Adobe Inc. (ADBE) on Thursday announced better-than-expected financial results for the fourth quarter despite a difficult operating environment due to the Covid-19 pandemic.
The San Jose, California software company reported earnings of $2.25 billion, or $4.64 per share, for the three months ended November 27, significantly higher than $852 million, or $1.74 per share in the comparable period last year. On an adjusted basis, profit rose to $2.81 per share, versus $2.29 per share in the year-ago quarter, and above the consensus forecast of $2.66 per share.
Revenue came in at $3.42 billion, up 14 percent from the same period of 2019. Analysts surveyed by FactSet were looking for revenue of $3 billion.
Speaking on the results, Adobe
Revenue from the digital media segment came in at $2.50 billion, up 20 percent on a year-over-year basis, while revenue from the creative segment jumped to $2.08 billion. Moreover, document cloud revenue increased to $411 million, while revenue from the digital experience segment came in at $877 million.
Moreover, the company projected an adjusted profit of around $11.20 per share and revenue of nearly $15.15 billion for the next fiscal year. On the other hand, analysts polled by FactSet had adjusted earnings outlook of $11.20 per share on revenue of $14.8 billion.
Factors Controlling Adobe’s Growth
Nevertheless, the company can continue to do well by improving existing products and services, timely launching new products, and addressing the changing needs of customers. It is currently competing in the market against Autodesk, Avid, Apple, Microsoft, and Corel, among many others.
The process of designing new tech products and services and enhancing the existing ones is not that simple. The company’s operations could suffer if it fails to anticipate the changing needs of customers and emerging technologies in the industry. Moreover, it must make long-term investments to develop a new product. But if that product is not according to the needs of the customers, it can hurt the earnings and revenue of the company.
Some of Adobe’s segments entirely make money through subscription-based models. Revenue from its subscription customers is dependent on the terms of the agreement, which usually range from one month to 3 years. There is no compulsion on users to renew their subscriptions for its products and services. Some of them even have the option to cancel their subscription in the middle. So, if the quality of services drops at any time or the company is unable to launch new offerings with changing customers’ needs, it can suffer heavy losses.
The consensus price target for Adobe