Adobe Q2 revenue beats expectations, but guidance was disappointing

Adobe Q2 revenue beats expectations, but guidance was disappointing

Published - June 17, 2022 @ 11:47 AM (EET)

In late trading Thursday, Adobe (NASDAQ:ADBE) stock lost ground after the provider of software for creativity provided softer-than-expected guidance for both its current quarter and full fiscal year but posted strong revenue results against the backdrop of economic uncertainty.


The outlook stoked worries about growth expectations at a time when inflation is eating into marketing spending and the fallout from the war in Ukraine.  In addition, the company pointed to a $175 million foreign-exchange headwind and summer seasonality.


Following the earnings report, Adobe shares lost 4%.


EARNINGS RESULTS


Driven by a strong performance across all segments, Adobe reported second-quarter revenue of $4.39 billion, up 14% and slightly ahead of its guidance target of $4.34 billion.


Revenue in Adobe's Digital Media segment grew 15% year-over-year to $3.20 billion, Creative grew 12% to $2.61 billion, and Document Cloud grew 27% to $595 million. Digital Experience segment revenue grew 17% year-over-year to $1.10 billion.


"We are winning in our established businesses and seeing significant momentum in new categories from content authoring for a broad base of creators to PDF functionality on the web to the leading real-time customer data platform for global enterprises." - Chairman and CEO Shantanu Narayen, Adobe.


LOOKING AHEAD


The company forecast third-quarter adjusted EPS of $3.33 on revenue of $4.43 billion, short of Wall Street estimates of $3.40 and $4.51 billion for EPS and revenue, respectively.


In addition, for the full fiscal 2022, Adobe expects revenue of $17.65 billion, below the consensus estimate of $17.85 billion.


Citing the launch of new applications, Adobe announced price hikes during the quarter for certain Creative Cloud subscriptions.  However, the company didn't institute a bigger price increase since it is focusing on adding new users, said President of the Digital Media business, David Wadhwani.


TURNING TO WALL STREET


Based on 21 Buys and five holds, the consensus among analysts remains a Strong Buy.  The average Adobe price target of $549.04 implies an upside potential of 50.4% to current levels.


Meanwhile, over the past year, shares have lost nearly 36%, while the S&P 500 index is down 23% during the same period.


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