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Will Adobe's (ADBE) Q1 Earnings Gain From Digital Media?

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Adobe’s ADBE first-quarter fiscal 2022 results, which are scheduled to be released on Mar 22, are likely to reflect its Digital Media segment’s strength.

Digital Media has been the key driver behind the company’s growth on the back of its Creative family of products and Document Services products.

We believe that the company’s persistent efforts to strengthen its content management capabilities are expected to have continued driving growth in the Digital Media segment in the to-be-reported quarter.

Notably, the segment under discussion generated revenues of $3.01 billion in fourth-quarter fiscal 2021, which improved 21% on a year-over-year basis.

For first-quarter fiscal 2022, Adobe expects year-over-year revenue growth of 8% from Digital Media. The Zacks Consensus Estimate for Digital Media revenues for the quarter under review is pegged at $3.09 billion, suggesting an 8.4% rise from the year-ago quarter’s reported figure.

Click here to know how the company’s overall fiscal first-quarter results are likely to be.

Adobe Inc. Revenue (TTM)

Adobe Inc. Revenue (TTM)
Adobe Inc. Revenue (TTM)

Adobe Inc. revenue-ttm | Adobe Inc. Quote

Factors to Consider

Solid momentum across Adobe Creative Cloud and Document Cloud is expected to have driven top-line growth for the Digital Media segment in the to-be-reported quarter.

The growing proliferation of 3D and the Metaverse platform, which are creating demand for new content types, is anticipated to have been a major tailwind. Strong momentum across mobile applications is expected to have contributed well to Creative Cloud’s revenue growth.

Adobe’s acquisition of a cloud-enabled video review and collaboration platform, Frame.io, and the integration of the latter’s solutions with creative software like Adobe Photoshop, Adobe Premier Pro, and other Adobe Creative Cloud applications are likely to have continued driving growth.

In the fiscal first quarter, the company launched a unified web and mobile solution, Creative Cloud Express, which offers innovative capabilities for creating and sharing rich multimedia content. This is expected to have aided the performance of Creative Cloud.

Notably, the Zacks Consensus Estimate for fiscal first-quarter Creative Cloud revenues is pegged at $2.52 billion, suggesting an improvement of 6.1% from the year-ago quarter’s reported figure.

The increasing uptake of Acrobat, Adobe Sensei and strong momentum across Acrobat Web services are anticipated to have contributed well to Document Cloud revenues growth.

The rising demand for Acrobat Mobile and Adobe Scan, along with strength across Adobe Sign, is expected to have benefited Document Cloud further in the quarter under review.

The Zacks Consensus Estimate for fiscal first-quarter Document Cloud revenues is pegged at $575 million, indicating an improvement of 19.8% from the year-ago quarter’s reported figure.

All these factors are expected to have contributed well to Creative annualized recurring revenues (ARR) and Document Cloud ARR, which, in turn, are anticipated to have driven growth in Digital Media ARR in the to-be-reported quarter.

However, high acquisition expenses are anticipated to have been major overhangs in the quarter under review.

Zacks Rank & Stocks to Consider

Currently, Adobe carries a Zacks Rank #4 (Sell).

Investors interested in the broader technology sector can consider better-ranked companies like Advanced Micro Devices AMD, Fastly FSLY and Arrow Electronics ARW. While Advanced Micro Devices sports a Zacks Rank #1 (Strong Buy), Fastly and Arrow Electronics currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Micro Devices has gained 21.4% on a year-to-date basis. The long-term earnings growth rate for the AMD stock is currently projected at 29.08%.

Fastly has gained 54% on a year-to-date basis. The long-term earnings growth rate for the FSLY stock is currently projected at 28.57%.

Arrow Electronics has gained 5.1% on a year-to-date basis. The long-term earnings growth rate for the ARW stock is currently projected at 3.13%.


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