The News: Adobe’s Q3 fiscal year 2022 revenue rose to a record $4.4 billion, an increase of 13 percent from $3.9 billion one year ago, as the digital creativity and experiences software maker reported its earnings on September 15. In a separate announcement, Adobe also said that it is acquiring Figma, a web-first collaborative design platform, for $20 billion to expand its digital creativity product lines and services. Read the full earnings announcement on the Adobe website.
Adobe Q3 Revenue Hits $4.4B, Up 13% YoY for FY2022
Analyst Take: Adobe’s Q3 FY2022 revenue of $4.4 billion set a new company record and was good news as the company’s executives opened their earnings call. But making the event even more interesting was just before the call, Adobe also announced that it is acquiring the collaborative design platform vendor, Figma, for $20 billion.
The Figma news was a massive and unexpected deal to accompany the earnings announcement. We like seeing Adobe keeping its head down and being bullish even as pundits have been cold on the company. This Figma acquisition is a bold move and a big bet on collaborative design, and we are impressed with this imaginative and topical addition to this long-established company. Of course, the price tag drew ire, and in the current macroeconomic climate this shouldn’t surprise anyone. However, the pace of growth for Figma coupled with its incredible operating margins and organic growth make the case for this deal so long as investors have a long term view like Adobe.
Here are the Adobe Q3 FY2022 earnings results by the numbers:
- Q3 FY2022 revenue $4.4 billion, up 13 percent from $3.9 billion for the same quarter one year ago. The $4.4 billion in revenue was just above analyst consensus estimates of $4.3 billion, according to Yahoo Finance.
- Q3 FY2022 non-GAAP net income $1.6 billion, up seven percent from $1.5 billion one year ago.
- Q3 FY2022 diluted non-GAAP earnings per share (EPS) of $3.40, up from $3.11 EPS one year ago. The $3.40 share price beat analyst consensus estimates of $3.33 per share, according to Yahoo Finance.
- Q3 FY2022 non-GAAP operating income of $1.95 billion, up 10 percent from $1.8 billion one year ago.
- Q3 FY2022 net operating cash flow was $1.7 billion, up 21 percent from $.4 billion one year ago.
- Remaining performance obligations (RPO) exiting the quarter were $14.11 billion.
These are good overall Adobe Q3 numbers, which also includes healthy revenue growth in each of its subscription, product, and services categories, demonstrating its value to customers for needed and loved products and services even within a topsy-turvy global marketplace.
Subscription revenue for Q3 FY2022 was $4.1 billion, up 13 percent from $3.7 billion one year ago. Product revenue for the quarter was $126 million, up six percent from $119 last year, while services and other revenue totaled $179 million, up 13 percent from $159 million one year ago.
We are stoked about the Figma deal, which is bullish over the long term, but the high price of $20 billion is likely a sticking point for some observers and investors. Competitive questions about potentially overlapping products and services could also arise, which will be interesting.
Adobe Revenue by Product Segment
By product segment, Adobe’s Q3 FY2022 revenue figures also showed good progress.
Digital Media segment revenue was $3.23 billion, up 21 percent from $2.87 billion one year ago, while creative revenue rose to $2.63 billion, up 9.6 percent from $2.37 billion one year ago. Document cloud revenue was $607 million, up 23 percent from $493 million one year ago. Adobe’s digital experience segment revenue hit $1.12 billion, up 14 percent from $985 million one year ago.
The only segment to see a decline was publishing and advertising revenue, which totaled $81 million, down five percent from $85 million one year ago.
Guidance from Adobe for Q4 FY2022
Amid a still challenging macroeconomic environment around the globe and foreign exchange headwinds, Adobe provided Q4 FY2022 guidance as follows:
- Total Q4 FY2022 revenue of about $4.52 billion.
- Digital Media annualized recurring revenue (ARR) of about $550 million of net new ARR.
- Digital Media segment revenue YoY growth of about 10 percent.
- Digital Experience segment revenue YoY of about 13 percent.
- Digital Experience subscription revenue YoY growth) of about 13 percent.
- Non-GAAP EPS of about $3.50 per share.
Overall Impressions on Adobe Q3 Earnings
Adobe is an interesting company that features broad product lines with Adobe Photoshop, Acrobat Pro, Illustrator, Adobe Express, Lightroom, Dreamweaver, Substance 3D Pro, and more, touching a massive swath of business professionals and consumers directly and indirectly. Just about every knowledge worker on the planet engages with Adobe’s Document Cloud and/or Experience Cloud and other products daily through everyday interactions with e-commerce and document correspondence.
But there is still more growth to be found, and Adobe knows it and is planning to find it. This potential growth does not strike us as surprising but reflects the strength of enterprise demand for real digital transformation and Adobe’s current positioning in these markets.
Adobe’s Q3 results were generally positive and provide proof of its executive team leadership and market strength, showing progress during challenging times. The continuing strength of its ARR and its record quarterly revenue should provide the market with confidence in the company’s continued strong execution. The macro climate is a concern, and Adobe wasn’t sheepish on that factor. However, cycles are part of any business. Good leaders and companies manage through cycles, but tend to keep their eye on the long term prize.
We continue to like Adobe’s market position and the smart and innovative bets it is making on the next generation of digital and web experiences even if the short term proves difficult for even the most robust growth names.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
Other insights from Futurum Research:
Adobe Q2 2022 Earnings Show Record Revenue Amid Revised Guidance
Adobe Q1 Delivers Record Revenue on Diverse Growth Across Segments
An Inside Look at Adobe’s Digital Economy Index – Futurum Tech Webcast Interview Series
Image Credit: Yahoo Finance
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
