Adobe and Peers Q2 Review: PTC Surges 24% YoY, Adobe Down 14.6% Since Earnings

Adobe reported Q2 revenues of $5.87 billion, up 10.6% YoY, exceeding analysts' expectations by 1.5%. PTC reported a 24.2% YoY revenue increase to $643.9 million, beating estimates by 10.4%. As a group, design software stocks reported a 4.2% beat on revenue estimates, but share prices have declined 2% since the latest earnings results.

Adobe Inc. (ADBE) reported Q2 revenues of $5.87 billion, up 10.6% year-over-year (YoY), exceeding analysts' expectations by 1.5%. The company's Digital Media revenues were $4.38 billion, indicating a 9.6% growth over the figure reported in the year-ago quarter. Digital Experience revenues were $1.46 billion, showing an 8.1% growth [1].

PTC Inc. (PTC), originally known as Parametric Technology Corporation, reported a 24.2% YoY revenue increase to $643.9 million, beating estimates by 10.4%. The company's strong performance included an impressive beat of analysts' EBITDA estimates and an exceptional quarter overall [2].

As a group, design software stocks reported a 4.2% beat on revenue estimates. However, share prices have declined 2% since the latest earnings results. Unity (NYSE:U), which powers over half of the world's mobile games, reported revenues of $440.9 million, down 1.9% YoY, but the stock is up 12% since reporting. PTC (NASDAQ:PTC) and Cadence Design Systems (NASDAQ:CDNS) also reported strong earnings, with PTC up 1% and Cadence up 4.9% since reporting. Adobe (NASDAQ:ADBE) and Procore Technologies (NYSE:PCOR) experienced declines in share prices, with Adobe down 14% and Procore down 8.5% since reporting [2].

Adobe's AI-powered portfolio, including Acrobat AI Assistant and Firefly Services, is gaining traction. The company's strategy of offering an AI-powered, comprehensive creative platform is addressing the needs of creative and marketing professionals. Adobe's AI book of business, including Acrobat AI Assistant, Firefly App, and Services, is tracking ahead of the $250-million ending Annual Recurring Revenue (ARR) target by the end of fiscal 2025 [1].

Despite the strong earnings, Adobe's share price has dropped 18.8% year-to-date, underperforming the broader Zacks Computer and Technology sector's return of 11.8%. The ADBE stock is trading at a premium, with a Value Score of C. The company's 12-month forward price/earnings (P/E) ratio is 16.02X, compared to Microsoft's 32.51X and Alphabet's 19.48X [1].

Adobe currently carries a Zacks Rank #3 (Hold), suggesting a neutral outlook. The company's AI initiatives and strong earnings growth may provide opportunities for investors, but the current market conditions and competition from larger tech companies like Microsoft and Alphabet may pose challenges [1].

References:
[1] https://www.nasdaq.com/articles/adobes-ai-powered-portfolio-gaining-traction-whats-ahead
[2] https://finance.yahoo.com/news/q2-earnings-highlights-unity-nyse-033443013.html