The News: Adobe revenue for the fourth quarter (Q4) of fiscal year (FY) 2023 rose to $5.05 billion, up 12% from $4.5 billion year-over-year (YoY). This quarter was the first in which the digital creativity and experience software maker brought in more than $5 billion in a single quarter, and it marks 10 straight quarters of record revenue totals for the company. In its Q4 earnings report on December 13, Adobe also announced that it brought in record revenue of $19.4 billion in the full FY 2023, which is up 10% from $17.6 billion YoY. Read the full press release on Adobe’s Q4 earnings on the company’s investor web page.
Adobe Revenue in Q4 Hits $5 Billion, Up 12% YoY, As Growth Continues
Analyst Take: Adobe revenue hit a record high mark for the tenth quarter in a row, exceeding the $5 billion mark for the quarter for the first time in the company’s history. That is quite an admirable accomplishment, we believe, and it provides proof that Adobe’s diverse product mix and aggressive business strategy are continuing to meet the needs of its expanding customer base and the overall marketplace. Adobe’s impressive sequential streak of 10 quarterly revenue records date back to Q4 FY 2021 when the company brought in $3.8 billion.
Here are the Adobe Q4 FY 2023 earnings results by the numbers:
- Q4 FY 2023 revenue was $5.05 billion, up 12% from $4.5 billion YoY, and beating analyst consensus estimates of $5.01 billion for the quarter, according to Investing.com.
- Q4 FY 2023 non-generally accepted accounting principles (non-GAAP) net income was $1.96 billion, up 17% from $1.68 billion YoY.
- Q4 FY 2023 diluted non-GAAP earnings per share (EPS) were $4.27, up from $3.60 EPS YoY. The EPS results beat analyst consensus estimates of $4.13 per share, according to Investing.com.
- Q4 FY 2023 non-GAAP operating income was $2.3 billion, up 16% from $2 billion YoY.
- Full year FY 2023 revenue was $19.4 billion, up 10% from $17.6 billion YoY.
- Full year FY 2023 non-GAAP net income was $7.4 billion, up 14% from $6.5 billion YoY.
- Full year FY 2023 diluted non-GAAP EPS were $16.07, up from $13.71 EPS YoY.
- Full year FY 2023 non-GAAP operating income was $8.9 billion, up 13% from $7.9 billion YoY.
Remaining performance obligations (RPOs) for Q4 totaled $17.22 billion.
This quarter was another positive one for Adobe, with a positive beat across the board, including its previous EPS guide. But the miss for Adobe came in its previous revenue guide for Q4 and for the full FY 2023, which came up light for the quarter and for the full year. Granted, it was not a big miss, but there was some sell off reaction from the market. And we must note, Adobe reporting its earnings on the same day the Federal Reserve was making its announcements can have unintended consequences and that may have had an effect here.
And as we have said previously, these positive revenue and earnings numbers are solid, but we expect continuing growth for Adobe as it follows its roadmap for delivering broader and powerful generative AI and AI-enhanced features within its products for its customers. We believe that those innovations will incrementally drive revenue growth and add to Adobe’s impressive gross margins.
Adobe Revenue by Business Segment Performance
By business segment in Q4, Adobe’s subscription revenue rose by 13% to $4.8 billion, up from $4.2 billion YoY. Product revenue for the quarter was $114 million, down 1% from $115 million YoY as customers continue to move to subscription-based products. Services and other revenue totaled $171 million, down 4% from $178 million YoY.
Business segment revenue for the full year of FY 2023 included subscription revenue of $18.3 billion, up 12% from $16.4 billion YoY, while full year FY 2023 product revenue totaled $460 million, down 14% from $532 million. Services and other revenue for the full year of FY 2023 totaled $665 million, down 3% from $686 million YoY.
Adobe Revenue by Product Segment
Adobe revenue by product segment in Q4 also showed good performance.
The Digital Media segment revenue totaled $3.72 billion for Q4, which was up 13% YoY, while Creative revenue rose 12% to $3 billion, and Document Cloud revenue hit $721 million, a 16% rise YoY. Digital Experience Q4 segment revenue came in at $1.27 billion, a 10% increase YoY.
Adobe also reported net new Digital Media annual recurring revenue (ARR) of $569 million for Q4, while its Creative ARR hit $12.37 billion, and its Document Cloud ARR rose to $2.81 billion. Adobe’s Digital Experience subscription revenue reached $1.27 billion, a 10% increase YoY in Q4.
For the full fiscal year of 2023, the Digital Media segment revenue totaled $14.22 billion, which was up by 11% YoY, while net new Digital Media ARR grew to $1.91 billion for FY 2023. Creative revenue grew to $11.52 billion for FY 2023, up 10 % YoY, while Document Cloud revenue rose to $2.7 billion, up 13% YoY.
Full FY 2023 Digital Experience segment revenue hit $4.89 billion, up 11% YoY, while Digital Experience subscription revenue rose 12% YoY to $4.33 billion.
Adobe’s $20 Billion Planned Figma Acquisition Still Under Regulatory Review
Adobe has been looking forward to closing its planned $20 billion acquisition of collaborative design platform vendor Figma since it was announced in late 2022, but the deal continues to be under review by regulators from the European Commission (EC) and in the US and UK.
Adobe CEO and Chairman Shantanu Narayen said during Adobe’s earnings call that his company is continuing to work with regulators to bring the deal to fruition. He said the EC’s decision is expected by February 5, 2024, while a decision from UK regulators is expected by February 25. US regulators are expected to issue a decision soon, he said.
The potential Figma deal has been hanging over Adobe for some time, and we hope the company gets its rulings soon to continue its progress. Adobe sees Figma’s acquisition as one that would further boost Adobe’s revenue and standing in the lucrative and demanding creative market, and we share that evaluation. As we have said in the past, we continue to like this proposed acquisition because it shows that Adobe is not standing still in the marketplace and is instead boldly trying to broaden its base and capture new revenue and segments.
(UPDATE: Adobe and Figma have decided to end their pending merger. As Adobe states in its annoucement, “Although both companies continue to believe in the merits and procompetitive benefits of the combination, Adobe and Figma mutually agreed to terminate the transaction based on a joint assessment that there is no clear path to receive necessary regulatory approvals from the European Commission and the UK Competition and Markets Authority.”)
Adobe Provides Guidance for Q1 FY 2024
As part of its Q4 earnings report, Adobe also provided revenue guidance for the first quarter (Q1) of FY 2024 and for the full FY 2024. For Q1 of FY 2024, Adobe expects total revenue of $5.1 billion to $5.15 billion and non-GAAP EPS of $4.35 to $4.40. The company said it expects the Digital Media segment revenue in Q1 to reach between $3.77 billion to $3.80 billion, and Digital Experience segment revenue of $1.27 billion to $1.29 billion. The company also expects Digital Experience subscription revenue of between $1.14 billion and $1.16 billion. For full FY 2024, Adobe expects total revenue of $21.30 billion to $21.50 billion and non-GAAP EPS of $17.60 to $18.00.
What It Means: Adobe Revenue Q4 Overview
For Adobe, we believe that its full FY 2023 and Q4 results provide clear evidence that this innovative company is continuing to show its strength and positive market position under the leadership of CEO Narayen and his executive team. And making it even more impressive is that this growth and steadiness comes during continuing challenging macroeconomic conditions around the globe, which has been affecting so many tech and consumer stalwarts.
Adobe’s success comes from its broad and successful line of professional creativity products, including Adobe Photoshop, Acrobat Pro, Illustrator, Adobe Express, Lightroom, Dreamweaver, and Substance 3D Pro as well as its Document Cloud and Experience Cloud offerings. Adobe products are used daily by huge numbers of business professionals and consumers directly and indirectly for years, giving the company its longstanding model for success. We see no reason to believe that these healthy business relationships with customers will not continue.
We are also pleased to see Adobe’s continuing successes in moving its customers to subscription models, which offer healthy recurring revenue and feed the company’s revenue juggernaut. This approach also helps enterprise customers, giving them access to the latest versions and features of their favorite creative applications. We remain bullish about Adobe and look forward to watching the company’s continuing progress.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Adobe’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group 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 The Futurum Group as a whole.
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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.
