Adobe (ADBE) Q4 Earnings & Revenues Beat Estimates, Rise Y/Y
Adobe Inc. ADBE reported fourth-quarter fiscal 2021 non-GAAP earnings of $3.20 per share, beating the Zacks Consensus Estimate by 0.6%. Further, the figure improved 13.9% on a year-over-year basis and 2.9% sequentially.
Total revenues were $4.11 billion, which surpassed the Zacks Consensus Estimate of $4.08 billion. Further, the figure was up 20% from the year-ago quarter and 4.4% from the previous quarter.
Top-line growth was driven by solid momentum across Adobe Creative Cloud, Document Cloud and Experience Cloud. Accelerating subscription revenues further benefited the results.
Top Line in Detail
Adobe reports revenues under three categories — subscription, product, and services & support.
Subscription revenues were $3.81 billion (accounting for 93% of its total revenues), up 22.4% on a year-over-year basis.
Product revenues totaled $128 million (3% of revenues), up 0.8% year over year.
Services & support revenues were $170 million (4% of revenues), declining 6.6% from the prior-year quarter.
Adobe Inc. Price, Consensus and EPS Surprise
Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. Quote
Segmental Details
Digital Media: The segment generated revenues of $3.01 billion, which improved 21% on a year-over-year basis. The segment comprises Creative Cloud and Document Cloud. Notably, Digital Media’s annualized recurring revenues (ARR) increased to $12.24 billion, in which enterprise ARR from the Frame.io buyout contributed well.
Creative Cloud generated $2.5 billion of revenues, up 19% year over year. Additionally, Creative ARR was $10.3 billion. The growing proliferation of 3D and the Metaverse platform, which are creating demand for new content types, remained a tailwind. Further, strong momentum across mobile applications, which have generated more than 400 million mobile IDs as of now, contributed well.
Document Cloud’s revenues were $532 million, up 29% from the prior-year quarter. Moreover, Document ARR was $1.9 billion. The growing adoption of Acrobat Web contributed well. Additionally, the increasing number of Adobe Sign transactions in Acrobat, owing to the integration of Adobe Sign and Acrobat, drove Document Cloud revenue growth. Also, the rising installation rate of Acrobat in mobiles and desktops remained a positive.
Digital Experience: The segment generated revenues of $1.01 billion, up 23% on a year-over-year basis. The segment is comprised of Adobe Experience Cloud. Experience Cloud subscription revenues were $886 million, which rose 27% from the year-ago quarter. The growing adoption of Adobe Sensei and product innovations drove top-line growth for the segment.
Operating Details
The gross margin was 87.7%, which expanded 20 basis points (bps) on a year-over-year basis.
Adobe incurred operating expenses of $2.1 billion, reflecting an 18% year-over-year increase. As a percentage of total revenues, the figure contracted 90 bps to 51.1%.
As a result, the adjusted operating margin was 45.2%, expanding 30 bps year over year.
Balance Sheet & Cash Flow
As of Dec 3, 2021, cash and short-term investment balance was $5.8 billion, down from $6.2 billion as of Sep 3, 2021. Trade receivables were $1.9 billion, up from $1.5 billion recorded in the fiscal third quarter.
Long-term debt was $4.123 billion at the end of the fiscal fourth quarter compared with $4.122 billion at the end of the previous quarter.
Cash generated from operations was $2.05 billion in the fiscal fourth quarter versus $1.4 billion in the fiscal third quarter. In the reported quarter, the company repurchased 1.6 million shares.
Guidance
For first-quarter fiscal 2022, Adobe projects total revenues of $4.23 billion. The Zacks Consensus Estimate for revenues is pegged at $4.32 billion.
Adobe expects year-over-year revenue growth of 8% from Digital Media. The Digital Experience segment’s revenues are expected to grow 11% on a year-over-year basis. Digital Experience subscription revenues are likely to increase 13% year over year.
Management expects non-GAAP earnings of $3.35 per share. The Zacks Consensus Estimate for the same is pegged at $3.37 per share.
For fiscal 2022, Adobe expects total revenues of $17.9 billion. The Zacks Consensus Estimate for revenues is pegged at $18.14 billion.
Adobe expects year-over-year revenue growth of 14% from Digital Media. The Digital Experience segment’s revenues are expected to grow 14% on a year-over-year basis. Digital Experience subscription revenues are likely to increase 16% year over year.
Management expects non-GAAP earnings of $13.7 per share. The Zacks Consensus Estimate for the same is pegged at $14.16 per share.
Zacks Rank & Stocks to Consider
Currently, Adobe carries a Zacks Rank #4 (Hold).
Investors interested in the broader technology sector can consider stocks like Advanced Micro Devices AMD, Mimecast Limited MIME and Nova Measuring Instruments NVMI, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Advanced Micro Devices has gained 51.2% on a year-to-date basis. The long-term earnings growth rate for the AMD stock is currently projected at 46.2%.
Mimecast has gained 39% on a year-to-date basis. The long-term earnings growth rate for the MIME stock is currently projected at 35%.
Nova Measuring Instruments has gained 81.9% on a year-to-date basis. The long-term earnings growth rate for the NVMI stock is currently projected at 32.2%.
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