The key factors behind Adobe’s record $11bn annual revenue

16 Dec 201913.85k Views

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Image: © wolterke/Stock.adobe.com

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After a record-breaking financial year, Adobe has set its sights higher for 2020 with the hopes of reaching revenue of more than $13bn.

For the first time since software company Adobe was founded in 1982, the business has surpassed $11bn in annual revenue. In its quarterly earnings report, which was submitted late last week, Adobe said that it generated revenue of $2.99bn for the quarter and exceeded $11bn in revenue for full-year 2019, breaking its existing records.

Shantanu Narayen, who has been CEO of the business since 2007, said: “Fiscal 2019 was a phenomenal year for Adobe as we exceeded $11bn in revenue, a significant milestone for the company.

“Our record revenue and EPS performance in 2019 makes us one of the largest, most diversified and profitable software companies in the world. Total Adobe revenue was $11.17bn in FY 2019, which represents 24pc annual growth.”

With a market capitalisation of more than $150bn, Adobe is the now third most valuable US enterprise software company, behind Microsoft and Oracle.

Acquisitions

Some commentators attributed this success to Adobe’s recent strategic acquisitions, which include the $1.7bn purchase of Magento in May 2018 and the $4.75bn acquisition of Marketo in September 2018.

Adobe CFO John Murphy acknowledged these purchases in the company’s quarterly earnings report. Both Magento and Marketo are categorised as sources contributing to Adobe’s ‘digital experience’ (DX) revenue, which grew from $821m in Q3 to $859m in the latest quarter.

Murphy said: “Key Q4 highlights include strong year-over-year growth in our content and commerce solutions led by Adobe Experience Manager and success with cross-selling and up-selling Magento; adoption of Adobe Experience Platform, Audience Manager and Real-Time CDP in our data and insights solutions; and momentum in our Marketo business, including in the mid-market segment, which helped fuel growth in our customer journey management solutions.”

Narayen added: “When I take a step back and look at what’s happened during the year, I feel really good about the amount of innovation that’s happening.

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“And the second thing I feel really good about is the alignment across Magento, Marketo and just call it the core DX business in terms of having a more unified and aligned go-to-market, which has not only helped our results but it’s also helped the operating expense associated with that business.”

Adobe’s CXM platform

Narayan also noted growing revenue from the enterprise side of the business. “We’re rapidly evolving our CXM [customer experience management] product strategy to deliver generational technology platforms, launch innovative new services and introduce enhancements to our market-leading applications.

“Adobe Experience Platform is the industry’s first purpose-built CXM platform. With real-time customer profiles, continuous intelligence and an open and extensible architecture, Adobe Experience Platform makes delivering personalised customer experiences at scale a reality.”

Transition to cloud services

After the earnings were reported, Adobe shares rose almost 4pc on Friday (13 December), to a record close of $317.94.

While there are a number of factors that contributed to Adobe’s success in 2019, some investors are also citing the company’s transition to offering cloud services, particularly when it comes to its suite of creative tools. This side of the business accounted for $1.74bn in revenue last quarter, with Document Cloud adding another $339m.

The company has spent six years moving from packaged software to the cloud and has seen subscription revenue jump by 23pc during the year. Adobe’s biggest product is its Creative Cloud, which covers the company’s most well-known brands such as Photoshop, Illustrator and Premiere Pro.

Narayen said: “We’re attracting new customers, with over 50pc of our cumulative subscribers being new to our Creative Cloud franchise.”

The company expects this growth to continue into 2020. In the earnings report, Adobe said that it is targeting FY2020 revenue of $13.15bn, representing a potential growth of around 18pc on this year’s record-breaking figure.

Kelly Earley is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com