Adobe Systems (ADBE  ) was 3% higher following the company's exceptionally strong Q2 earnings report. The company topped expectations on the top and bottom line. Adobe is one of the first tech companies to report earnings, so it's considered to be a leading indicator of tech spending. It's certainly a positive sign as many were concerned that the economy's reopening would lead to decreased spending. However, this is clearly not the case at this point.

Inside the Numbers

In Q2, Adobe reported $3.03 in earnings per share which were above analysts' expectations of $2.82 per share. Revenue came in at $3.8 billion, a 23% increase from 2020's Q2 and above expectations of $3.7 billion. Subscription revenue came in at $3.5 billion, a 22% increase, also beating expectations of $3.45 billion.

Some other results from key areas include document cloud revenue which has annual recurring revenue of $1.7 billion, a 35% increase from 2020's Q2, and above expectations of $1.7 billion. The company is spending heavily on R&D at $612 million as it is looking to develop new products. Operating cash flow came in at $2 billion which is a record for the company.

Q3 forecast also came in above expectations. The company is looking for earnings per share of $3, while analysts were forecasting $2.90 per share. It projects revenue of $3.88 billion which was also above expectations of $3.8 billion.

Stock Price Outlook

Following these results, Adobe shares broke out to new, all-time highs. This followed a lengthy, consolidation period from August to May in which shares traded between $450 and $500.

We are seeing similar bullish resolutions to these consolidation periods across the tech sector among companies that have maintained earnings momentum. In contrast, tech companies with deteriorating earnings are falling lower from these ranges.

Going forward while it's probably not wise to chase shares given the burst in momentum, Adobe remains a high-quality stock especially as its valuation has gotten much more attractive over the past year. Currently, it has a forward PE of 40 which is above the market average but Adobe does deserve a higher multiple given its years of double-digit revenue growth and 40% profit margins.