The cloud computing industry has been one of the biggest beneficiaries of the COVID-19 pandemic, given increased demand for services to facilitate remote working and learning. While mass vaccine deployment and reduced restrictions on social distancing are expected to drive economic recovery this year, the corporate world is expected to retain the remote working culture it adopted last year.
Most organizations and tech giants have announced plans to develop a hybrid work model, allowing employees to work from home partially or permanently in the future. In light of these developments, the global cloud computing market is expected to grow at a CAGR of 17.5% over the next five years, to reach $832.10 billion by 2025.
Cloud computing giants Adobe, Inc. (ADBE), ServiceNow (NOW), and VMware (VMW) have capitalized on the new trend in an effort to solidify their foothold in the market. These companies have taken several steps to expand their market reach and therefore are expected to generate significant revenues and earnings in the near term.
Adobe Inc. (ADBE)
Founded in 1982, ADBE is a software company that enables its users to design and deliver exceptional digital experiences. The company operates primarily through three segments – Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment offers its flagship product Creative Cloud, which is a subscription service that allows users to download and access the latest versions of its creative products. ADBE’s products include Adobe Creative Cloud, Adobe Document Cloud, and Adobe Experience Cloud.
The company announced this month that it has collaborated with Zoom Video Communications, Inc. (ZM) to make remote working easier with the availability of Zoom plugin for Adobe XD. Users can now quickly join or start Zoom meetings directly from XD. A new feature called “invite to edit” was introduced in ADBE’s Photoshop, Illustrator and Fresco on the same day. It allows collaborators to edit a shared cloud document, one at a time.
ADBE acquired Workfront on December 7, 2020. With the acquisition, ADBE hopes to improve on remote work collaboration. Workfront is equipped with APIs that enable a seamless connection to Adobe Creative Cloud and Adobe Experience Cloud, which have become the global standards for creative workflows and customer experience management.
ADBE’s total revenue increased 14.4% year-over-year to $3.42 billion for the fiscal 2020 fourth quarter ended November 27, 2020. The company’s revenue from the digital media segment increased 20% year-over-year to $2.50 billion. Its net income was reported at $2.25 billion, up 164.1% year-over-year. Its non-GAAP EPS increased 22.7% year-over-year to $2.81.
A consensus EPS estimate of $2.78 for the quarter ending February 28, 2021, represents a 22.5% improvement year-over-year. Moreover, ADBE surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $3.76 billion for the quarter ending February 28, 2021 represents a 21.6% rise from the same period last year.
ADBE has gained 32.1% over the past year and closed yesterday’s trading session at $501.64.
ADBE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
ADBE has an A grade for Quality and B for Momentum and Stability. We have also graded ADBE for Growth, Value and Sentiment. Click here to access all ADBE’s ratings.
ADBE is ranked #21 of 107 stocks in the Software – Application industry.
Founded in 2004, NOW is a provider of enterprise cloud computing solutions that define, structure, manage and automate services for global enterprises. The company’s nearly 6,900 global enterprise customers include nearly 80% of the Fortune 500 companies which rely on the company’s ‘Now Platform’—an intelligent and intuitive cloud platform—for successful digital transformation. NHS Scotland is also using the ‘Now Platform’ to integrate and digitize its COVID-19 vaccine administration process.
NOW signed an agreement in November to acquire Element AI, which is a leading artificial intelligence (AI) company with deep AI capabilities and some of the world’s brightest AI minds. The acquisition is expected to significantly enhance NOW’s commitment to build the world’s most intelligent workflow platform, enabling employees to work efficiently, streamline business decisions, and unlock new levels of productivity.
The company obtained both the International Organization for Standardization’s ISO27701 and Asia‑Pacific Economic Cooperation Privacy Recognition for Processors (APEC PRP) Certifications this month. This enables NOW to achieve the highest standard of data privacy protections and gain trust from its users. Accenture plc (ACN) and NOW formed a new business group last October to help private- and public-sector clients accelerate their digital transformation and better address today’s dynamic operational challenges.
NOW’s total revenues increased 31.4% year-over-year to $1.25 billion for the fourth quarter ended December 31, 2020. Its subscription revenues were reported to be $1.18 billion, up 31.7% year-over-year. Its gross profit increased 31.2% year-over-year to $971.23 million. And its non-GAAP EPS increased 21.9% year-over-year to $1.17.
A consensus EPS estimate of $1.34 for the quarter ending March 2021 represents a 27.6% improvement year-over-year. Moreover, NOW surpassed the consensus EPS estimates in each of the trailing four quarters. The consensus revenue estimate of $1.34 billion for the quarter ending March 31, 2021 represents a 27.7% rise from the same period last year.
NOW has gained 64.46% over the past year and closed yesterday’s trading session at $585.74.
NOW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
NOW has a B grade for Momentum, Sentiment, Quality and Growth. We have also graded NOW for Value and Stability. Click here to access all of NOW’s ratings.
The stock is ranked #19 of 60 stocks in the Software – Business industry.
VMware, Inc. (VMW)
An information technology (IT) company, VMW is engaged in the development and application of virtualization technologies with x86 server-based computing, separating application software from the underlying hardware. The company develops and markets its product and service offerings within three product groups that include software-defined data center, hybrid cloud computing and end-user computing.
Accenture plc (ACN) and VMW announced an expanded partnership on February 10 and the launch of a dedicated business group to help organizations adopt a ‘cloud first’ strategy to . accelerate migration to the cloud, build modern apps more rapidly, and use the cloud as a foundation for innovation and new business models. The company also announced innovations across its VMware vRealize Cloud Management portfolio of on-premises and Software as a Service (SaaS) solutions on February 4.
Also this month, Lumen Technologies Inc. (LUMN) and VMW announced a significant expansion of their partnership to fast-track the design, development, and delivery of edge computing and more secure, work-from-anywhere solutions.
VMW is scheduled to announce its fourth quarter and fiscal year 2021 financial results on February 25 after the market closes. VMW’s total revenue increased 7.8% year-over-year to $2.86 billion for the third quarter ended October 30, 2020. The combination of subscription and SaaS and license revenue was $1.32 billion, up 10% from the third quarter of 2019. Its net income increased 6.6% year-over-year to $434 million and its non-GAAP EPS increased 16.9% year-over-year to $1.66.
A consensus EPS estimate of $7.05 for the fiscal year 2021 represents a 13% improvement year-over-year. r VMW surpassed the consensus EPS estimates in three of the four trailing quarters., The consensus revenue estimate of $2.93 billion for the quarter ending April 30, 2021 represents a 11% rise from the same period last year.
The stock has gained 6.2% over the past month to close yesterday’s trading session at $143.19.
VMW’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a grade of B for Value, Quality and Momentum also. We have also graded VMW for Growth, Stability and Sentiment. Click here to access all VMW’s ratings.
VMW is ranked #5 of 60 stocks in the Software – Business industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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ADBE shares were trading at $491.23 per share on Wednesday afternoon, down $10.41 (-2.08%). Year-to-date, ADBE has declined -1.78%, versus a 4.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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