Adobe (NASDAQ:ADBE)’s ADBE fourth-quarter fiscal 2021 results, which are scheduled to be released on Dec 16, are likely to reflect its Digital Media segment’s strength.
Digital Media has been the key driver behind the company’s growth on the back of its Creative family of products and Document Services products.
Notably, the company helps content creators, app and game developers, and creative professionals such as graphic designers, photographers, and video editors generate, publish, and promote their content anywhere with its robust Digital Media solutions.
We believe that the company’s persistent efforts toward strengthening its content management capabilities are expected to have continued driving growth in the Digital Media segment.
Notably, the segment under discussion generated revenues of $2.87 billion (72.8% of the total revenues) in third-quarter fiscal 2021, which improved 23% on a year-over-year basis.
For fourth-quarter fiscal 2021, Adobe expects year-over-year revenue growth of 20% from Digital Media. Further, the Zacks Consensus Estimate for Digital Media revenues for the quarter under review is pegged at $2.96 billion, suggesting an 18.6% rise from the year-ago quarter’s reported figure.
Click here to know how the company’s overall fiscal fourth-quarter results are likely to be.
Factors to Consider
Solid momentum across Adobe Creative Cloud and Document Cloud is expected to have driven top-line growth for the Digital Media segment in the to-be-reported quarter.
Adobe completed the acquisition of a cloud-enabled video review and collaboration platform named Frame.io. The company combined Frame.io’s solutions with creative software like Adobe Photoshop, Adobe Premier Pro, and other Adobe Creative Cloud applications to provide a collaboration platform and add strength to the video editing process.
The buyout is likely to have aided the company’s customer momentum and bolstered Creative Cloud’s performance in the quarter to be reported.
Apart from this, the growing adoption of Adobe Lightroom, Photoshop and creative mobile applications is expected to have accelerated growth in Creative revenues in the quarter under review. Further, strengthening AI-based advancements in the company’s photography offerings are likely to have aided the performance of Creative Cloud.
Notably, the Zacks Consensus Estimate for fiscal fourth-quarter Creative Cloud revenues stands at $2.44 billion, suggesting an improvement of 17.3% from the year-ago quarter’s reported figure.
Additionally, the increasing uptake of Acrobat and strong momentum across Acrobat Web services are anticipated to have contributed well to Document Cloud revenues. The Zacks Consensus Estimate for fiscal fourth-quarter Document Cloud revenues is pegged at $508 million, indicating an improvement of 23.6% from the year-ago quarter’s reported figure.
The rising demand for Acrobat Mobile and Adobe Scan along with strength across Adobe Sign is expected to have benefited Document Cloud further in the fiscal fourth quarter.
All these factors are expected to have contributed well to Creative annualized recurring revenues (ARR) and Document Cloud ARR, which, in turn, are anticipated to have driven growth in Digital Media ARR in the to-be-reported quarter.
Notably, Adobe’s projection for fiscal fourth-quarter Digital Media ARR is pegged at $550 million of net new ARR.
However, high acquisition expenses are anticipated to have been major overhangs in the quarter under review.
Zacks Rank & Stocks to Consider
Currently, Adobe carries a Zacks Rank #4 (Sell).
Investors interested in the broader technology sector can consider some better-ranked stocks like Advanced Micro Devices (NASDAQ:AMD) AMD, Mimecast (NASDAQ:MIME) Limited MIME and Arrow Electronics (NYSE:ARW) ARW, all of which currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Advanced Micro Devices has gained 64.3% on a year-to-date basis. The long-term earnings growth rate for the AMD stock is currently projected at 46.2%.
Mimecast has gained 37.8% on a year-to-date basis. The long-term earnings growth rate for the MIME stock is currently projected at 35%.
Arrow Electronics has gained 26.2% on a year-to-date basis. The long-term earnings growth rate for the ARW stock is currently projected at 27.4%.
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