There were plenty of high points when Adobe (ADBE +1.75%) reported the results of its just completed second-quarter. The software company delivered another in a long line of impressive results that blasted past analysts' expectations, as well as its own lofty forecasts.
Adobe's revenue grew a whopping 24% year over year to $2.2 billion, better than the 21% growth the company had telegraphed just last quarter. Adjusted earnings per share were equally impressive, up 63% compared to the prior-year quarter, exceeding the company's guidance for a 55% increase.
On its conference call with analysts, management provided additional color, and offered insights into their view of the company's future. Among the topics discussed: Adobe's recent acquisition of Magento, the opportunities provided by the growing movement for greater consumer privacy, and the advances being brought by artificial intelligence.
Adobe CEO Shantanu Narayen at Adobe Summit 2018. Image source: Adobe.
The jump to e-commerce
One of the hottest topics during the conference call was Adobe's recent acquisition of Magento. Its cloud-based content management system provides the tools to create and implement e-commerce websites, handling payments and shipping, while also integrating both "digital and physical shopping experiences" according to the company's website. Adobe said Magento "brings together digital commerce, order management, and predictive intelligence into a unified commerce platform enabling shopping experiences across a wide array of industries."
Adobe has always been clear about its intent to provide an end-to-end commerce solution. Adding Magento fills what had been a noticeable gap in that effort, and "will enable commerce to be seamlessly integrated ... delivering a single platform that serves both B2B and B2C customers globally, while providing the flexibility to scale to serve mid-market and large enterprise customers." This move increases Adobes offerings to include "content creation, marketing, advertising, analytics, and now commerce," thereby increasing the company's addressable market. This should not only attract new customers, but increases what Adobe can offer to existing customers.
Customer privacy in the digital age
The European Union recently implemented its much ballyhooed General Data Protection Regulation (GDPR), a sweeping set of statutes designed to protect and preserve the privacy rights of its citizens. The enhanced requirements for protecting consumer data have been a topic of conversation on many companies' recent conference calls, and Adobe's was no different.
Many of Adobe's customers operate in the digital advertising arena, and President and CEO Shantanu Narayen said that companies need to recognize that "GDPR is not just a checklist item, but a new way of doing business which requires people to tailor their digital marketing." He went on to say that customer engagement would be more important than ever as a method for companies to maintain the trust they've built. He also believes that Adobe's breadth of experience in privacy protection will attract new customers to its platform.
Adobe CTO Abhay Parasnis discusses AI at Adobe Summit 2018. Image source: Adobe.
Creating artificial intelligence
Adobe went all in on artificial intelligence last year, announcing a "commitment to train every one of our technical employees in artificial intelligence fundamentals." That statement came on the heels of the introduction of Sensei, a unified framework of AI systems implemented across its products and services designed to improve their usefulness. Examples include the ability to find multiple documents with similar content, or search among millions of images by subject matter.
In response to an analyst question, Narayen said that Sensei has the ability to provide auto tagging, which will label an image, audio, or video based on its content, but also by inferring the intent of the user. The platform also provides a number of creative tools that Narayen referred to as "Adobe Magic" that work across Creative Cloud, Document Cloud, and Experience Cloud. This, he asserted, was one of the reasons the company was "recognized again as one of the world's most innovative companies by Forbes for 2018."
Adobe's path forward
These discussions show that Adobe sees opportunities at every turn, whether they stem from adding e-commerce capabilities, focusing on customer privacy, or creating innovative tools with the help of artificial intelligence. And its management team believes that by relentlessly focusing on the customer, it can continue to attract new users and maintain its stratospheric growth rates.
