Adobe Inc announced that its revenue in its digital experience segment, which contains its e-commerce software, Magento Commerce increased 5% year over year to $826 million for the fiscal second quarter ended May 29.
Sales surged 18% in its digital media segment to $2.27 billion, this, signaling strong demand for its photoshop and productivity tools while customers work from home, the company made a statement on Thursday.
The company, which specializes in software tools told its investors in March that the COVID 19 outbreak had created business uncertainty and reduced corporate marketing budgets, leading to weaker demand for its products.
However, Thursday’s results showed the damage to the business wasn’t as bad as predicted, as its quarterly sales increased by 14% to $3.13 billion. Analysts projected $3.16 billion.
GROWTH WITH CLOUD STRATEGY
Its president, chairman, and CEO, Shantanu Narayen has spurred Adobe’s revenue and market value to record heights since he transitioned the company to cloud-based software in 2012.
Before the COVID crises and recession, Adobe’s fast pace of growth was expected to slow, even as the company unveils a consistently steady stream of new products to modernize clients’ technology systems and heighten mobile apps for consumers, designers, and social media players.
While this software giant has sought to diversify from the creative products that became household names with expensive bets on enterprise software, Photoshop, and its brother remains the company’s milking cash cow.
“We have successfully navigated several crises and have always used them as a catalyst to make a strategic and structural change to emerge stronger,” the CEO said in a conference call after the results were out.
“Our employees, broad and diverse portfolio of products, strong balance sheet, and rigorous operating cadence put us in a rarified atmosphere among companies of our size and scale.” he further added.
The New York stock market responded by an increase of about 3% in extended trading after closing at $387.67.The stock has grown by about 18% this year.
Adobe said it will generate a profit of $2.40 a share in the current period, missing estimates by 5 cents. Profit, after some expenses, was $2.45 a share in the period ended May 29, beating analysts’ expectations of $2.34.
WEB CONTENT TOOLE AND NEXT-GEN APPS INVESTMENTS
Revenue from digital media is projected to increase by 16% year-over-year in the current period. Adobe said the unit’s annual recurring revenue will show a net increase of $340 million in the current period, pointing to continued growth for the business. The annualized recurring revenue for the digital media division was $9.17 billion at the end of the fiscal second quarter, said a Thursday released statement.
Analysts, on average, estimated $9.03 billion, according to Bloomberg’s estimates.
Adobe projected revenue of $3.15 billion in the current period ending in August, missing analysts’ average estimate of $3.27 billion,. This was primarily because of the weak demand for the company’s Advertising Cloud product. The company withdrew its annual forecast announced in December.
Adobe’s executives said that by stopping the product, which helped clients conduct advertising transactions, the company can instead invest in future growth areas, such as making web browsers a better platform for creating content, artificial intelligence, and next-generation apps.
Adobe has seen record web density for its document and creative products, but demand from small and mid-sized businesses has weakened during these COVID times.