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Adobe Systems Climbs to New Highs on Accelerated Growth

By Steve Symington – Updated Jun 21, 2017 at 1:00PM

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The creative-software company under-promised and over-delivered yet again. Here's what investors need to know.

Adobe Systems Incorporated (ADBE -3.29%) announced impressive fiscal second-quarter 2017 results on Tuesday after the market closed. The company marked yet another company-record performance on both the top and bottom lines, with continued momentum for its popular cloud-based solutions. 

Shares of the creative-software specialist set an all-time high in after-hours trading. Let's take a closer look at how Adobe crafted its latest quarterly win.

The exterior of the Adobe headquarters office.

Image source: Adobe Systems.

Adobe Systems results: The raw numbers


Fiscal Q2 2017*

Fiscal Q2 2016

Year-Over-Year Growth


$1.772 billion

$1.399 billion


GAAP net income

$374.4 million

$244.1 million


GAAP earnings per share (diluted)




Data source: Adobe Systems. *For the quarter ended June 2, 2017.

What happened with Adobe Systems this quarter?

  • On an adjusted (non-GAAP) basis, which adds perspective by excluding items such as stock-based compensation and restructuring expenses, net income per diluted share rose 43.7% to $1.02.
  • These figures compare favorably with Adobe's guidance provided last quarter, which called for lower revenue of $1.73 billion, GAAP earnings of $0.66 per share, and adjusted earnings of $0.94 per share. 
  • Digital-media segment revenue increased 29% year over year, accelerating from 22% growth last quarter and above guidance for 24%. This also included 34% growth in creative revenue to $1.01 billion.
  • Digital media annualized that recurring revenue climbed $312 million sequentially to $4.56 billion exiting the quarter, thanks to strong adoption and retention for Creative Cloud and Document Cloud.
  • Adobe Experience Cloud marketing revenue increased 29% to $495 million.
  • Quarterly cash flow from operations came in at $645 million.
  • Roughly 2 million shares were repurchased during the quarter for $266 million, completing Adobe's $2 billion repurchase authorization that was initially approved in early 2015. Adobe will now begin repurchasing shares under its new $2.5 billion authorization, approved earlier this year.

What management had to say

"Digital transformation continues to be the burning agenda for creative professionals, enterprises, governments and educational institutions," CEO Shantanu Narayen said. "Adobe is the go-to company for creating world-class digital customer journeys, from design to delivery to measurement and monetization."

"Adobe continues to execute well, with another quarter of record revenue and operating profit in Q2," CFO Mark Garrett added. "We're excited about the strong business momentum we have as we enter the second half of fiscal 2017 and remain confident in our ability to drive strong revenue and earnings growth in the future."

Looking forward

For the current fiscal third quarter of 2017, Adobe expects revenue of $1.815 billion, assuming 26% year-over-year growth in digital-media segment revenue, and 25% growth in Adobe Experience Cloud revenue. That should translate to GAAP earnings of $0.72 per share and non-GAAP earnings of $1.00 per share. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- Wall Street was modeling lower fiscal Q3 adjusted earnings of $0.97 per share on revenue of just $1.80 billion

All things considered, this was another great quarter from Adobe as it continues to delight the creative-software community and investors alike.  

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems. The Motley Fool has a disclosure policy.

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