Hi All,
Welcome to our brief overview of portfolio news from the past few days.
Adobe's AI-Powered Earnings Beat
Our headline story is Adobe, which reported strong fiscal third-quarter results that sent the stock higher in after-hours trading.
Adjusted Earnings Per Share (EPS): Came in at $5.31, ahead the consensus estimate of $5.18.
Revenue: Rose 11% year-over-year to a record $5.99 billion, beating Wall Street's view of $5.92 billion. This growth was broad-based, with strength in both its Digital Media and Digital Experience segments.
The real story here is the incredible momentum in Artificial Intelligence. Adobe's strategy to infuse AI across its product suite is not just working; it's accelerating. The company reported that its "AI-influenced" Annualized Recurring Revenue (ARR) has now surpassed $5 billion (up from $3.5 billion exiting fiscal 2024). Even more impressively, its new "AI-first" products, like Firefly, GenStudio for performance marketing and Acrobat AI Assistant, have already exceeded the company's full-year target of $250 million in ARR.
Reflecting this strength, Adobe raised its full-year guidance for both revenue and earnings, a clear sign of management's confidence.
As CEO Shantanu Narayen stated,
“Adobe is the leader in the AI creative applications category... Given our customer strategy, AI product innovation and strong go-to-market execution, we’re pleased to once again raise our FY25 total revenue and EPS targets.”
This was a stellar report that validates our thesis. Adobe is successfully transitioning from simply selling software to selling intelligent, AI-augmented creative and marketing platforms. The acceleration in Remaining Performance Obligations to 13% growth which is a key indicator of future revenue, is highly encouraging and shows that large enterprises are committing to bigger, long-term deals.
PayPal
At a conference, CEO Alex Chriss highlighted the "PayPal World" initiative. This new platform will connect different global digital wallets like WeChat, Mercado Pago, and India's UPI, making them interoperable. This massively expands the potential user base from 400 million to 2 billion people.
Allegion
At a Morgan Stanley conference, Allegion management explained its powerful "economic moat." A key part of this is their "spec writing" process, where Allegion employees write the technical hardware specifications for architects on new buildings. This allows them to embed their own products into the design from the start, creating a sticky, high-margin business that's hard to compete with.
Amazon
Amazon pushes on multiple fronts.
Zoox Robotaxis: Amazon's autonomous vehicle unit, Zoox, launched free robotaxi rides on the Las Vegas Strip, a major step forward in the self-driving space.
Ads Partnership: Amazon Ads has partnered with Netflix, allowing advertisers to buy Netflix's premium ad inventory directly through the Amazon platform.
Ashtead Group
Jefferies downgraded Ashtead to 'Hold' from 'Buy' and trimmed its price target to £57.00. An update valuation from StockOpine is coming today.
Other Updates
Economic Pulse: US inflation accelerated to 2.9% in August, the highest rate in seven months, with analysts noting that tariff costs are being passed on to consumers. The probability of a Fed rate cut next week is now at 93%.
Absci a data-first generative AI drug creation company, is collaborating with Oracle and AMD (integrates AMD's latest MI355X GPUs to enhance performance and scalability) to use AI for drug discovery, highlighting AI's expanding role.
That's a wrap. See you soon.
We are trying this new format aiming to deliver news and insights of our portfolio companies more effectively. Your feedback is invaluable as we continuously refine our content. Please take a moment to share your thoughts in the poll below.
