Why Record Revenues Aren’t Enough for Adobe Investors

By Chris Lange Updated Jan 12, 7:59AM EST · Published Sep 20, 11:16AM EDT

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Why Record Revenues Aren’t Enough for Adobe Investors — © Thinkstock

Adobe Systems Inc. (NASDAQ: ADBE) released its most recent quarterly results after the markets closed on Tuesday and investors were not happy. Although the company reported a record revenue and beat analyst estimates, this still was not enough for investors.

Keep in mind that shares have risen roughly 50% in 2017 alone, so there is a high bar set if shares want to keep growing, especially for a company this size.

The software giant said that it had $1.10 in earnings per share (EPS) and $1.84 billion in revenue, which compares to consensus estimates from Thomson Reuters of $1.01 in EPS and revenue of $1.82 billion. In the third quarter of last year, it EPS of had $0.75 and $1.46 billion in revenue.

Digital Media segment revenue totaled $1.27 billion, with Creative revenue growing to $1.06 billion. Separately, the Adobe Experience Cloud segment achieved revenue of $508 million, which represents 26% in year-over-year growth.

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Also annualized recurring revenue for Digital Media grew to $4.87 billion at the end of the quarter, a quarter-over-quarter increase of $308 million. Deferred revenue totaled $2.20 billion.

On the books, Adobe’s cash, cash equivalents and short-term investments totaled $5.38 billion at the end of the quarter, up from with $4.76 billion at the end of the previous fiscal year.

Shantanu Narayen, president and CEO, Adobe, commented:

Adobe delivered another record quarter with stellar year-over-year revenue growth of 26 percent. The imperative to deliver intelligent, intuitive and effective customer experiences is key to the C-suite agenda of digital transformation, and Adobe’s cloud offerings are critical to that business mandate.

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Mark Garrett, executive vice president and CFO, added:

Our results in Q3 once again reflect the leverage of our financial model, with record revenue driven by our cloud-based subscription offerings, strong earnings and cash flow from operations.

Shares of Adobe were last seen down 4% at $150.34, with a consensus analyst price target of $161.80 and a 52-week range of $98.00 to $157.89.

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About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.