Adobe sees enterprise bookings impacted by COVID-19, but positive in outlook

Profile picture for user ddpreez By Derek du Preez June 15, 2020
Digital experiences company Adobe delivered a mixed bag of results in Q2, but has confidence in its future strategy.

Adobe CEO Shantanu Narayen
(Adobe CEO Shantanu Narayen, Adobe Summit)

Adobe's Q2 results suggest that enterprise buyers are delaying anticipated technology deals as a result of the COVID-19 pandemic, instead choosing to focus on financial stability and employee support. However, according to the CEO of the digital experiences company, Shantanu Narayen, the global health crisis is also focusing minds at Adobe on how it can thrive in a post-Coronavirus world.

Adobe saw quarterly revenue of $3.13 billion, which represents a 14 percent year-over-year growth, but falls slightly short of analyst estimates (largely due to weak demand in the company's Advertising Cloud product).

However, areas such as Digital Media, Creative, Document Cloud, and Digital Experience all saw growth in the quarter, signalling that investments that aid ‘work from home' and digital productivity will continue to strengthen as distributed workforces continue to be the new normal.

Adobe CEO Narayen commented on this trend, which is also being seen across other enterprise vendors, and said:

The past couple of months have shown us that in times of uncertainty people are turning to creative expression to learn, cope and make an impact. Adobe Creative Cloud is the center of this new creative renaissance, unleashing creativity for all and empowering millions of people around the world to tell their stories. As schools faced physical closures and moved online, we focused our attention on enabling them to create from home.

The shift to remote work has driven a surge in demand for digital documents, with use of web-based PDF services, up nearly 40% quarter-over-quarter and the number of documents shared in Acrobat, increasing 50% year-over-year. We continued to drive strong adoption for Adobe Sign, our cloud-based electronic signature solution, with usage increasing 175% since the start of our fiscal year. Mobile usage exploded with Acrobat Reader installations increasing 43% year-over-year and Adobe Scan installations up 66% year-over-year.

As part of the strategic review of our Document business, we are increasing investment in Adobe Sign and our PDF services on the web and availability of PDF functionality through APIs to capitalize on the wholesale shift to remote work and digital-first document processes.

Narayen highlighted how the City of Seattle's digital workplace division has deployed Adobe Sign across its departments when the city shifted to remote working and that the State of Utah is using Adobe Acrobat and Sign as part of its initiative to facilitate emergency response and streamline communication.

However, despite these positive signs, Narayen was frank about how enterprise buyers of its Digital Experience business - one of its core enterprise offerings - have been more cautious in the short-term as they refocus on the immediate impact of COVID-19. He said:

In our Digital Experience business, we achieved Experience Cloud revenue of $826 million for the quarter. As outlined at our last earnings call, we saw anticipated delays in enterprise bookings and consulting services implementations as companies prioritized employee and financial well-being. The extreme economic challenges that enterprise customers in certain verticals experienced as well as weakness in our commercial segment that targets small and medium sized businesses also adversely impacted bookings. In addition, the significant global decline in advertising spending impacted our Advertising Cloud revenue.

However, Narayen said that despite this companies now have a "heightened urgency" to transform and Adobe has signed key deals with IBM, Walgreens, Safeway and Allianz in this quarter.

Adobe's internal response

Narayen also highlighted some of the ways in which Adobe has responded to the COVID-19 crisis, some of which include short-term pivots, whilst others point to a long-term doubling down in areas it sees opportunities.

For example, much like most other enterprises out there, Adobe took early and "decisive action" to direct teams to work from home, suspend travel and cancel in-person events through 2020. In addition, Narayen said:

We immediately instituted work streams to control discretionary expenses and evaluate our strategic priorities to double down on those that will drive the greatest growth and profitability for the long-term. Through all of this, the resiliency and flexibility of our employees has been awe-inspiring. I am proud of how our employees transitioned to this new reality.

On the events point, Adobe Summit this year went fully digital - where we at diginomica tuned into a couple of customer sessions, which you can see here and here. Narayen also pointed to the benefits of going digital for events, citing a larger audience and the ability to easily engage with buyers at home. He said:

The Adobe Summit Live virtual experience enabled us to engage a far larger audience than an in-person event and set the bar for virtual events. Cumulatively, we have engaged with more than 0.5 million visitors. While it was difficult to imagine only conducting business with CMOs and CIOs virtually, a side benefit of everyone working at home is that we are able to schedule and engage with far more customers across multiple continents.

In all these discussions with business leaders, it is clear that investments in digital and specifically customer experience are more important than ever.

However, it's the long-term focus that is of particular interest, where Narayen suggested that it won't just be customers going through significant changes to see success post-COVID-19 - but Adobe itself will too be assessing its priorities. He said:

Great companies are defined by how they lead through adversity. We have successfully navigated several crises and have always used them as a catalyst to make strategic and structural change to emerge stronger.

Our employees, broad and diverse portfolio of products, strong balance sheet and rigorous operating cadence put us in a rarified atmosphere among companies of our size and scale. We will emerge stronger than ever.