Even Without AI, Adobe Is A Money Making Machine

Odds are that Adobe Inc ADBE has a bright future with artificial intelligence, but its presence is already more than bright. The company saw its shares rise 5% in extended trading on March 15th upon its fiscal first-quarter results that exceeded Wall Street expectations, along with providing a better-than-expected guidance.

Fiscal First Quarter Results

For the quarter that ended on March 3rd, revenue rose 9% YoY as it amounted to $4.66 billion, topping the $4.62 billion that Refinitiv’s survey of analysts expected. 

Net income did slightly drop to $1.25 billion, but adjusted earnings per share topped Refinitiv’s expectations of $3.68 as they amounted to $3.80 per share.

The Creative Applications Weren’t Growing Alone

Considering that pretty much every division saw a revenue increase, this is a strong beginning of a new fiscal year that could be another record year of revenues and profits. AS a reminder, last year’s revenue grew 15% YoY and reached a new record of $17.61 billion.

Fiscal Second Quarter Outlook 

Adjusted earnings per share are expected to be in the range between $3.75 to $3.80 on a revenue in the range between $4.75 billion and $4.78 billion, with Refinitiv estimates being in the lower half of the both ranges.

An Even Brighter 2023 Guidance

Rising the guidance it gave in December while also topping Refinitiv estimates, Adobe now expects adjusted earnings per share in the range between $15.30 to $15.60 with net new annualized recurring revenue from Digital Media being $1.7 billion. 

The Pinch Of An Economic Slowdown Is Reflected In The Growth

Although estimates were topped, the above growth rates are low when looking at Adobe’s previous performance. After all, the previous year’s revenue growth of 11.5% was its lowest in eight years, with the current quarterly growth of 9% being something Adobe has not experienced on a quarterly basis since 2014. 

The Antitrust Scrutiny Related To Its Attempted Figma Acquisition

Six months have passed since Adobe’s announcement regarding to $20 billion deal to acquire Figma which is considered by many crucial to its future. Considering that the deal equates to approximately last three years of summed up free cash flow, so Adobe certainly thinks so. It it taking four more months compared to its second-largest deal, the $4.8 billion acquisition of Marketo that took place in 2018. But, the regulatory environment has become far stricter since with the FTC blocking Microsoft Corporation’s MSFT pending acquisition of Activision Blizzard Inc ATVI also laying fears the same scenario is in the cards for the creative software company. But CEO Shantanu Narayen assured investors on the conference call that Adobe is ready both an approval, as well as a challenge.

All In All, Adobe Is Going Strong

During the reported quarter, Microsoft revealed it has embedded Adobe’s Acrobat PDF experience to its 1.4 billion users. But what is arguably most fascinating is that Adobe posted gains and exceeded expectations in a period during which it hasn’t even released any new software, added new futures or raised prices.  It can be said that it is making more money and beating competitors simply by being there with its offerings, which is in its own, quite remarkable. Just look at Microsoft's efforts over the cloud in a space that is already crowded. Being the most well-capitalized software provider focused on the creative market, Adobe already has an edge in adopting the sophisticated and pricey AI technology, with the acquisition of Figma simply raising the stakes even higher.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.