Adobe has a strong third quarter… but weaker than hoped for guidance upsets investors
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Adobe has a strong third quarter… but weaker than hoped for guidance upsets investors

Adobe, the software giant that pretty much owns the creative space in digital, reported third-quarter earnings last month that overshot analysts’ expectations. Despite this win, the maker of programs like Photoshop and InDesign saw its share price decline. Why? Because its guidance for the current quarter came in lower than the market would like.

Adobe’s share price was flat last week

Adobe Oct 4

Source: Yahoo Finance

For its fiscal third quarter, Adobe reported earnings of $793 million – or $1.61 per share. On a non-GAAP basis, that becomes earnings of $2.05 per share. And total revenue came in at $2.83 billion – up 24% from the same period in the previous year. This exceeded analysts’ expectations, which were for earnings of $1.97 per share on revenue of $2.82 billion.

On the company’s earnings call, chief financial officer John Murphy highlighted a number of challenges in the third quarter – most notably, Marketo’s subscription bookings growth “did not meet our expectations.” Murphy continued:

“In addition, there were Analytics Cloud subscription bookings delays with related shortfalls in consulting services bookings and revenue associated with the launch of our new Adobe Experience Platform. We are confident the enhanced innovation in Analytics Cloud, the introduction of our Real-Time CDP product, and the ongoing global roll-out of the Adobe Experience Platform will convert strong customer demand and the current pipeline into bookings starting in Q4. We now expect to grow our total Digital Experience subscription bookings in fiscal 2019 by greater than 20 percent year-over-year.”

For the current quarter, Adobe has forecast earnings of $2.25 per share on revenues of $2.97 billion. This is lower than analysts had hoped (earnings of $2.30 per share on revenues of $3.03 billion).

Disclosure

Dominion holds Adobe in its Global Trends Ecommerce Fund.


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