Digital marketing leader Abode (ADBE) will report second quarter (May) results this afternoon, and company management will host a call to address those results at 5:00 ET.
Analysts are looking for second quarter non-GAAP EPS up 7% on a year-over-year revenue increase of 23%.
Adobe guided for Q2 EPS of $1.77 on revenue of $2.70 billion with digital media revenue up 20%, digital experience revenue up 32% and net new digital media annualized recurring revenue (ARR) of ~$370 million -- a key metric.
Last quarter, Adobe guided for fiscal 2019 non-GAAP EPS up 15% to $7.80; revenue up 23% to $11.15 billion; Digital Media segment revenue growth of ~20%; net new Digital Media ARR of ~$1.50 billion; Digital Experience segment revenue growth of ~34%; and Digital Experience annual subscription bookings growth of ~25%.
Analysts expects Q3 non-GAAP EPS up 18.5% with revenue up 23.5%.
Adobe has beaten estimates on the top line for eleven consecutive quarters. First quarter results were muddied by the Magento and Marketo acquisitions as well as by the adoption of ASC 606. While some analysts are concerned about valuation, slowing growth, or competition, most remain bullish on the stock.
Adobe is the largest company that has successfully transitioned to a software-as-a-service (SaaS) cloud software model. The marketing technology leader has been very acquisitive and is growing cash flow at scale with highly visible recurring revenue.
Following first quarter results in March, Canaccord Genuity raised its price target on the stock to $300 from $290, calling it the strongest franchise in marketing technology. Richard Davis noted at that time, "In the short-run, last night's confusion from cross-currents are nothing more than analysts stressing that the real world isn't as linear as their Excel models imply. The second question is whether Adobe will be disrupted by upstarts, and at this point that is at best a speculation about an ‘issue' beyond the investment horizon of almost all investors. Therefore, if those risks are ephemeral and distant, respectively, then owning a company with best in class growth plus FCF margins at scale seems like a good idea to us. BUY."
Adobe has a $135 bln market cap, which equates to ~31x FY19 FCF estimates or ~26x FY20 FCF estimates, on par with Salesforce (CRM).