Office automation facilitator Adobe Inc. (Nasdaq: ADBE) reported better-than-anticipated fiscal 2021 second-quarter earnings and revenue, aided by a sharp rise in subscription revenue. The company also issued a better-than-anticipated third-quarter earnings and revenue outlook.
The stock hit a new 52-week high of $570 on Friday before closing at $565.59, reflecting a gain of $14.23 or 2.58% from the earlier close.
The San Jose, California-based company reported second-quarter 2021 revenue of $3.84 billion, an increase of 22.7% from $3.128 billion in the similar period last year.
For the quarter ended June 4th, 2021, Adobe posted earnings of $1.116 billion, or $2.32 per share, compared with earnings of $1.110 billion, or $2.27 a share in the quarter ended May 29th, 2020.
Excluding stock-based and deferred compensation expense and amortization of intangibles, among others, non-GAAP net income for the 2Q 2021 increased to $1.456 billion, or $3.03 per share, from $1.187 billion, or $2.45 a share, in 2Q 2020.
Analysts polled by Thomson Reuters had anticipated the company to report earnings of $2.82 per share on revenues of $3.73 billion.
Commenting on the results, Shantanu Narayen, president and CEO of Adobe, said, “Adobe had an outstanding second quarter as Creative Cloud, Document Cloud and Experience Cloud continue to transform work, learn and play in a digital-first world.”
Segment-wise,
- Subscription revenues increased 24.34% y-o-y to $3.520 billion.
- Product revenues were $153 million, up $25 million from last year.
- Services and other revenues decreased slightly to $162 million, from $169 million in the prior-year period.
Specifically, digital media segment revenue rose by 25% y-o-y to $2.79 billion. Creative revenue was $2.32 billion, reflecting 24% y-o-y growth. Document cloud revenue increased 30% y-o-y to $469 million.
Digital experience segment revenue grew 21% to $938 million. Likewise, digital experience subscription revenue was $817 million, up 25% on a y-o-y basis. During the second quarter, cash flows from operations hit a new high of $1.99 billion. Furthermore, Adobe bought back roughly 2.1 million shares during the quarter.
Looking ahead, the company expects third-quarter GAAP earnings of $2.27 per share and non-GAAP earnings of $3 per share. Adobe also anticipates revenues of $3.88 billion for the current quarter. Furthermore, the company expects digital media segment revenue growth of 22% on a y-o-y basis. Also, digital experience subscription revenue is forecast to record 25% growth.
Following impressive results, multiple analysts have upwardly revised the price target of Adobe’s stock.
Matthew Hedberg, an analyst at RBC Capital Markets, upwardly amended his price target to $650 from $575, and also reaffirmed the “outperform” rating. Likewise, Keith Bachman of BMO Capital Markets lifted his price target to $630 from $585, and maintained his “outperform” rating. Morgan Stanley also boosted its price target to $610 from $575, reaffirming an “overweight” rating.
The Q2 earnings beat and strong Q3 outlook are expected to keep the stock bullish in the short term.
The historical price chart indicates that the stock is ascending after consolidating at 450 levels. The stock is trading above the 50-day moving average, while the MACD indicator has a positive reading. Therefore, we are anticipating the stock to remain in an uptrend in the days ahead.
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