In fact, in 4Q17, ADBE generated record quarterly revenue of $2.01 billion, up 25% year/year. More specifically, its Digital Media segment (69% of revenue), which includes its high-growth Creative Cloud products (Photoshop, Illustrator), has been a primary driving force thanks to strong subscription growth.
Today, however, the stock is moving higher after the company increased its 1Q18 and FY18 EPS guidance due to a lower expected tax rate following the passage of the Tax Cuts & Jobs Act. ADBE now is expected 1Q18 EPS of $1.43 vs. the $1.27 Capital IQ Consensus, and FY18 EPS of $6.20 vs. the $5.56 Capital IQ Consensus.
The company did also update its Q1 and FY18 revenue guidance, but, that remained roughly inline with expectations at $2.04 billion and $8.73 billion, respectively. With this revenue guidance, ADBE is forecasting 25% growth for its Digital Media segment in Q1, and 25% growth for this segment for the fully year 2018.
In regards to the Tax Act, ADBE commented in the press release, "The new Tax Act is lowering Adobe’s effective tax rates, driving a significant increase in our earnings per share targets. With ready access to our offshore cash, we will continue to evaluate investment opportunities to grow our business and we are actively expanding our campuses in the Bay Area and Utah to accommodate the growth of our employee base.”
And, indeed, the company has a significant amount of cash offshore at $5.8 billion. The company could use this cash for acquisition purposes, or, to continue buying back stock, creating further earnings leverage.
Wrapping up, the new lower tax rate for ADBE is just one more significant catalyst for the company and the stock. It was already performing very well, thanks to notable momentum across its business segments, and as the company continued to buy back stock (8.2 million shares in FY17). With a 1-Year forward P/E of about 28x, ADBE isn't cheap per-se, but, it also isn't egregiously expensive given its healthy double digit revenue and EPS growth.