Will Digital Media Strength Aid Adobe's (ADBE) Q2 Earnings?
Adobe’s ADBE second-quarter fiscal 2023 results, scheduled to be released on Jun 15, 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.
With its robust Digital Media solutions, the company helps content creators, app and game developers and creative professionals such as graphic designers, photographers and video editors to generate, publish and promote their content anywhere.
We believe that the company’s persistent efforts toward strengthening its content management capabilities are expected to continue driving growth in the Digital Media segment.
The segment under discussion generated revenues of $3.4 billion in first-quarter fiscal 2023, which improved 9% on a year-over-year basis.
For second-quarter fiscal 2023, Adobe expects Digital Media revenues between $3.45-$3.47 billion. The Zacks Consensus Estimate for Digital Media revenues for the quarter under review is pegged at $3.46 billion, suggesting an 8.2% rise from the year-ago quarter’s reported figure.
Click here to know how the company’s overall fiscal second-quarter results are likely to be.
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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.
Positive contributions from the acquisition of a cloud-enabled video review and collaboration platform named Frame.io are likely to have continued to aid the segment’s performance. In the quarter under review, the company made Frame.io’s video collaboration platform available for Creative Cloud users.
Apart from this, the monthly growing active user base of Creative Cloud Express and the new AI-powered innovations in Premiere Pro are expected to have accelerated growth in Creative revenues in the quarter under review.
The rising proliferation of Metaverse is also likely to have aided the performance of Creative Cloud.
The Zacks Consensus Estimate for fiscal second-quarter Creative Cloud revenues is pegged at $2.81 billion, suggesting an improvement of 7.7% from the year-ago quarter’s reported figure.
A spike in searches for document actions is likely to have benefited Acrobat Web. The new sign integration with Adobe Commerce and Workfront and the signature feature in Acrobat are expected to have aided the adoption of Adobe Sign.
Strong momentum for Acrobat PDF on mobile is expected to have been beneficial. The robust Document Cloud enterprise business is likely to have been another positive. All these are anticipated to have contributed well to Document Cloud revenues.
The Zacks Consensus Estimate for fiscal second-quarter Document Cloud revenues is pegged at $651 million, indicating an improvement of 9.4% from the year-ago quarter’s reported figure.
The above-mentioned 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.
Notably, Adobe’s projection for fiscal second-quarter Digital Media ARR is pegged at $420 million of net new ARR.
The Zacks Consensus Estimate for total Digital Media ARR is pegged at $14.1 billion, indicating year-over-year growth of 8.8%.
Zacks Rank & Stocks to Consider
Currently, Adobe carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the broader technology sector are Palo Alto Networks PANW, NVIDIA NVDA and AMETEK AME. While Palo Alto Networks and NVIDIA sport a Zacks Rank #1 (Strong Buy), AME carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Palo Alto Networks shares have gained 65% in the year-to-date period. The long-term earnings growth rate for PANW is currently projected at 31.5%.
NVIDIA shares rallied 173.8% in the year-to-date period. Its long-term earnings growth rate is presently projected at 23.02%.
AMETEK shares have increased by 10.2% in the year-to-date period. The long-term earnings growth rate for AME is currently projected at 8.95%.
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