Share

Under the Spotlight Wall St: Adobe Inc. (ADBE)

Starting with the development of a language for printers and documents, Adobe has become one of the most important companies for modern day internet. Let’s put it under the spotlight.

Despite not being one of the members of the FAANG acronym, Adobe ($ADBE) is one of the world’s biggest tech companies, transforming the way we interact with computers and the web. Adobe's software is used by professionals and individuals globally to create and edit digital media, as well as to manage and publish content online, but the company’s roots run deeper than that.

In fact, Adobe’s first product dealt with the world’s most hated devices: printers. PostScript, as it was called, was a programming language that used a set of commands and data structures to describe the layout and appearance of a document. It included support for text, graphics, and images, and could be used to create complex documents with a high degree of formatting control, thus revolutionising the printing industry.

Like Amazon ($AMZN), Apple ($APPL) and many other Silicon Valley companies, Adobe was founded in a garage, but the success of PostScript quickly allowed Adobe to scale up. Its success was so big indeed, that Steve Jobs tried to acquire the company, though he’d eventually settle to own 19% of Adobe’s shares.

Building the suite

During the 80s, the software giant begun to develop what would become one of its flagship products: Adobe Illustrator and Adobe Photoshop, a vector-based illustration software and an image editor, used by millions of designers all around the globe. Eventually Premiere, InDesign, After Effects, Lightroom and other apps would join the much beloved Adobe suite, helping thousands of businesses improve the performance of their creative teams.

One key factor that has contributed to Adobe's financial success is its focus on the subscription model. In 2013, Adobe made the decision to move its Creative Cloud products to a subscription-based model, which has allowed the company to generate a more predictable and recurring stream of revenue. This model has also allowed Adobe to continually update its products and offer new features to customers, which has helped drive customer loyalty and retention.

Another factor that has contributed to Adobe's financial success is the expansion into new markets and customer segments. In recent years, Adobe has made significant investments in acquisitions and partnerships to enter new markets and expand its product offerings. For example, in 2018, Adobe acquired Magento, a leading e-commerce platform, which has helped the company expand its presence in the digital marketing space for US$1.68b, and in September 2022 it announced the acquisition of Figma, a software development startup focused on design tools for US$20b.

Creative money-making

Adobe has had strong financial performance in recent years. In 2022, it reported revenue of US$17.6b, which represents a year-over-year growth of 15%. This growth was driven by strong demand for the company's Digital Media products, which allow users to make online ads. The segment had record revenues of US$12.84b in the period, making up for most of its income.

Adobe's financial performance has also been supported by its ability to generate consistent and growing levels of profit. In 2022, Adobe's net income was US$4.7b, which represents a margin of 27%. This strong profitability has allowed the company to consistently realise shares buybacks while also investing in research and development (R&D) to drive future growth.

Despite its strong financial performance, Adobe does face some challenges and risks. One key risk it faces is the potential for disruption from new technologies and competitors. The software industry is constantly evolving, and there is always the risk that new technologies or competitors could emerge and pose a threat to Adobe's business. However, considering the company’s creative nature, it might be hard to believe they will not continue to surprise us.

This does not constitute financial advice nor a recommendation to invest in the securities listed. The information presented is intended to be of a factual nature only. Past performance is not a reliable indicator of future performance. As always, do your own research and consider seeking financial, legal and taxation advice before investing.


Related


Want more?

You know what to do

Insights, trends and company deep dives delivered straight to your inbox.


Stake logo
Over 7,000 5-star reviews
App Store logoGoogle Play logo

Subscribe to our free newsletters

By subscribing, you agree to our Privacy Policy.

Stakeshop Pty Ltd is registered as an overseas company in New Zealand (NZBN: 9429047452152), and is registered as a Financial Service Provider under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (No. FSP774414). We hold a full licence issued by the Financial Markets Authority to provide a financial advice service under the Financial Markets Conduct Act 2013. However, the content on this website has not been prepared to take into account any of your individual objectives, financial situation or needs. To the extent you require further information about the relevant New Zealand legislation that may apply, or require specific advice, please contact your legal and/or financial adviser (as appropriate). The information on our website or our mobile application is not intended to be an inducement, offer or solicitation to anyone in any jurisdiction in which Stake is not regulated or able to market its services. At Stake, we’re focused on giving you a better investing experience but we don’t take into account your personal objectives, circumstances or financial needs. Any advice is of a general nature only. As investments carry risk, before making any investment decision, please consider if it’s right for you and seek appropriate taxation and legal advice. Please view our Terms & Conditions, Privacy Policy, Financial Advice Disclosure and Disclaimers before deciding to use or invest on Stake. By using the Stake website or service in any way, you agree to our Privacy Policy and Terms & Conditions All financial products involve risk and you should ensure you understand the risks involved as certain financial products may not be suitable to everyone. Past performance of any product described on this website is not a reliable indication of future performance. Stake is a registered trademark under class 36 (New Zealand).

Copyright © 2024 Stake. All rights reserved.