Why Adobe Stock Soared 30.2% in the First Half of 2019

The creative software leader keeps setting new company records.

Steve Symington
Steve Symington
Jul 9, 2019 at 10:00AM
Technology and Telecom

What happened

Shares of Adobe Systems (NASDAQ:ADBE) climbed 30.2% in the first six months of 2019, according to data from S&P Global Market Intelligence, following a pair of record quarterly reports from the creative software specialist.

To be fair, the broader markets also enjoyed broad-based gains in the process -- including a more than 17% rise from S&P 500 -- but Adobe shined brighter than most as consumers continued to flock to its growing base of recurring cloud-based subscription products.

Adobe office space in Utah with sunset in the background.

IMAGE SOURCE: ADOBE SYSTEMS.

So what

Adobe's rise so far this year has been gradual, even despite its record fiscal first-quarter 2019 report in mid-March that saw the company modestly increase its full-year earnings guidance. For that, CEO Shantanu Narayen described "continued momentum across Adobe Creative Cloud, Document Cloud, and Experience Cloud."

Shantanu was more direct when Adobe repeated the feat with an even better fiscal second-quarter report in June, crediting an "explosion of creativity across the globe" as well as Adobe's broad business transformation aimed at delivering more "engaging customer experiences."

More specifically, Adobe's revenue last quarter soared 25% year over year to $2.744 billion, translating to adjusted earnings of just over $900 million, or $1.83 per share. Both the top and bottom lines easily exceeded Adobe's guidance provided in March for earnings of $1.77 per share on revenue closer to $2.7 billion.

But perhaps most exciting was Adobe's successful shift to recurring revenue sources, which comprised around 91% of total sales during the quarter. 


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Now what

Adobe didn't update its full-year guidance last month, however -- though management was quick to point out they don't normally do so at this point in the year. But CFO John Murphy did tease that Adobe believes its first-half momentum should continue into the second half, "with typical seasonality in Q3 and strength in Q4."

In the end, that musing was more than enough to leave investors satisfied that Adobe is likely to extend its winning streak going forward. And the stock has responded in kind.