Adobe reported a strong third quarter and fourth quarter outlook but is starting to see more seasonal patterns following a boom year during the COVID-19 pandemic.
The company reported third quarter revenue of $3.94 billion, up 22% from a year ago, with earnings of $2.52 a share. Non-GAAP earnings were $3.11 a share in the third quarter. Wall Street was looking for earnings of $3.02 a share on revenue of $3.89 billion.
For the fourth quarter, Adobe projected revenue of $4.07 billion with non-GAAP earnings of $3.18 a share. Digital Media revenue growth for the fourth quarter will be up about 20% and Digital Experience revenue will be up 22%.
Here are the four big takeaways from Adobe's results.
Adobe's digital media business is returning to pre-COVID pandemic seasonality. The big issue for investors handicapping Adobe's third quarter was growth that was lower than expected. Now third quarter revenue growth of 23% is nothing to worry about CFO John Murphy said Adobe was seeing seasonal patterns return. Murphy said:
As anticipated, with regions beginning to reopen across the globe, we saw pronounced summer seasonality in Q3. This is consistent with the experience of businesses across industries, as evidenced by data from the Adobe Digital Index, which showed that June and July marked the highest consumer travel season in 2 years. This correlated with lower web traffic while individuals enjoyed their summer holidays.
Bottom line: Lower traffic to Adobe.com meant fewer subscriptions from consumers and individuals.
SMBs are recovering. While seasonality was a slight bummer for the digital media unit, Adobe was more upbeat about SMB demand as it saw new users for Creative Cloud, reseller traction and subscription gains for flagship products. Adobe CEO Shantanu Narayen said, "we are continuing to see strengths associated with SMBs."
Adobe Experience Platform continues to show gains as it is seen as a digital transformation and customer experience management tool. Narayen said Adobe Journey Optimizer and Customer Journey Analytics was also seeing strength. Narayen said customer experience management is a priority for B2B and B2C companies looking to combine analytics, audiences, commerce and marketing workflows.
Adobe Document Cloud had record third quarter revenue of $493 million, up 31%. Acrobat subscriptions surged and Adobe Sign continues to get traction. It remains to be seen whether Adobe Document Cloud becomes a counterweight to DocuSign.