Earnings preview: Adobe to keep up the momentum in Q2 on cloud power

The main strength of Adobe (Nasdaq: ADBE) is the steady demand for its products across all business segments, especially Digital Experience. While taking advantage of the rapid adoption of cloud technology, the company has been able to maintain a stable customer base.

Adobe is set to publish results for the second-quarter of 2019 Tuesday after the market’s close. The consensus estimate is for earnings of $1.78 per share on revenues of $2.7 billion, up 7.2% and 23.2% respectively from the year-ago period.

Earnings of the California-based company, which provides digital publishing and analytics services, topped expectations in the first quarter, registering a 10% year-over-year increase to $1.71 per share. The positive outcome was supported by a 25% growth in revenues to $2.6 billion, which also exceeded the forecast. The company has a good track record of beating estimates, though it is not consistent, and the upcoming report is expected to be positive in that respect.

While taking advantage of the rapid adoption of cloud technology, the company maintained a stable customer base

Adobe stands to benefit from the positive business environment and its strong customer base this time too. The uptick in recurring revenue is expected to continue in the to-be-reported quarter and during the full fiscal year.

Another factor that is estimated to have contributed to growth in the second quarter is the expansion of the Digital Experience segment. In the longer term, Adobe is seen registering wider operating margins, easing the ongoing squeeze, aided by synergies from the recent acquisitions, including that of 3D editing technology company Allegorithmic.

Related: Adobe Systems Incorporated Q4 2018 Earnings Conference Call Transcript

Analysts, on average, recommend buy for Adobe’s stock, with a consensus target price of $300. The latest brokerage to comment on the company is BidaskClub, which last month upgraded the stock from hold to a buy.

Salesforce (CRM), which competes with Adobe, last week reported a double-digit increase in first-quarter earnings and revenues, reflecting strong top-line performance by all the business segments. Oracle (ORCL) reported an increase in third-quarter earnings to $0.87 per share on flat sales, marking an improvement from last year’s net loss.

Adobe shares jumped to a record high in April, after recovering from the sharp loss they suffered towards the end of last year. The stock has maintained a steady uptrend since the beginning of 2019, gaining nearly 22% so far. In the past six months, it moved up 20%.

Listen to publicly listed companies’ earnings conference calls along with the edited closed caption text