Why Adobe Is One of the Best Software Stocks Around

Digital transformation is sweeping across the globe, and the pressure on companies to update their customer experiences for the 21st century is on the rise. Despite ample competition, there is plenty of new business to go around. However, after yet another quarterly performance that exceeded expectations, digital content creation software provider Adobe (NASDAQ:ADBE) has proven it is a best-in-breed pick.

Building another year of huge growth
Adobe’s second-quarter revenue rose 25%, building on the same rate put up during the fiscal 2019 first quarter and topping management’s guidance. Full-year expectations for $11.15 billion in revenue was left unchanged — a 23% annualized increase — and third-quarter revenue results were forecast to be up 22%. Adobe does tend to under-promise and over-deliver, so investors were more than happy to focus on the first half of the year’s results.

Though gross profit margins declined as Adobe added new services aimed at digital commerce — primarily through its big takeover of Magento and Marketo last year — the metric was still near a lucrative 85% rate. That’s substantially higher than some of Adobe’s software peers like salesforce.com (at 75.5% gross profit margin in its last quarter) and Shopify (at 56.3% gross profit).

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