On the other hand, for Microsoft (NASDAQ: MSFT), it's a gently sloping trend, with operating margins currently at above 40%, despite the fact that Bill Gates' company also sells hardware surface tablets and game consoles. However, EBIT margins have been stagnating around the 33% mark, showing that increased adoption of online media has not proportionately increased Adobe's operating profitability. In this context, COVID-19 has shifted customers' behavior with more people buying online, and 88% of people polled have changed their online content consumption pattern, according to an Adobe-sponsored survey, with 58% of consumers relying on online news to make purchase decisions.Īs a result, corporations have responded by increasing their online advertisement budgets and making use of Adobe's array of marketing tools aimed at improving shoppers' digital experience. Then, it's no mystery why Adobe's revenues have been growing at double-digit figures. Looking at secular trends, customer's online experience and personalized digital marketing have taken the central stage with the advent of eCommerce, further accelerated by the pandemic.
Additionally, there are e-Commerce integration frameworks as well as advertising tools within the cloud offering. Through the company's flagship Creative Cloud, a subscription-based product, content creators, app developers, marketing agencies and publishers can produce high-quality work.
Adobe's profitability amid changing market dynamicsįirst, those who still remember Adobe as offering free versions of Adobe Reader in order to read PDF files or selling Adobe Writer aimed at digitization of paper documents, are due for a refresh. My objective is to identify the reasons for the acquisition, by first providing a glimpse of the profitability run, with focus on Adobe's Creative Cloud. Then, one starts to wonder why the software giant spent about half of its quarterly revenues to acquire Workfront, a startup specializing in marketing, for 1.5 billion dollars in November, despite the latter having only raised $375 million in fundraising activities to date. A look at Adobe's (NASDAQ: NASDAQ: ADBE) quarterly post-pandemic sales figures not only reveals that the software company is COVID-proof, but is largely benefiting from the virus as well.
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