(Bloomberg) — Adobe Inc. reported quarterly revenue that topped Wall Street estimates, signaling the Photoshop maker’s expanding product suite is continuing to fuel growth.
Sales increased 25% to $2.74 billion in the fiscal second quarter from a year earlier, the San Jose, California-based company said Tuesday in a statement. Analysts, on average, projected $2.7 billion.
For more than a decade, Chief Executive Officer Shantanu Narayen has sought to diversify the company known for creative software. Adobe made two big-ticket acquisitions in the past year, Magento, an e-commerce company, and Marketo, which sold marketing software, and is now working to integrate its bigger line of products. Adobe unveiled a software platform in March that will further connect the company’s programs with other systems, so clients can glean more insights about their consumer data.
“We expect the first half momentum to continue in the second half,” Narayen said on a conference call. “Our revenue growth, cash flow, and operating profit differentiates us among” large software companies.
Adobe’s shares gained about 2.8% in extended trading after closing at $276.78 in New York.
The company, however, gave a profit forecast that fell short of analysts’ projections for the second consecutive quarter. Earnings, excluding some expenses, will be about $1.95 a share in the current period. Analysts estimated $2.05 a share, according to data compiled by Bloomberg.
There’s “a bit of a relief that something didn’t go wrong,” Pat Walravens, an analyst at JMP Securities, said in an interview. “They had a nice beat and they’re maintaining a steady 25% growth rate. That’s solid.”
Adobe’s stock has been an investor favorite for years, jumping sevenfold from 2012 through the end of 2018 — six times more the S&P 500 Index and far outpacing rivals. While the shares have gained 22% this year, the enthusiasm has cooled since March after the earnings forecast missed estimates. The stock increased just 3.4% since that March 14 outlook through Tuesday’s close.
Sales from Adobe’s experience cloud division, which comprises marketing, analytics and e-commerce tools, climbed 34% to $784 million in the period ended May 31, and is projected to grow by the same percentage in the fiscal third quarter.
The creative cloud division, led by Photoshop, grew 22% to $1.89 billion in the quarter and is projected to increase by 20% in the period ending in August.
Adobe’s remaining performance obligation, a measure of future revenue under contract, increased to $8.37 billion, compared with $8.13 billion at the end of the fiscal first quarter. That metric, plus the sales projection for the company’s experience unit, suggests demand will remain steady.
(Updates with comments from analyst in the seventh paragraph.)
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