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Why Adobe Systems Incorporated Stock Popped Today

By Steve Symington - Oct 19, 2017 at 4:49PM

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The creative software leader touched a fresh all-time high after offering impressive guidance for the year ahead.

What happened

Shares of Adobe Systems Incorporated (ADBE 2.77%) were up 11.6% as of 3:30 p.m. EDT Thursday after the creative-software specialist provided strong fiscal 2018 guidance.

More specifically, during an investor meeting at its Adobe MAX user conference, Adobe revealed preliminary fiscal-year 2018 targets for total revenue to increase roughly 20% year over year, to $8.7 billion, assuming digital media segment growth of 23%, Adobe Experience Cloud subscription revenue growth of 20%, and Adobe Experience Cloud total revenue growth of 15%. On the bottom line, that should translate to GAAP earnings per share of approximately $4.40 and adjusted (non-GAAP) earnings per share of roughly $5.50.

By comparison, analysts' consensus estimates had predicted that Adobe would achieve fiscal 2018 adjusted earnings of only $5.21 per share on slightly lower revenue of $8.68 billion.

Adobe headquarters office.


So what

In addition, Adobe told investors that Adobe Experience Cloud bookings should climb around 20% next fiscal year. The company further believes it will simultaneously add roughly $1 billion of net new digital media annualized recurring revenue (ARR). For perspective, Adobe's total digital media ARR at the end of last quarter stood at approximately $4.87 billion.

Now what

Adobe also reaffirmed its latest fiscal fourth-quarter 2017 financial targets, which call for quarterly revenue of $1.95 billion, GAAP earnings of $0.86 per share, and adjusted earnings of $1.15 per share. Shareholders will need to wait for more color on Adobe's performance when it releases its final fiscal fourth-quarter results in mid-December. But given this encouraging update on Adobe's longer-term targets in the meantime, it's no surprise to see the company's stock hit a new all-time high today.

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

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