Adobe reports strong Q1 results, adjusts outlook on coronavirus uncertainty

The company expects enterprise customers to defer bookings, delay consulting services and cut spending amid the worsening global pandemic.

Adobe on Thursday reported better-than-expected earnings for its fiscal first quarter, as the company braces for ongoing uncertainty from the coronavirus outbreak. The Photoshop maker lowered its guidance for the current quarter, saying that it expects enterprise customers to defer bookings, delay consulting services and cut spending amid the worsening global pandemic. 

The company is also preparing for reduced consumer spending and lower software license revenue from channel partners. 

"While Q1 was a typically strong quarter, I know what's top of mind for all of us is navigating the impact of COVID-19," said Adobe CEO Shantanu Narayen. "In addition to encouraging employees in impacted regions to work from home for the next two weeks, we are restricting travel and cancelling in-person events."

As for the numbers, Adobe reported fiscal first quarter earnings of $955 million, or $1.96 a share. Non-GAAP earnings in the quarter were $2.27 a share (Adobe estimates that it took a hit of 7 cents per by cancelling its corporate events) on revenue of $3.09 billion. Wall Street was looking for earnings of $2.23 a share on revenue of $3.04 billion.

For the current quarter, analysts were looking for earnings of at least $2.33 a share on revenue of $3.22 billion. Adobe responded with a revenue estimate of $3.18 billion with non-GAAP earnings of $2.35 per share. 

Elsewhere on the balance sheet, the company said subscription revenue was $2.83 billion, product revenue was $143 million, and that services and support revenue reached $123 million.

Revenue from Adobe's Digital Media unit overall was $2.17 billion and Digital Experience segment revenue was $858 million. Broken out, Creative Cloud revenue reached $1.82 billion in Q1, while Document Cloud was $351 million. Meanwhile, Adobe said annualized recurring revenue in its Digital Media unit grew to $8.73 billion, a quarter-over-quarter increase of $400 million.

"The benefits of running a real-time business and the high percentage of our revenue that is recurring enables us to monitor and take action in how we drive revenue or control costs – all of which should enable us to deliver solid results as the world navigates the COVID-19 situation," said Adobe CFO John Murphy.