The 10-second takeaway
For the quarter ended March 1 (Q1), Adobe Systems beat expectations on revenues and beat expectations on earnings per share.
Compared to the prior-year quarter, revenue shrank. Non-GAAP earnings per share dropped significantly. GAAP earnings per share dropped significantly.
Margins contracted across the board.
Adobe Systems notched revenue of $1.01 billion. The 20 analysts polled by S&P Capital IQ predicted revenue of $985.7 million on the same basis. GAAP reported sales were the same as the prior-year quarter's.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
EPS came in at $0.35. The 21 earnings estimates compiled by S&P Capital IQ predicted $0.31 per share. Non-GAAP EPS of $0.35 for Q1 were 39% lower than the prior-year quarter's $0.57 per share. GAAP EPS of $0.13 for Q1 were 65% lower than the prior-year quarter's $0.37 per share.
Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
For the quarter, gross margin was 84.5%, 510 basis points worse than the prior-year quarter. Operating margin was 9.7%, much worse than the prior-year quarter. Net margin was 6.5%, much worse than the prior-year quarter. (Margins calculated in GAAP terms.)
Next quarter's average estimate for revenue is $1.01 billion. On the bottom line, the average EPS estimate is $0.34.
Next year's average estimate for revenue is $4.12 billion. The average EPS estimate is $1.45.
The stock has a two-star rating (out of five) at Motley Fool CAPS, with 1,772 members out of 1,892 rating the stock outperform, and 120 members rating it underperform. Among 507 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 480 give Adobe Systems a green thumbs-up, and 27 give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Adobe Systems is hold, with an average price target of $38.24.
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Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings here. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. The Motley Fool recommends Adobe Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.