Design Software Stock Review Q2: Adobe (NASDAQ:ADBE) vs. Competitors

Earnings numbers are often indicative of where a company will head in the coming months. With Q2 behind us, let’s take a look at Adobe (NASDAQ:ADBE) and its peers.

There is a growing demand for rich, interactive 2D, 3D, VR, and AR experiences, and while the ubiquitous metaverse may still be more buzzword than reality, there is a real need for the tools to create these experiences, whether they are games, 3D tours, or interactive movies.

The 6 design software companies we track had a weaker second quarter. As a group, revenue beat analyst estimates by 1.8%, while revenue forecasts for the next quarter were 0.8% lower.

Stocks, especially growth stocks with cash flows further into the future, had a strong end to 2023. On the other hand, this year has seen more volatility in the stock market due to mixed inflation data. However, design software stocks have held steady through it all, with average share prices remaining relatively unchanged since the last earnings results.

Adobe (NASDAQ:ADBE)

One of Silicon Valley’s most iconic software companies, Adobe (NASDAQ:ADBE) is a leading provider of software-as-a-service for digital design and document management.

Adobe reported revenue of $5.31 billion, up 10.2% year over year. It was a strong quarter for the company. Adobe beat analysts’ expectations for revenue, RPO and EPS. These beats were driven by a massive outperformance in net new Digital Media ARR of $487 million (vs. estimates of $434 million). On the back of the strong results, Adobe raised its full-year guidance for net new Digital Media ARR and EPS, which boosted the stock price.

“Adobe delivered record revenue of $5.31 billion driven by strong growth across Creative Cloud, Document Cloud and Experience Cloud,” said Shantanu Narayen, Adobe president and CEO.

Interestingly, since the report was published, the share price has increased by 16.2% and currently stands at $533.29.

Is it time to buy Adobe? Access our full earnings analysis here, it’s free.

Best Q2: Unity (NYSE:U)

Unity (NYSE:U) is a game studio founded by three friends in a Copenhagen apartment. It is a software-as-a-service platform that makes it easy to create and monetize new games and other visual digital experiences.

Unity reported revenue of $449.3 million, down 15.8% year over year and beating analyst expectations by 1.7%. The company outperformed its competitors, but unfortunately it was a weaker quarter for the company due to a disappointing net revenue retention rate and a mismatch with analyst estimates for billings.

The market seems pleased with the results, as the stock is up 13.1% since the report. It is currently trading at $16.24.

Is it time to buy Unity? Get access to our full earnings analysis here, it’s free.

Weakest Q2: PTC (NASDAQ:PTC)

PTC’s (NASDAQ: PTC) software-as-a-service platform used to design Airbus A380 and Boeing 787 Dreamliner commercial airplanes helps engineers and designers create and test products before production.

PTC reported revenue of $518.6 million, down 4.4% year over year and 2.8% below analyst expectations. It was a weak quarter for the company, which missed analyst estimates on billings and saw its gross margin decline.

PTC had the weakest results vs. analyst estimates and the weakest full-year forecast update of the group. As expected, shares are down 3.2% since the results and are currently trading at $172.05.

Read our full analysis of PTC’s performance here.

Procore (NYSE:PCOR)

Procore (NYSE:PCOR) is used to manage the multi-year expansion of the Panama Canal, which began in 2007, and offers a software-as-a-service platform for project, financial and quality management for the construction industry.

Procore reported revenue of $284.3 million, up 24.4% year over year and beating analyst expectations by 3.3%. In retrospect, it was a mixed quarter for the company, with a significant beat on analyst estimates for ARR (annual recurring revenue) but slowing customer growth.

Procore achieved the fastest revenue growth among its peers. The company added 152 customers, reaching a total of 16,750. The stock is down 17.6% since the filing and currently trades at $55.40.

Read our full, hands-on Procore report here, it’s free.

Cadence (NASDAQ:CDNS)

Cadence Design Systems (NASDAQ:CDNS), whose name refers to a repeating pattern or rhythm in electronics design, offers a software-as-a-service platform for semiconductor engineering and design.

Cadence reported revenue of $1.06 billion, up 8.6% year over year and topping analyst expectations by 1.7%. Overall, it was a mixed quarter for the company, which significantly beat analyst estimates for billings but saw gross margin decline.

Cadence received the largest full-year estimate increase among its peers. Shares are down 5.4% since the report and are currently trading at $271.94.

Read our full, hands-on report on Cadence here, it’s free.

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