No Surprise Here: Adobe Beats Estimates in Fiscal 3Q16

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Part 6
No Surprise Here: Adobe Beats Estimates in Fiscal 3Q16 PART 6 OF 12

Adobe Marketing Cloud Was a Key Contributor in 3Q16

Adobe Marketing Cloud grew 10% in fiscal 3Q16

Earlier in this series, we discussed Adobe Systems’ (ADBE) fiscal 3Q16 results. We also discussed the performance of its primary operating segments, Digital Media and Digital Marketing. We saw that Creative Cloud and Document Cloud drove growth in Adobe’s Digital Media segment. Marketing Cloud was a key contributor to the Digital Marketing segment’s growth, as we highlighted in our pre-3Q16 results series.

In fiscal 3Q16, Adobe’s Marketing Cloud revenues grew 10% on a YoY (year-over-year) basis to $404 million. It had ~23 trillion customer data transactions that quarter, compared with ~19 trillion transactions in fiscal 2Q16.

Marketing Cloud growth exceeded Adobe’ management estimates. In its earnings release, the company stated that “reported Marketing Cloud revenue was a record $404 million, ahead of our Q3 target as a result of accelerated second half pipeline conversion – and resulted in year-over-year growth of 10%.”
Adobe Marketing Cloud Was a Key Contributor in 3Q16

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The marketing cloud space is seeing increased competition

Although Adobe dominates the marketing cloud space, its growth is slowing down, as shown in the chart above. Lately, this space is seeing increased competition due to more participation from Salesforce (CRM), Oracle (ORCL), and IBM (IBM). The Demandware acquisition boosted Salesforce’s marketing cloud, and the company now expects a $1 billion run rate from its marketing cloud.

Adobe’s leadership position in the Marketing Cloud space led market research firm Stifel to suspect that Adobe was the other competitor in the Demandware bidding war with Salesforce. The Demandware acquisition marks the biggest deal in Salesforce’s history.

The growing competition in the marketing cloud space likely pushed Adobe to make the Livefyre acquisition. Livefyre, an audience engagement company, offers several tools that companies and brands can use to engage with their audiences.

Adobe accounts for 0.24% of the SPDR S&P 500 ETF (SPY). SPY has a 7% exposure to the application software sector.


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