Adobe Q3 earnings beat on record revenues; stock dips on weak guidance

Revenues of Adobe, Inc. (NASDAQ: ADBE) increased sharply in the third quarter of 2019, benefiting from the stable demand for its products in the key business segments. Consequently, earnings of the publishing software company rose 18% and surpassed the market’s prediction. Meanwhile, the stock declined during Tuesday’s extended trading session after the management provided weak outlook for the fourth quarter.

Record Revenue

Revenues of the San Jose, California-based company climbed 24% to a record high of $2.83 billion in the third quarter, beating analysts’ estimate. Adobe continues to benefit from the favorable market conditions and strong customer base.

Digital Media segment revenue advanced 22% annually to $1.96 billion, while Document Cloud revenue rose to $307 million. At $821 million, Digital Experience revenue was up 34% year-over-year.

The Bottom Line

Earnings, excluding special items, moved up 18% year-on-year to $2.05 per share in the third quarter, far exceeding the consensus estimate. On an unadjusted basis, net profit climbed to $792.8 million or $1.61 per share from $666.3 million or $1.34 per share in the third quarter of 2018.

Related: Adobe Q2 2019 Earnings Conference Call Transcript

CEO Shantanu Narayen said, “Customers across every industry continue to rely on Adobe to run their businesses, transform how they work, and bring their creative ideas to life as reflected in our record Q3 results. We’re excited for the opportunities in front of us and confident in our ability to drive strong top-line and bottom-line growth.”

Outlook

Encouraged by the positive results, the management predicts that Digital Media revenues will advance about 20% annually in the fourth quarter, when Digital Experience revenue is estimated to grow around 23%. The forecast for total revenue is $2.97 billion. The company is looking for adjusted earnings of $2.25 per share and unadjusted profit of $1.68 per share for the fourth quarter. The outlook, meanwhile, fell short of expectations.

Also see: Is Adobe’s future linked to stock climbing to record high?

Adobe’s stock 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 has gained about 24% so far this year, closed Tuesday’s regular session slightly higher.

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