Adobe Inc. Reports Record Revenue and EPS Growth for FY23 and Q4 2023, Provides FY24 Targets

$ADBE(ADBE)

Adobe, the global software company, reported record-breaking revenue and year-over-year growth in its fiscal year 2023. The company achieved a revenue of $19.41 billion, with a 17 percent increase in earnings per share (EPS). Adobe's success can be attributed to its strong performance across its Creative Cloud, Document Cloud, and Experience Cloud offerings.

In fiscal year 2023, Adobe achieved fourth-quarter revenue of $5.05 billion, representing a 12 percent year-over-year growth or 13 percent in constant currency. Diluted earnings per share were reported at $3.23 on a GAAP basis and $4.27 on a non-GAAP basis. The company's operating income for the fourth quarter was $1.74 billion on a GAAP basis and $2.34 billion on a non-GAAP basis. Adobe generated $1.60 billion in cash flows from operations during the quarter.

Adobe's Digital Media segment revenue reached $3.72 billion in the fourth quarter, experiencing a 13 percent year-over-year growth or 14 percent in constant currency. Creative revenue, a part of the Digital Media segment, grew to $3.00 billion with a 12 percent year-over-year growth, while Document Cloud revenue reached $721 million, representing a 16 percent year-over-year growth.

The Digital Experience segment revenue for Adobe in the fourth quarter was $1.27 billion, showing a 10 percent year-over-year growth or 11 percent in constant currency. Digital Experience subscription revenue, a part of this segment, was reported at $1.12 billion, reflecting a 12 percent year-over-year growth.

Adobe's positive performance is also reflected in its net new Digital Media Annualized Recurring Revenue (ARR) of $569 million in the fourth quarter. The company ended the quarter with Digital Media ARR of $15.17 billion. Creative ARR reached $12.37 billion, and Document Cloud ARR grew to $2.81 billion. Remaining Performance Obligations (RPO) exiting the quarter were $17.22 billion. 

For the first quarter of fiscal year 2024, Adobe forecasts a total revenue of $5.10 billion to $5.15 billion. The net new Digital Media ARR is estimated to be around $410 million, with a Digital Media segment revenue between $3.77 billion and $3.80 billion. The Digital Experience segment revenue is projected to be within the range of $1.27 billion to $1.29 billion, while Digital Experience subscription revenue is expected to reach $1.14 billion to $1.16 billion. The company forecasts GAAP earnings per share for the first quarter to be between $3.35 and $3.40, and non-GAAP earnings per share to be in the range of $4.35 to $4.40

In terms of financial targets for fiscal year 2024, Adobe aims to achieve total revenue between $21.30 billion and $21.50 billion. The projected Digital Media net new ARR is approximately $1.90 billion, and the company targets a Digital Media segment revenue of $15.75 billion to $15.85 billion. The Digital Experience segment revenue is expected to reach $5.275 billion to $5.375 billion, with Digital Experience subscription revenue ranging from $4.75 billion to $4.80 billion.

Adobe expects sequential growth from the first quarter to the second quarter of fiscal year 2024, typical Q3 summer seasonality, and a strong finish to the year in the fourth quarter of 2024.

While Adobe has achieved significant success, it also faces challenges. The company is currently engaged in discussions with the Federal Trade Commission (FTC) regarding its disclosure and subscription cancellation practices. The resolution of the FTC matter could result in potential monetary costs or penalties, impacting the company's operations and financial results.

Overall, Adobe's financial performance in fiscal year 2023 demonstrates its strength in the market. With its innovative products and strong customer base, the company is well-positioned for continued growth in 2024 and beyond. However, it must navigate the challenges posed by the ongoing FTC matter to sustain its success.

Shares of ADBE fell 8% following news. Q4 figures were in line with expectations. The problem was the outlook for Q1 and FY24 were light of expectations. Shares dropped to $590 which matches the December low and the lower end of its Bollinger band on the daily chart. This sets up as a key level of support for investors to watch.