- Q2 revenues and earnings beat
- Investors worried about slowing growth
- Stock down 35% this year and almost 50% off 2021 highs
Creative digital software firm Adobe (ADBE:NASDAQ) beat second-quarter estimates thanks to a robust performance across its entire product set. Yet in common with so many growth companies recently, the tone of forward guidance left investors worrying about the pace of growth for the rest of 2022.
Adobe is a dominant force in the creative digital content industry, with more than 50% of the creative software market, according to analysts. Readers will be familiar with Adobe-powered PDFs, Photoshop and perhaps its image and graphics library, Adobe Stock. But the company’s suite extends far deeper with professional Creative Cloud products like InDesign, Illustrator and Premiere Pro, among many others.
SECOND-QUARTER FORECAST BEAT
Overnight, the $170 billion company posted stronger-than-expected Q2 2022 results, exceeding both earnings and revenue expectations. Notably, the results also surpassed its own guidance. Adobe reported adjusted earnings of $3.35 per share, topping the consensus estimate of $3.31, on revenues of $4.39 billion, up 14% year-on-year and ahead of analysts’ expectations of $4.35 billion.
But to a forward-looking market, tepid Q3 and full year guidance left investors nervous, fretting about the pace of future growth. Adobe now anticipates Q3 earnings of $3.33 per share on revenues of $4.43 billion. This compares to consensus forecasts pitched at $3.40 and $4.51 billion respectively.
Full year 2022 revenue is expected to be $17.65 billion, below the consensus estimate of $17.85 billion, with adjusted earnings anticipated at $13.50 per share, significantly less than analysts’ expectations of $13.67.
OPTIMISM LOST ON INVESTORS
In the current environment this was more than enough to spark stock sales. Pre-market data shows the stock opening around 3.3% lower when Wall Street opens later today, at $353. That implies a new 2022 low after losing roughly 35% this year, or nearly 50% down on last year’s highs.
‘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,’ said CEO Shantanu Narayen.
Attempting to reassure investors further, finance chief Dan Durn said that Adobe’s operating model ‘continues to fuel consistent growth, enabling the company to invest in category-leading cloud solutions and emerging innovations that are gaining traction in the marketplace.’
Shares recently outlined three clear reasons why Adobe stands out, which you can read here.
