Why Record Revenues Aren’t Enough for Adobe Investors

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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.

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.

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.