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Preview: Demand likely to drive Adobe (ADBE) Q4 earnings

Adobe Inc. (NASDAQ: ADBE) is slated to report its earnings results for the fourth quarter of 2019 on Thursday after the market closes. The results will be benefited by demand for its products and a strong customer base. The business momentum will be driven by Document Cloud mobile applications as well as the strength in Acrobat subscription adoption.

The Creative Cloud is expected to drive sustained long-term revenue growth through the continued expansion of the customer base and keeping existing customers current on the latest release. The Creative Cloud strategy is designed to increase its revenue with users, attract more new customers, and grow recurring and predictable revenue stream.

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Also, the addition of Marketo Engage and continued demand across Adobe Experience Cloud solutions portfolio, including new offerings and enhancements to existing solutions, could be driving revenue growth in the future. The subscription revenue associated with Adobe Commerce Cloud offerings and Adobe Marketing Cloud offerings AEM and Campaign is likely to contribute to a lesser extent to the overall growth.

As of August 30, 2019, the company’s total deferred revenue was $3.26 billion, up from $3.05 billion as of November 30, 2018, primarily due to increases in new contracts and the timing of renewals for offerings with cloud-enabled services and hosted services.

Analysts expect the company’s earnings to jump by 23.50% to $2.26 per share and revenue will climb by 20.60% to $2.97 billion for the fourth quarter. The company has surprised investors by beating analysts’ expectations thrice in the past four quarters. The majority of the analysts recommended a “buy” rating with an average price target of $317.62.

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For the third quarter, Adobe posted a 19% jump in earnings helped by higher revenues. The top line benefited from the stable demand for its products in the key business segments as well as favorable market conditions and strong customer base.

For the fourth quarter, the company predicts total revenue of $2.97 billion, unadjusted earnings of $1.68 per share, and adjusted earnings of $2.25 per share. For fiscal 2020, total revenue is expected to be about $13.15 billion, unadjusted earnings of about $7.40 per share, and adjusted earnings of $9.75 per share.

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