Monday, March 16, 2015

ADBE: Expect More of the Same From the Adobe Earnings Report

Adobe stock will continue to perform well, thanks to new partnerships between ADBE and other cloud service providers.

Adobe Systems ADBE
Adobe Systems Incorporated (NASDAQ:ADBE) is scheduled to report its first-quarter earnings for fiscal 2015 after the bell on March 17. And while investors shouldn’t necessarily expect Adobe earnings to send Wall Street into a euphoric frenzy, ADBE is making enough right moves that it should meet or slightly beat expectations.

And more importantly, ADBE should continue its steady uphill climb — currently at 90% gains over the past two years.

ADBE Is Focusing Partnerships in the Cloud


First, a look at the numbers: Wall Street analysts expect ADBE to report EPS of 39 cents on $1.08 billion of revenue, which is almost exactly the midpoint of Adobe management’s guidance for Q1 earnings of 34 to 40 cents and $1.05 billion to $1.1 billion in revenues.

Nobody expects Adobe stock to knock the ball out of the park, but rather to simply meet expectations, which is more than likely what will happen. The only potential concern is the number of ADBE business segments that are expected to report declines for the first quarter.

In the digital marketing segment, both LiveCycle and the marketing cloud are expected to report sequentially lower revenue compared to Q4 2014. In the digital media segment, document services revenue is also expected to decline sequentially.

The only segment management expects to grow is the Creative Cloud, which currently accounts for the bulk of the company’s value.

ADBE grew its Creative Cloud subscriptions almost 3.5 million last year. The company’s goal is nearly 6 million paid subscribers by the end of FY2015. It’s entirely possible for Adobe Systems to reach this goal, considering the solid growth of its cloud subscription service over the past year. Modifications to its cloud-based platform — which streamlined the process of creative collaboration between team members in different locations — were well-received, leading to increased customer satisfaction and new license agreements.

On a similar note, Adobe’s Marketing Cloud, which represents the second-largest component of the company, generated $1.17 billion in annual revenue. Last week, management pushed out six press releases in one day, all touting new features and benefits being added to the Marketing Cloud. Perhaps most notable among the six releases were two that announced joint efforts, one involving International Business Machines Corp. (NYSE:IBM) and one involving Accenture Plc (NYSE:ACN).

Adobe will be working with IBM to add specialized enterprise consulting capabilities to the Marketing Cloud by integrating IBM Interactive Experience. Utilizing IBM’s comprehensive big data and customer experience services, ADBE customers will be able to further customize how consumers interact with websites, hopefully facilitating more successful sales closing techniques.

Accenture’s arrangement with ADBE will allow customers to better track their digital marketing and the success or failure of their efforts, as well as further customize those solutions to create completely unique advertisements.

The third-largest division within Adboe Systems is the Acrobat suite of document programs. Adobe’s free Acrobat Reader software has been downloaded more than 1 billion times, as ADBE is responsible for the nearly universal acceptance of its PDF document format. At the conclusion of the company’s fourth-quarter earnings presentation, management stated that a “major update” is planned for the first half of 2015.

Final Thoughts


Overall, expect Adobe earnings for the first quarter to be in line with previously established guidance. While it won’t be hitting a home run out of the park, Adobe stock will continue to perform well and reward shareholders long into 2015. Management continues to expand the cloud capabilities available to customers by way of mutually agreeable partnerships and arrangements with other cloud storage providers who possess complimentary services to those already available on ADBE’s Creative Cloud and Marketing Cloud platforms.

With the increasing number of cloud storage solutions for both personal and enterprise customers expanding at an exponential rate, Adobe has chosen — wisely — to better compete in the arena by partnering with other digital storage providers. The result is a continually evolving and expanding platform through which individuals, small business owners, and giant corporations can create, develop, and collaborate on a host of digital marketing and advertising efforts.

Together, these comprehensive tools should be continue driving more customers to Adobe’s paid subscription model, generating increased revenue, and further securing ADBE’s place as a leader in the enterprise cloud arena.

Article originally appeared on InvestorPlace (03/16/2015)