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Adobe anticipates $75m hit from Russia, Belarus pullout

Of course it's still making money hand over fist, but there's an actual number to put on war's effect on big tech

Adobe had a great first quarter this year, but the real news is the losses it is predicting due to the Russo-Ukraine war, which finally gives us a sense of the financial impact of Russian pullouts on big tech.

The purveyor of Creative Cloud posted record Q1 revenue [PDF] for the period ending March 4, 2022, in which it turned over $4.26bn, equating to 9 percent year-over-year growth for the quarter. 

Segments of Adobe's operations also posted big growth in Q1: revenues in the Digital Media segment were $3.11bn, representing the same growth percentages as Adobe overall. Creative revenue grew to $2.55bn, or 7 percent YoY growth; and Document Cloud revenue hit $562m, or 17 percent YoY growth. 

Additionally, the annualized recurring revenue (ARR) from Adobe's subscription products brought large financial windfalls: $12.57bn for Digital Media, Creative grew to $10.54bn and Document Cloud to $2.03bn. The Digital Experience segment revenue also surpassed $1bn, 13 percent YoY growth, and Digital Experience ARR grew by 15 percent as well. 

How Russia and Ukraine affect Adobe's bottom line

Adobe is just one in a long list of tech companies that have pulled out of Russia and Belarus in response to Moscow's push to seize Ukraine. The company announced in early March that it was halting the sale of new products and services in Russia and Belarus, and is projecting a financial hit because of it. 

Adobe didn't mention any predictions of lost new sales, and measured its losses in Russia, Belarus and Ukraine based on recurring revenue from subscription services, something that Adobe made no mention of cutting off when it stopped new sales in the two countries in early March. By its estimates, the loss of ARR payments from Russia and Belarus will account for $75m; Adobe is also writing off its ARR from Ukraine, which amounts to $12m. 

Altogether, Adobe said "this results in a total ARR reduction of $87m and an expected revenue impact of $75m for fiscal year 2022."

The ARR losses Adobe predicts aren't tied to any action it is taking, rather the losses will come from the fact that there's no way to get payments out of those countries and to Adobe, said CEO Shantanu Narayen in an earnings call with investors. 

"We are not going to be getting payments from Russia, which is the $75m for the rest of the year. So, in addition to seizing new payment, in addition to stopping new sales, what you have to realize is for a SaaS-based service, you are unable to collect payments," Narayen said. 

Ultimately, that $75m for fiscal '22 amounts to a drop in the bucket for Adobe, which predicts $4.34bn in Q2 revenue, $440m of new ARR revenue, and growth rates in the mid to high teens across segments. 

The company also teased a new pricing structure scheduled for release sometime in Q2, but was tightlipped about specifics beyond saying it had been four years since Adobe last revisited its pricing scheme. In other words, customers should get ready for a wallet-pounding. ®

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