4 key takeaways from Adobe’s Q2 earnings report

By: Wajeeh Khan
Wajeeh Khan
Wajeeh is an active follower of world affairs, technology, an avid reader, and loves to play table tennis in… read more.
on Jun 17, 2021
  • Adobe beats Wall Street estimates in the fiscal second quarter.
  • The software company expects $3.88 billion of revenue in Q3.
  • Adobe shares were about 3% up in extended trading on Thursday.

Adobe Inc (NASDAQ: ADBE) reported its financial results for the fiscal second quarter on Thursday that topped Wall Street estimates. The company attributed its hawkish performance to the COVID-19 driven digital acceleration.

1. Financial performance

Adobe said that its net income in the second quarter printed at $1.12 billion (£800 million) that translates to $2.32 per share versus the year-ago figure of a slightly lower $1.1 billion, or $2.27 per share. On an adjusted basis, the American multinational earned $3.03 per share in Q2.

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The software company generated $3.84 billion of revenue in the recent quarter. In the same quarter last year, it had posted $3.13 billion of revenue. According to FactSet, experts had forecast $3.73 billion of revenue and $2.81 of per-share profit.

2. Revenue from individual business segments

Adobe valued its remaining performance obligations at the end of the second quarter at $12.23 billion that represents a 23% annualised growth. As the pandemic made people continue to work from home, demand for PDF and Adobe Sign remained strong.

The San Jose-based firm’s Second-quarter revenue from Creative, Digital Media, and DocumentCloud products jumped 24%, 25%, and 30%, respectively, on a year over year basis. Cash flow from operations stood at $1.99 billion.

3. CFO John Murphy’s remarks

Commenting on the earnings report on Thursday, CFO John Murphy said:

“With the momentum we are seeing across creativity, digital documents and customer experience management, we are on track for another record year with a strong first half already in the books. Few companies of our scale can boast 20 per cent plus revenue growth, world-class operating margins and a recurring-revenue model built for long-term growth and profitability.”

4. Guidance for the current quarter

For the fiscal third quarter, Adobe now forecasts $3 of adjusted per-share earnings on $3.88 billion of revenue. In comparison, analysts are calling for $2.89 of adjusted EPS on $3.83 billion of revenue.

In the prior quarter (Q1), the Nasdaq-listed company had posted a 26% annualised growth in revenue.

Impact on the share price

Adobe shares were reported about 3% up in after-hours trading on Thursday. Including the price action, the stock is exchanging hands at $567 per share. In comparison, it had started the year at a much lower $485 per share.

Adobe performed largely upbeat in the stock market last year with an annual gain of close to 45%. At the time of writing, the $263.55 billion has a price to earnings ratio of 47.88.

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