Adobe upgrades annual guidance as Q1 results top estimates; analysts positive

March 15, 2023 4:54 PM EDT
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(Updated - March 16, 2023 5:19 AM EDT) - Adobe lifted its annual guidance Wednesday after reporting better-than-expected fiscal first-quarter results, driven by growth in its core digital media business.

Adobe Systems (NASDAQ: ADBE) shares are trading over 5% higher in pre-open Thursday following the report.

Adobe reported EPS of $3.80 on revenue of $4.66 billion. Analysts polled by anticipated EPS of $3.68 on revenue of $4.62B.

Its digital media business saw revenue of $3.40B, up 9% year-over-year growth in Q1, with net new digital media annualized recurring revenue, or ARR, of $410 million.

“Adobe drove record Q1 revenue and we are raising our annual targets based on the tremendous market opportunity and continued confidence in our execution,” said Shantanu Narayen, chairman and CEO, Adobe.

For the second quarter, revenue was guided in a range of $4.75B to 4.78B, compared with Wall Street estimates for $4.75B.

For 2023, the company upgraded guidance on EPS to between $15.30 and $15.60 from $15.15 to $15.45 previously. Net new ARR from digital media was expected to come in at $1.7B from $1.65B previously.

SVB MoffettNathanson analyst Sterling Auty praised ADBE for delivering a clean quarter.

"The management statement, we believe, points to the idea that Adobe will be fine if the deal gets blocked or goes through. But we believe the growth outlook is much better including Figma at this point than without it," Auty said in a note.

Goldman Sachs analyst Kash Rangan said the results were "solid". He reiterated a Buy rating and a $475 per share price target "as this is one of the first prints in software that suggest elevated conviction in FY targets based on 2023 demand activity."

"Though stacking up against more conservative expectations, we remind investors that Adobe has exposure to marketing and advertising budgets, SMB and consumers – all of which typically show more pronounced levels of weakness. Adobe’s strong execution is also curbing concerns of market saturation and maturity as they continue to attribute healthy net new user acquisition as the main driver of growth," Rangan said.

By Yasin Ebrahim and Senad Karaahmetovic

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