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Adobe stock gains after Q2 earnings exceed expectations

Benefitting from the stable demand for products across all the business segments, Adobe’s (Nasdaq: ADBE) revenues rose sharply in the second quarter, driving up the profit. The results also exceeded the market’s estimates. The company’s stock gained 2% Tuesday afternoon following the report.

Adobe Q2  revenue up 25%

Revenues of the San Jose, California-based company, which provides digital publishing and analytics services, climbed 25% to $2.74 billion in the second quarter, beating analysts’ estimate of $2.7 billion by a narrow margin.

Adobe continues to benefit from the positive business environment and its strong customer base. Recurring revenues advanced to $7.47 billion during the three-month period.

Earnings, excluding special items, moved up 10% year-on-year to $1.83 per share, surpassing the consensus estimate. On an unadjusted basis, net profit dropped to $632.6 million or $1.29 per share from $663.17 million or $1.33 per share in the second quarter of 2018.

Adobe continues to benefit from the positive business environment and its strong customer base

CEO Shantanu Narayen said, “Adobe’s continued momentum is being fueled by the explosion of creativity across the globe and the widespread business transformation agenda to deliver engaging customer experiences. With an innovative technology platform, exciting product roadmap and strong ecosystem of partners, we are well positioned for the second half of FY19 and beyond.”

For the third quarter, the company expects revenues of about $2.80 billion, which represents a 20% rise in Digital Media revenue and 34% growth in Digital Experience revenue. It is looking for unadjusted earnings of $1.40 per share and adjusted earnings of $1.95 per share for the current quarter.

Analysts, on average, recommend buy for Adobe’s stock, with a consensus target price of $300. The latest brokerage to comment on the company is BidaskClub, which last month downgraded the stock from strong buy to a buy.

Also see: Microsoft Q3 2019 Earnings Conference Call Transcript

Adobe’s competitor International Business Machines (IBM) recently reported lower revenues and earnings for its first quarter, hurt by decline in sales at all the business divisions. Earnings slipped 8% to $2.25 per share and revenues dropped 5% to $18 billion.

Adobe shares jumped to a record high in April, after recovering from the sharp loss they suffered towards the end of last year. The stock has maintained a steady uptrend since the beginning of 2019, gaining nearly 24% so far. In the past six months, it moved up 22%.

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