The digital age is upon us in a big way, and the current pressure is on modern day companies to update their services to match the needs of 21st century customers. Despite a saturated market there are plenty of new and up and coming companies entering the space. However when it comes to software the digital content creation giant Adobe have proved yet again that they are the best in the sector with another quarterly performance that exceeded analysts and Wall Street’s Expectations.
Adobe saw their second-quarter revenue rise over 25%, which added further to the same rate put up during the first financial quarter of 2019 and exceeding management’s guidance. The companies full year revenue expectations have been left unchanged at $11.15 Billion USD which is an annual increase of 23%. Adobe didn’t stop there, to sweeten investors even more, they announced that their third quarter revenue forecast was set to be up a further 22%. The great news about Adobe is more often than not the company does under promise and over deliver on results, so investors in the company were overly happy to focus on the first half of the year’s results.

Adobe did see one decline, and that was in their gross profit margins, however this was to be expected as the company are adding more updated services aimed at the current need for digital commerce. Adobe has big plans in the sector after making acquisitions of Magento and Marketo last year, and although Adobe saw declines, the data still showed that they only saw an 85% gross profit margin after these huge moves. This is still a long way above some of Adobe’s closest competition which saw salesforce.com at a rate of 75.5% and Shopify at 56.3%.

With the current global digital change happening, there is still a huge opportunity for growth for companies that can keep up with demand. Adobe are one of those companies that are moving and constantly building traction, the company are expanding as the need for products do. Adobe saw an expenses increase in the first half of 2019 up 33% which was mainly led by their huge push into the sales and marketing sector. The higher expenses that the company have were the primary reason the companies adjusted earnings were only up 10% this year, which is trailing the top line growth rate. Any way you look at it, Adobe is not a cheap company, however being the leader in an evolving sector, and successfully keeping up to date with the needs of consumers the price reflects that of a company that are set to expand and grow in both the short, and long term. We can expect to see a 20% revenue expansion in the near future and combine that factor with one of the best profit margins in the software space will show investors that stick around a huge pay off down the road.

James Lee – Walter International