook that triggered a stock selloff. The stock ended Friday’s trading session at $360.79, down $4.29 or 1.18% from the prior close.
The San Jose, California-based company reported second-quarter revenues of $4.386 billion, an increase of 14% from $3.835 billion in the similar period last year.
For the quarter ended June 3, 2022, Adobe posted a net income of $1.178 billion, or $2.49 per share, compared with a net income of $1.116 billion, or $2.32 a share, in the quarter ended June 4, 2021.
Excluding stock-based and deferred compensation expenses, amortization of intangibles, investment (gains) losses, and income tax adjustments, the 2Q 2022 non-GAAP net income was $1.585 billion, or $3.35 per share, up from $1.456 billion, or $3.03 a share in 2Q 2021.
Analysts surveyed by Refinitiv had anticipated the company would post earnings of $3.31 per share on revenues of $4.34 billion for the quarter.
Commenting on the results, Shantanu Narayen, chairman and CEO of Adobe, said, “Adobe achieved record Q2 revenue with strong demand across Creative Cloud, Document Cloud, and Experience Cloud.”
Broadly speaking,
- Subscription revenues increased 13.50% y-o-y to $4.07 billion.
- Product revenues fell to $146 million, from $153 million.
- Services and other revenues were $170 million, an increase from $162 million in the prior-year period.
Segment-wise,
- The Digital Media segment, which offers Document Cloud and Creative Cloud products, posted revenues of $3.20 billion, an increase of 15% on a y-o-y basis and greater than the StreetAccount forecasts of $3.16 billion. While Creative revenues grew by 12% to $2.61 billion, document cloud revenue increased 27% to $595 million.
- Digital Experience revenues surged 17% to $1.10 billion, and surpassed the $1.08 billion StreetAccount projections of estimates. Specifically, digital experience subscription revenue posted a rise of 18% to $961 million.
At the end of the second quarter, Adobe’s deferred revenue was $4.88 billion, a decrease from $5.02 billion in the earlier quarter and lower than StreetAccount estimates of $5 billion. The company ended the second quarter with cash, cash equivalents, and short-term investments worth $5 billion.
Adobe’s Chief Executive Officer Shantanu Narayen revealed that the business would be searching for takeover opportunities as the valuations will look more convincing than they were before. This is despite the fact that Adobe does not require anything to be added to its offerings.
Looking forward, the company forecasts 3Q 2022 adjusted earnings of about $3.33 per share on revenues of roughly $4.43 billion. Analysts’ consensus estimates currently call for earnings of $3.40 per share on revenues of $4.51 billion.
For FY 2022, Adobe currently forecasts adjusted earnings of $13.50 per share on revenues of roughly $17.65 billion. Analysts surveyed by Refinitiv are forecasting earnings of $13.66 per share on revenues of $17.85 billion. Notably, back in December, the company had projected FY 2022 adjusted earnings of $13.70 per share on revenues of $17.90 billion.
The company’s performance is also expected to be affected due to the negative impact of the currency conversion rate and the Russia-Ukraine war.
Overall, the quarterly earnings beat and slightly weak Q3 and FY 2022 outlook are expected to keep the stock of Adobe range-bound in the short term.
The historical price chart indicates that the stock is declining after facing resistance at 425. The next major support is anticipated only near 325. Additionally, the stock is trading below its 50-day moving average, while the Chaikin money flow indicator has a negative reading. Therefore, we are anticipating the stock to remain in a downtrend in the short term.
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