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According to Technavio, the global digital marketing spending is estimated to grow 9% annually over the next four years. Adobe (Nasdaq: ADBE) is counting on this growth trend as it continues to expand its digital footprint in the market.

Adobe’s Financials

Adobe’s fourth quarter revenues grew 23% over the year to $1.61 billion, ahead of the market’s projections of $1.589 billion. EPS of $0.90 was also ahead of the Street’s estimated $0.86 per share for the quarter. Clearly Adobe has shown how to successfully migrate from a license-based model to a subscription, SaaS-based model.

For the quarter, Subscription revenues grew 39% over the year to $1.26 billion and services and support revenues were flat at $0.11 billion. Product revenues fell 22% over the year to $221.93 million. Services and support revenues grew 8% to $124.22 million.

Among other business segments, revenues from Digital Media brought in $1.08 billion in revenues, ahead of the Street’s estimated $1.06 billion. Within the segment, digital marketing revenues grew 32% to $465 million, compared with the market’s projected revenues of $482 million.

Annualized recurring revenue for the company grew from $3.7 billion a quarter ago to $4.01 billion. The market was forecasting recurring revenues of $3.97 billion.

During the year, Adobe repurchased 10.4 million shares for $1.01 billion.

Adobe ended the full year with revenues growing 22% to $5.85 billion and an EPS of $3.01.

It expects the first-quarter revenues of $1.625 billion with an adjusted EPS of $0.87. The Street had forecast revenues of $1.65 billion with an EPS of $0.85. Adobe expects to end the current year with revenues of $6.95 billion and adjusted EPS of $3.75 compared with the market’s projected revenues of $7.07 billion and EPS of $3.83.

Adobe’s TubeMogul Acquisition

Earlier last quarter, Adobe announced plans to acquire video ad-tech company TubeMogul for an estimated $540 million. TubeMogul was founded in 2006 and offers a programmatic platform to enable agencies and brands to plan, procure, and evaluate video advertising spend across all platforms. TubeMogul had listed on the Nasdaq in 2014, but depressed market conditions along with realistic investor valuations had caused its stock to fall from a peak of $22 to nearly $8 apiece. The acquisition will help strengthen Adobe’s already strong Marketing Cloud offering. Adobe’s Marketing Cloud includes Adobe Primetime, which helps with creating and monetizing video across devices. Adobe expects the acquisition to help it deliver end-to-end advertising and data management services by providing a one-stop shop for video advertising.

Despite the upbeat performance, the stock fell 2.5% in after hours trading. It is currently trading at $105.10 with a market capitalization of $52.3 billion. It touched a 52-week high of $111.09 in October this year. It has recovered significantly from the low of $71.27 it had fallen to in February this year.

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