Adobe Inc. (ADBE) shares are cloud-bound after solid second-quarter results are building optimism in the company despite a bit of a light forecast ahead.
Shares of the San Jose-based software leader shot up more than 4% before Wednesday's opening bell, carried ahead by earnings of $1.83 per share on an adjusted basis on revenue of $2.74 billion for the second quarter. Those figures edged out the FactSet consensus for earnings of $1.78 per share on revenue of $2.70 billion.
"The power of our brand, the continuous innovation in our products and services, the deep investment we are making in our technology platforms, and a robust ecosystem of partners are enabling us to serve millions of customers around the globe," CEO Shantanu Narayen said. "We are creating large, addressable markets in the creativity, document, and customer experience management categories. Our opportunity has never been greater."
The record results and bullish commentary appear to have overshadowed concerns about the company's light third-quarter forecast, as Adobe is charting $2.8 billion in revenue and $1.95 in earnings per share versus the consensus of $2.83 billion in revenue and $2.05 in earnings per share
"While management's initial F3Q outlook came in light of the Street, investors appeared largely unfazed by the guidance," Stifel analyst Tom Roderick said. "We view this as a signal of continued belief in the durability of EPS growth for the company, which is expected to be fueled by margin expansion in the back half of the year as Adobe laps its acquisitions of Magento and Marketo."
Adobe's multiple billion-dollar acquisitions were a key part of the narrative as Narayen outlined the road ahead.
"This quarter, we announced the availability of Adobe Commerce Cloud, built on the Magento Commerce platform, with deep integrations across Adobe Analytics Cloud, Marketing Cloud, and Advertising Cloud," Narayen said. "We announced a new partnership with Amazon (AMZN) , creating Magento Commerce branded stores for Amazon sellers, which will give merchants a more seamless way to manage their business across both Amazon.com and their own storefront."
Narayen said Marketo has helped integrate the marketing cloud at companies such as Microsoft Corp. (MSFT) for its LinkedIn social media platform, and its Experience Platform, currently in beta, is gaining traction with companies such as Best Buy Co. (BBY) , Sony Corp. (SNE) , Home Depot Inc. (HD) and Verizon Wireless (VZ) .
"The depth and breadth of our enterprise partner ecosystem remains a competitive advantage contributing to pipeline generation, customer success as well as financial performance," Narayen said. "We had another successful quarter of selling alongside Microsoft, where our combined value proposition is resonating with enterprise customers."
For the broader Experience Cloud, Narayen suggested the opportunity ahead represents more than $70 billion in revenue.
Stifel's Roderick assigns a very bullish $325 price target for Adobe.
"As a result of its early mover position and strategic M&A transactions, Adobe has established itself as the unchallenged leader in Creative software for both the Enterprise and Consumer markets," Roderick said. "Given the company's recent ability to deliver 20%+ organic top-line growth, its best-in-class margin structure and product maturity relative to other vendors in the space, we view Adobe as one of the most compelling investment cases in our coverage area."