Mixed Outlook
Adobe’s earnings growth in the past twelve months was slower than the average earnings growth in the past five years, but it maintained stable top-line growth. However, the recent shift in focus to high-growth areas of the business should help the company achieve its long-term goals. On the positive side, the robust cash flow allows Adobe to take forward its investment plans and tap the growth opportunities.
What needs to be seen is whether the company will repeat last quarter’s exceptionally impressive performance, when the core segment of Digital Media registered a 22% revenue growth.
Q2 Outcome
In the second quarter, the San Jose, California-based company recorded double-digit growth in adjusted earnings and revenues to $1.83 per share and $2.74 billion, respectively, benefiting from the strong demand for its products across all the business segments. The results also surpassed the estimates.
Competition
Rival software maker International Business Machines (IBM) is slated to unveil its third-quarter results on October 16 after the closing bell, with market watchers looking for a year-over-year decrease in earnings and revenues.
Adobe’s stock made strong gains in the recent past and climbed to a record high towards the end of July, but slipped back to the pre-boom levels in the following weeks. The stock, which is trading broadly at the levels seen a year ago, moved up about 24% so far this year.