Earnings preview: All you need to know ahead of Adobe’s Q3 earnings

Adobe, Inc. (NASDAQ: ADBE), a leading provider of digital publishing software, will be announcing its third-quarter financial results on September 17 at 4:05 pm ET. Analysts’ consensus earnings forecast is $1.97 per share, which is up 14% from the third quarter of 2018. The positive outlook reflects an estimated 23% annual growth in revenues to $2.82 billion. The estimate is slightly above the management’s projection for the quarter.

The general business environment for digital publishing and analytics services remains favorable for the company, which continues to expand its user base. Adobe’s main strengths are its solid partner ecosystem and innovative product portfolio, which is popular among professionals across the world.

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.

Related: Adobe Q2 2019 Earnings Conference Call Transcript

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.

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