Will Adobe’s (ADBE) Q1 revenue benefit from digital media? – March 21, 2022

Adobeit’s (ADBE Free Report) first-quarter fiscal 2022 results, expected to be released on March 22, are expected to reflect strength in its digital media segment.

Digital media has been the main driver of the company’s growth through its Creative product line and its document services products.

We believe that the company’s persistent efforts to strengthen its content management capabilities should continue to drive growth in the digital media segment in the quarter ahead.

Notably, the segment under discussion generated revenue of $3.01 billion in the fourth quarter of fiscal 2021, which improved 21% year-over-year.

For the first quarter of fiscal 2022, Adobe expects 8% year-over-year revenue growth from digital media. Zacks’ consensus estimate for digital media revenue for the quarter under review is pegged at $3.09 billion, suggesting an 8.4% increase from the figure reported a year ago.

Click here to learn how the company’s overall fiscal first-quarter results are likely to be.

Factors to consider

Strong momentum in Adobe Creative Cloud and Document Cloud is expected to have driven revenue growth in the digital media segment in the quarter ahead.

The growing proliferation of 3D and the Metaverse platform, which are creating demand for new types of content, should have been a major tailwind. Strong mobile app momentum should have contributed well to Creative Cloud’s revenue growth.

Adobe’s acquisition of a cloud-enabled video editing and collaboration platform, Frame.io, and the integration of its solutions with creative software like Adobe Photoshop, Adobe Premier Pro and others Adobe Creative Cloud applications should have continued to drive growth.

During the first fiscal quarter, the company launched a unified web and mobile solution, Creative Cloud Express, which provides innovative features for creating and sharing rich media content. This should have helped Creative Cloud performance.

Notably, Zacks’ consensus estimate for Creative Cloud’s fiscal first quarter revenue is pegged at $2.52 billion, suggesting a 6.1% improvement over the figure reported for the fiscal quarter. last year.

The growing adoption of Acrobat, Adobe Sensei and the strong momentum of Acrobat web services should have contributed well to Document Cloud’s revenue growth.

Growing demand for Acrobat Mobile and Adobe Scan, as well as the strength of Adobe Sign, should have further benefited Document Cloud in the quarter under review.

Zacks’ consensus estimate for Document Cloud revenue in the fiscal first quarter is set at $575 million, indicating a 19.8% improvement over the figure reported for the year-ago quarter.

All of these factors should have contributed well to Creative’s annualized recurring revenue (ARR) and Document Cloud’s ARR, which, in turn, should have driven digital media ARR growth in the quarter ahead.

However, high acquisition spending should have been the main overhangs of the quarter under review.

Zacks Ranking and Stocks to Consider

Currently, Adobe carries a Zacks Rank #4 (selling).

Investors interested in the broader tech sector may consider higher-ranked companies like Advanced micro-systems (AMD free report), Quickly (FSLY free report) and Electronic Arrow (ARW free report). While Advanced Micro Devices sports a #1 (strong buy) Zacks rank, Fastly and Arrow Electronics currently carry a #2 (buy) Zacks rank. You can see the full list of today’s Zacks #1 Rank stocks here.

Advanced Micro Devices has gained 21.4% since the start of the year. AMD’s long-term earnings growth rate is currently projected at 29.08%.

Fastly has gained 54% since the start of the year. The long-term earnings growth rate of FSLY stock is currently projected at 28.57%.

Arrow Electronics has gained 5.1% since the start of the year. ARW’s long-term earnings growth rate is currently projected at 3.13%.

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