“Adobe is a rocket ship”

It was cool to read what Blair Reeves had to write about Adobe in his Bullish Data Newsletter… pretty much in line with what we’ve been telling the market we’re trying to do, and have been heads-down working on for the last few years. Wonderful to be in the company of other great, smart, passionate professionals in our #AdobeLife who are working together and becoming “a cast study candidate”…

Adobe is a rocket ship

Adobe’s Q2 report came out on Monday, and I updated my running chart of financial performance for the company and Marketing Cloud specifically. The company is on a tear. While their P/E multiple is still at eye-watering levels, in 2015 they’ve nearly doubled their operating margin from where it was in 2013/2014 and begun to ramp up net income in a big way. The fruits of their pivot to a cloud model are beginning to show.

One day, Adobe should be a case study candidate for a company that has successfully done two extremely difficult things well – simultaneously. First, they pivoted from an on–prem software model to mostly cloud. The transition to Creative Cloud, while ceasing the sale of their on-prem creative products, involved swapping out one source of revenue for another (recurring) one, which distorted the optics of their revenue growth for several years. It’s a tribute to their strong leadership and clear communication that they were able to do it as a public company.

Second, they built an industry-leading digital marketing line of business from virtually nothing. Starting with the Omniture acquisition in 2009, Adobe has deftly managed its marketing tech acquisitions in such a way as to build enormous value around the portfolio as a whole, and not just through the sum of its parts. (Can you tell I’m trying to avoid saying “synergy?”) Very, very few companies have done this nearly as successfully.