Adobe today announced the company’s fiscal year 2023 first quarter financial results.
The report shows that Adobe’s first quarter revenue of $4.655 billion, the latest record in the company’s history, compared with $4.262 billion in the same period last year, an increase of 9%, excluding the impact of changes in foreign exchange rates for 13% year-on-year growth; net income of $1.247 billion, compared with the net income of $1.266 billion in the same period last year, down 2%; excluding certain one-time items (not in accordance with Excluding certain one-time items (not in accordance with U.S. GAAP), Adobe’s first quarter adjusted net income was $1.746 billion, compared with $1.602 billion in the same period last year.
Adobe’s first-quarter revenue and adjusted earnings per share both beat Wall Street analysts’ expectations, and its outlook for second-quarter revenue and adjusted earnings per share also beat expectations, driving its after-hours share price up more than 5 percent.
Results Summary.
For the quarter ended March 3, 2023, Adobe reported net income of $1.247 billion, down 2 percent from net income of $1.266 billion in the same quarter last year, and diluted earnings per share of $2.71, compared with $2.66 per diluted share in the same quarter last year.
Excluding certain one-time items (not in accordance with U.S. GAAP), Adobe’s adjusted net income for the first quarter was $1.746 billion, compared with $1.602 billion in the same period last year, and adjusted earnings per share were $3.80, compared with $3.37 in the same period last year, beating analysts’ expectations. According to data provided by Yahoo Finance, 26 analysts previously expected Adobe’s first-quarter earnings per share to reach an average of $ 3.68.
Adobe’s first-quarter revenue of $4.655 billion, the latest record in the company’s history, compared with $4.262 billion in the same period last year, an increase of 9%, excluding the impact of currency changes to 13% year-on-year growth, the results also exceeded analysts’ expectations. According to data provided by Yahoo Finance, 25 analysts previously expected Adobe’s first-quarter revenue to reach $4.62 billion on average.
According to business segments, Adobe’s first quarter subscription revenue was $4.373 billion, compared with $3.958 billion a year ago; product revenue was $120 million, compared with $145 million a year ago; services and other business revenue was $162 million, compared with $159 million a year ago.
Digital business: (1) Adobe’s first quarter digital media revenue was $3.40 billion, up 9 percent compared with the same period last year, or 14 percent excluding the impact of currency fluctuations. Of which, creative revenue was $2.76 billion, an increase of 8% compared with the same period last year, excluding the impact of currency exchange rate changes to 13% year-on-year; file cloud revenue was $634 million, an increase of 13% compared with the same period last year, excluding the impact of currency exchange rate changes to 16% year-on-year. Annualized recurring revenue from the digital media business increased $410 million sequentially to $13.67 billion, with annualized recurring revenue from the creative business increasing to $11.28 billion and annualized recurring revenue from File Cloud increasing to $2.39 billion. (2) Adobe’s digital experience revenue increased 11 percent to $1.18 billion in the first quarter compared to the same period last year, or 14 percent excluding the impact of currency movements. Revenue from the digital experience subscription business was $1.04 billion, an increase of 12 percent compared with the same period last year, or 14 percent excluding the impact of currency fluctuations.
Adobe’s total cost of revenue for the first quarter was $568 million, compared with $512 million in the same period last year. Cost of revenue for the subscription business was $434 million, compared with $393 million in the same quarter last year; cost of revenue for the product business was $8 million, compared with $10 million in the same quarter last year; and cost of revenue for the services and other businesses was $126 million, compared with $109 million in the same quarter last year.
Adobe’s first quarter gross profit was $4,087 million, compared with $3,750 million in the same period last year.
Adobe’s total operating expenses for the first quarter were $2.501 billion, compared with $2.170 billion in the same period last year. Research and development expenses were $827 million, compared with $701 million in the same period last year; sales and marketing expenses were $1.301 billion, compared with $1.158 billion in the same period last year; general and administrative expenses were $331 million, compared with $269 million in the same period last year; and amortization of acquired intangible assets was $42 million, compared with $42 million in the same period last year.
Adobe reported operating profit of $1,586 million in the first quarter, compared with $1,580 million in the same period last year. Excluding certain one-time items (not in accordance with U.S. GAAP), Adobe’s adjusted operating income for the first quarter was $2,131 million, compared with $1,993 million in the same period last year.
In the first quarter, Adobe repurchased approximately 5 million shares of its stock, and Adobe generated $1.69 billion in cash flow from business operating activities in the first quarter.
Adobe’s remaining performance obligation at the end of the first quarter was $15.21 billion.
Results Outlook.
Second Quarter Fiscal Year 2023 Results Outlook
Adobe expects revenue for the second quarter of fiscal 2023 to be between $4.75 billion and $4.78 billion, with the average ($4.765 billion) exceeding analysts’ expectations. According to data provided by Yahoo Finance, 25 analysts previously expected Adobe’s second-quarter revenue to reach $4.76 billion on average.
By segment, Adobe expects annualized recurring digital media net new value-added to be about $420 million in the second quarter of fiscal 2023; digital media revenue to be between $3.45 billion and $3.47 billion; digital experience revenue to be between $1.21 billion and $1.23 billion; digital experience subscription revenue to be between $1.06 billion and Revenue from the Digital Experience segment will range from $1.21 billion to $1.23 billion; revenue from the Digital Experience subscription business will range from $1.06 billion to $1.08 billion; and the tax rate will be approximately 21.5 percent on a GAAP basis and 18.5 percent on a non-GAAP basis.
On the earnings front, Adobe expects to earn between $2.65 and $2.70 per share in the second quarter of fiscal 2023, and between $3.75 and $3.80 per share on a non-GAAP basis, with the average ($3.775) beating analysts’ expectations. According to data provided by Yahoo Finance, 26 analysts previously expected Adobe to earn an average of $3.76 per share on a non-GAAP basis in the second fiscal quarter.
Fiscal year 2023 earnings outlook
Adobe expects its annualized recurring digital media revenue to be $1.70 billion in net new value added throughout fiscal 2023, with earnings per share expected to range from $10.85 to $11.15 and non-GAAP earnings per share expected to range from $15.30 to $15.60, exceeding analysts’ expectations by an average of $15.45. analysts’ expectations.
According to Yahoo Finance, 31 analysts previously expected Adobe to earn an average of $15.31 per share on a non-GAAP basis in fiscal 2023.
Stock price movement.
On the same day, Adobe shares rose $0.28, or 0.08 percent, to close at $333.61 in regular Nasdaq trading. In subsequent after-hours trading through 5:35 p.m. ET on the 15th (5:35 a.m. BST on the 16th), Adobe shares rose another $14.54, or 4.36 percent, to $348.15. Over the past 52 weeks, Adobe’s high price was $473.49 and its low price was $274.73.
