Adobe (ADBE) – Earnings Review – December 15, 2023

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Adobe (ADBE) – Earnings Review – December 15, 2023

Adobe is a software giant. It provides programs to create and imagine, handle customer interactions and process documents. Revenue is split into two main buckets: Digital Media and Digital Experiences. Digital Media is made up of its “Creative Cloud” and “Document Cloud.” The Creative Cloud includes Photoshop and Illustrator. It’s what empowers creation, iteration and perfection of digital design. The Document Cloud, including the ubiquitous Adobe Acrobat, allows for secure PDF management and collaboration – among other things.

Finally, its Experience Cloud includes Adobe Analytics and other products like “Campaign.” Campaign is its intuitively-named marketing campaign tool. Experience Cloud covers end-to-end customer interactions with a real-time customer data platform (CDP) to ensure those interactions are optimized. It also publishes some great macro data on overall commerce spend.


  • Beat revenue estimates by 0.6% and beat its guide by 1.0%.
  • Its 13.9% 3-yr revenue compounded annual growth rate compares to 14.8% as of last quarter & 15.5% 2 quarters ago.
  • Beat Digital Media revenue guidance by 0.9%.
  • Beat Digital Experience revenue guidance by
Adobe Earnings Q3

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases

Adobe Earnings Q3

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases


  • Beat $3.11 GAAP earnings per share (EPS) estimates by $0.12 & beat guidance by $0.10.
  • Beat $4.14 EPS estimates by $0.13 & beat guidance by $0.15.
  • Earnings per share rose by 17% Y/Y in 2023 as a whole.
  • It slightly missed EBIT estimates by a fraction of a percent. It doesn’t provide guidance for this metric.

Operating cash flow (OCF) margin was impacted by an $826 million U.S. tax payment that was deferred from Q2 and Q3. Without this one-time hit, OCF margin would have been 48.1%.

Adobe Margins Q3

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases

ADBE Margin Trends Q3

Source: Brad Freeman – SEC Filings, Company Presentations, and Company Press Releases


Next quarter guidance missed slightly on revenue, but beat slightly on both GAAP and non-GAAP EPS.

For the full year guide, revenue was 1.4% light. GAAP EPS was $0.18 (or 1%) light vs. $17.98 expectations. Non-GAAP EPS was $0.37 (or 2.8%) ahead of $13.28 estimates. It generally likes to offer highly conservative preliminary annual guidance.

Balance Sheet

  • $7.84 billion in cash & equivalents.
  • $3.6 billion in debt.
  • Basic share count fell 2.2% Y/Y; diluted share count fell 1.5% Y/Y.
  • It has $3.15 billion in current buyback capacity.



Adobe plans to lean on what it sees as its two strengths to capitalize on the GenAI wave: Data and model-building. The data item is simple. Its scale is massive. Generative AI models need massive sums of data to be trained. The model building part is a bit more subjective. Adobe Firefly is its group of GenAI models. It enhances use cases among its current products, infuses new layers of automation into them and tears down the barriers to content creation.


Figma is a platform for next-generation digital design. Adobe plans to purchase this company to introduce incremental value to its already broad toolkit. The European Commission has already pushed back on the deal for competitive concerns, but Adobe is responding to these concerns and pushing hard to close the deal. Ideally, that will happen some time next year.

Digital Media – Creative Cloud

Creative Cloud had a strong quarter. The company did hike pricing here last month, but growth was driven by paid subscriptions. Most of the benefit from the hike has yet to be realized.

New GenAI product integrations are allowing clients to keep up with increased consumer demand for beloved brand content. These integrations are diminishing friction and vastly expediting content creation to meet enterprise needs. Across imaging, design, video and 3D, Creative Cloud + Firefly is leading to accelerating strength in mid and large client wins.

Along these lines of increased content demand, GenStudio is another key Adobe product. This is essentially an upgraded version of Adobe express – its end-to-end content creation product. GenStudio is GenAI-based and automates that creation from “ideation to delivery.” Automation unlocks a lot more capacity to create more content.

  • Deloitte and Pepsi were among highlighted wins for the quarter as the segment enjoyed a new record for net subscriber additions.

Firefly debuted 3 new models for Creative Cloud during the quarter including the Firefly Vector Model. Per investor materials, the Vector Model is the first GenAI model to transform text into “stunning vector artwork like icons and even entire scenes.” There are a lot of text to image models, but this supposedly goes a lot deeper. As an important aside, it’s adding GenAI credit packs to monetize this new usage growth.

  • While strength here was broad-based, emerging market strength was called out as a standout.
  • (video-based creation and collaboration) enjoyed a record year in 2023 for net new ARR.

Digital Media – Document Cloud

Adobe Acrobat for Web enjoyed 70% Y/Y growth in monthly active users. It also delivered a 400% Y/Y “surge” in link sharing for PDF collaboration. Thanks to Liquid Mode, Acrobat Mobile reached 100 million users. Liquid Mode is an AI powered tool to automatically retrofit web-based PDFs for mobile viewing.

  • Integrated Acrobat with all Adobe Express Workflows to pair powerfully artistic content creation with PDF formatting.
  • The segment won Bank of America, the Department of Veterans Affairs, Mastercard and State Farm as new customers during the quarter.
  • GenAI tools for the Document Cloud are in private beta.

Digital Experiences

As we’ve already covered in previous articles, Adobe Analytics is a go-to provider for consumer spend data. It reported 7.5% Y/Y holiday weekend growth, which compares very well to expectations of 5.5% growth. This is where the Experiences Cloud thrives. If consumers want to spend more, brands will have more drive to optimize every interaction to maximize revenue per touchpoint. That’s what this suite does. Its real-time CDP gives companies a holistic, end-to-end control panel of individual customer interaction profiles at near-endless scale.

Adobe Experience Platform (AEP) is its product bundle that combines all of the Experiences Cloud. Like other platforms plays in software that can drive vendor consolidation and cost savings, this platform is thriving in today’s environment. AEP had its first $100 million net new business quarter. Its entire book of business sits at just $700 million, making that feat very notable. Overall, the AEP and native apps business rose 60% Y/Y. Coke, Vanguard, Marriott and Unilever are among large customer wins for this segment during the quarter.

My Take

This is one of those wonderfully boring and highly consistent performers. It’s a titan in creative software and a large player in customer relationship management as well. The underwhelming annual guide will likely be raised throughout 2024 if history is any indication. A fine quarter from an elite company. Enough said.

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