The company beat investor earnings and revenue expectations.
Adobe’s stock rose nearly 5% last week after releasing its latest earnings report to investors. The company’s earnings were $1.83 per share, which is 5 cents higher than investors were expecting. And it’s revenue grew to $2.74 billion, which is a 25% increase.
The company did lower its guidance for the rest of the year but this didn’t seem to put a damper on investor enthusiasm. Adobe’s stock is up nearly 29% in 2019 and up nearly 300% from five years earlier.
Things that are going well for Adobe
Adobe provides design, imaging, and publishing software for media production. The company has been around since 1982 but its stock was largely underperforming until the company made some strategic changes in the past five years.
Adobe moves its software to the cloud
One of the best decisions Adobe’s CEO Shantanu Narayen made was to move the company’s software to the cloud. The company’s profits and market increased after it made the switch.
And moving to the cloud allowed Adobe to improve its time to market and execute quickly on the newest trends in online marketing.
Growth in core business segments
Digital Media is Adobe’s largest business segment which hosts its Creative Cloud and Cloud Document products. This segment produced $1.89 billion in revenue, which is up 22%.
But Adobe’s most popular product is its Digital Experience segment, which is marketing software that’s designed to create and measure a company’s marketing efforts. It contains Marketo and Magneto, two companies that Adobe acquired in 2018.
Adobe’s Digital Experience segment helps companies of all sizes with their marketing efforts. It has also enabled Adobe to compete with companies like Salesforce. This segment of Adobe’s business brought in $783.5 million in revenue, which was also higher than expected.
Strategic partnership with Microsoft
The company also decided to partner with Microsoft so customers can enjoy seamless integration between Adobe and Microsoft’s products. This allows customers to create seamless workflows that will improve business processes.
Adobe’s momentum will continue
Stephens analyst James Rutherford upgraded the stock from equal weight to overweight. Rutherford said that in spite of the soft guidance, the company should be well-positioned for growth during the rest of 2019.
Adobe’s bottom line isn’t growing as quickly as might be expected, mostly because the company continues to invest in new initiatives that should pay off in the long run. If the company continues to invest in forward-thinking initiatives, it should continue to see its revenue and shares grow in the coming year.