Adobe (ADBE) – Get Report, whose stock is up over 8% after it beat February quarter estimates and issued May quarter sales guidance that was just slightly below consensus, said on its earnings call that it has seen “little to no impact” to date on demand for its Creative Cloud and Document Cloud content-creation suites.
The company also noted (like some peers) that its reliance on subscription-based recurring revenue streams gives its business a measure of predictability in an environment such as the current one. Notably, Adobe guided for its closely-watched Digital Media annualized recurring revenue (ARR) to grow by $385 million sequentially to $9.115 billion, roughly even with a consensus of $9.11 billion.
At the same time, CEO Santanu Narayen did caution that Adobe expects some enterprise clients to delay deal bookings, postpone services implementations and otherwise cut expenses. Separately, CFO John Murphy admitted that Adobe saw some Digital Media weakness in China last quarter, and that its Digital Experience (marketing/ad software) business witnessed “some unanticipated deal slippage during the last 10 days of the quarter.”
In many ways, e-signature software leader and Adobe rival DocuSign (DOCU) – Get Report, whose stock is up 4% post-earnings, sang a similar tune. The company beat January quarter estimates, issue above-consensus April quarter and fiscal 2021 (ends in Jan. 2021) sales guidance and insisted that it hasn’t yet “seen any material changes” to business trends.
CEO Dan Springer also pointed out that “the vast majority” of DocuSign software implementations are done remotely. He also pointed out (as others have) that COVID-19 could lead to a pickup in the speed at which some companies transition from physical to digital document signings, albeit while adding that DocuSign doesn’t think “that trend is going to be dramatically moved one way or another by [the] pandemic.”
Chat/collaboration software upstart Slack (WORK) – Get Report is having a rougher time than Adobe and DocuSign: Its stock is down over 8% after the company beat January quarter estimates but issued mixed guidance that was said to bake in macro uncertainty related to COVID-19. While Slack’s EPS guidance and fiscal 2021 (ends in Jan. 2021) revenue guidance was roughly in-line, its April quarter revenue guidance and fiscal 2021 billings guidance was moderately below consensus.
The market’s harsh reaction to the numbers might partly stem from the fact that Slack — like DocuSign, or for that matter Zoom Video Communications (ZM) – Get Report — has been expected to benefit from the COVID-19 outbreak driving a greater amount of remote work activity. As a result, the company’s mixed guidance could be reigniting fears about competitive headwinds from Microsoft’s (MSFT) – Get Report Teams collaboration platform, which is bundled with many Office 365 subscriptions.
For his part, CEO Stewart Butterfield said Slack has seen “a massive outpouring” of customer interest amid the COVID-19 outbreak, and that his company is both proactively reaching out to major enterprise clients and seeing a large amount of inbound activity. However, he cautioned that it’s difficult for Slack, which relies on a freemium business model, to forecast just how many new free users will be converted into paid subscribers.
CFO Allen Shim added that Slack is trying to be prudent with its enterprise sales forecasting at a time when its ability to meet with existing and potential customers in person is limited.
“The pipeline is healthy and…we have the sales capacity, but it’s really hard to predict the close rates, when the deals will close in the quarter,” Shim said. “And so I think we’re just trying to reflect a bit more [of the] uncertainty that we’re seeing in the macro environment.”