After delivering record-high revenues in the second quarter, Adobe Inc. (NASDAQ: ADBE) is gearing up to report third-quarter results next week. The design software maker has effectively integrated advanced AI tools into its Creative Cloud suite products, delivering an all-new experience to users.
Adobe’s shares traded mostly sideways in the past two months, after recovering from a one-year low. The stock is down 6% since the beginning of the year. Market watchers, in general, are bullish on the ADBE’s prospects, citing mainly the continued strong growth of the Creative Cloud division. When it comes to monetizing its AI initiatives, Adobe looks better positioned than most software businesses.
Q3 Report on Tap
The company impressed investors by delivering stronger-than-expected earnings for ten consecutive quarters. For the most recent quarter that ended in August 2024, the consensus earnings forecast is $4.53 per share, excluding one-off items, compared to $4.09 per share in the year-ago quarter. Market watchers project revenues of $5.37 billion for the third quarter, which is higher than the $4.89 billion revenue the company generated in the same period a year earlier. The Q3 report is expected to be released on Thursday, September 12, at 4:05 pm ET.
Adobe’s success can be attributed mainly to its strategy of growing customer value through a strong product roadmap — continued innovations across Creative Cloud, Document Cloud, and Experience Cloud drive customer growth. Being a frontrunner in the AI race, the company has introduced powerful AI tools for popular products including Photoshop and Illustrator. It looks well-positioned to continue tapping into the AI boom.
Competition
Adobe has been dominating the creative software market for quite some time, but it faces competition from AI startups offering similar products at lower prices. The relatively high costs for Adobe products, especially after shifting to the subscription-based model, could be a dampener for price-conscious customers.
Adobe’s CEO Shantanu Narayen said while addressing investors after reporting Q2 results, “Everyone from creators, communicators, students, entrepreneurs, and businesses of all sizes are using our products to unleash their creativity, accelerate document productivity, and power their digital businesses. Adobe’s highly differentiated approach to AI is rooted in the belief that creativity is a uniquely human trait and that AI has the power to assist and amplify human ingenuity and enhance productivity. We’re innovating across data, models, and interfaces and natively integrating AI across all our offerings.”
Strong Q2
In the second quarter, revenues rose 10% from last year to a record $5.31 billion, driven by strong growth across Creative Cloud, and topped expectations — the sixth beat in a row. Digital Media revenue, the main business segment that accounts for about 75% of the total, grew in double digits. That translated into a 15% increase in adjusted earnings to $4.48 per share. Unadjusted profit was $1.57 million or $3.49 per share in the May quarter, compared to $1.30 billion or $2.82 per share in Q2 2023.
After staying almost flat since the beginning of the week, Adobe’s stock traded lower on Friday afternoon. The value has increased by more than a fifth in the past three months.