Adobe: A Powerhouse in Software-as-a-Service
Company Overview
Adobe is a prominent software-as-a-service company known for its cloud platform that offers a wide range of innovative products, including Document Cloud, Creative Cloud, and Experience Cloud.
Financial Performance
From fiscal 2020 to fiscal 2022, Adobe showed consistent growth in both revenue and operating income. Total revenue increased from $12.9 billion to $17.6 billion, while operating income rose from $4.2 billion to $6.1 billion. Net income was impacted by a tax credit in fiscal 2020 and a higher effective tax rate for fiscal 2022. However, Adobe demonstrated its financial strength by generating increasing free cash flow, which improved from $5.3 billion in fiscal 2020 to $7.4 billion in fiscal 2022.
Latest Results and Future Growth
In the fiscal fourth quarter of 2023 (ending Dec. 1), Adobe continued its growth trajectory. Total revenue reached a new record of $19.4 billion, rising 10.2% year over year. Subscription revenue accounted for 94% of the total. Operating income and net income climbed 9.1% and 14.1% year over year, respectively, to $6.7 billion and $5.4 billion. Furthermore, Adobe generated a positive free cash flow of $1.55 billion during the fourth quarter.During the Adobe MAX 2023 event in October, the company unveiled significant advancements in its generative AI toolkit, featuring more than 100 new features to enhance its Creative Cloud applications.
Okta: Empowering Organizations in the Digital Age
Company Overview
Okta specializes in providing services that help organizations manage access requirements across their various IT systems as they undergo digital transformation.
Financial Performance
Okta’s financial numbers demonstrate steady growth, with total revenue increasing from $835 million to $1.9 billion from fiscal 2021 to 2023 (ended Jan. 31). Despite some losses, Okta consistently generated positive free cash flow during these fiscal years.Total revenue surged by 23% year over year to $1.7 billion, with gross profit improving by nearly 30% to $1.2 billion. Additionally, Okta achieved a positive free cash flow of $322 million, a significant improvement from the prior year’s $9 million outflow.
Customer Growth and Market Potential
Okta’s customer base reached a new high of 18,800 in the current quarter, compared to just 10,000 in fiscal 2021. The number of customers with an annual contract value of over $100,000 more than doubled from 1,950 to 4,365 over the same period. Okta maintained a remarkable dollar-based net retention rate of 115% and above for the last 11 quarters, highlighting the loyalty of its customers.With the total addressable market for identity management estimated at $80 billion, Okta still has significant opportunities to expand its revenue in the coming years.
Snowflake: Unleashing the Power of Data
Company Overview
Snowflake operates a data cloud service that enables organizations to consolidate data from various sources, facilitating valuable insights and information. As the demand for data management continues to grow exponentially, Snowflake’s platform is well-positioned to benefit from this long-term tailwind.
Financial Performance
Snowflake’s revenue soared from $592 million in fiscal 2021 to $2.1 billion within two years. The company achieved positive free cash flow in fiscal 2022, amounting to $56.9 million, which experienced an eightfold increase to $495.8 million in fiscal 2023.
Continued Growth and Market Potential
For the first nine months of fiscal 2024, Snowflake sustained its growth, with revenue jumping 37.6% year over year to $2 billion. The company also experienced a 46.5% year-over-year increase in free cash flow to $425.7 million, demonstrating its ability to generate consistent cash flow.The number of Snowflake’s customers reached 8,907, a 23.5% increase from the previous year, including 647 customers on the Forbes Global 2000 list. The customer base contributing more than $1 million in product revenue skyrocketed by 52% year over year to 436. Snowflake’s estimated total addressable market for 2022 stood at $140 billion, anticipated to more than double to $290 billion by 2027, providing ample opportunity for revenue and free cash flow growth.When investing for the long term, consider these promising growth stocks like Adobe, Okta, and Snowflake, which have demonstrated strong financial performance and possess sustainable tailwinds driving their businesses forward.