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Adobe Posts Strong Q2 Results on Creative Cloud Subscription Sales

Adobe Posts Strong Q2 Results on Creative Cloud Subscription Sales
Adobe Systems Inc, the maker of Photoshop and Acrobat software, reported better-than-expected quarterly profit and revenue, helped by higher subscription sales of its Creative Cloud and Marketing Cloud suites.

Adobe's shares rose 8.6 percent in after-hours trading.

"These results reflect Adobe is continuing to execute well through its transition to the cloud, which continues to be a key ingredient in the company's long-term recipe for success," FBR Capital Markets analyst Samad Samana told Reuters.

Adobe said in March it would phase out the traditional box license versions of its Creative Suite 6 and offer the software only on a web-based subscription model.

Subscription models bring in less money upfront, but they usually ensure more predictable recurring revenue.

Adobe said it added 464,000 paid Creative Cloud subscribers in the second quarter ended May 30, ending the quarter with 2.3 million paid subscribers.

(Also see: Adobe Creative Cloud grows past 1.4 million subscribers in Q4)

The company said it expects to have 3.3 million subscribers of its Creative Cloud suite at the end of fiscal 2014, up from its earlier forecast of 3 million.

Creative Cloud suite includes Photoshop, Illustrator and Flash software.

FBR Capital's Samana said Adobe's strong uptick in net new subscriber additions indicates that customers are increasingly seeing the value of the Creative Cloud offering, the engine of growth for the company's digital media business.

"All key metrics were above consensus and the company's transition to subscriptions is proceeding well ahead of plan," Deutsche Bank analyst Nandan Amladi told Reuters.

The company offers Creative Cloud and document services under its digital media unit, while its digital marketing unit offers marketing analytics tools, document management and web conferencing software.

Digital media revenue rose 3 percent to $691.6 million In the second quarter, while digital marketing revenue rose 16 percent to $330.3 million.

The company said it expects marketing cloud revenue to grow about 20 percent this year, from a year earlier.

The company forecast an adjusted profit of 22-28 cents per share on revenue of $975 million to $1.025 billion for the current quarter. Analysts were expecting an adjusted profit of 27 cents per share on revenue of $1.018 billion, according to Thomson Reuters I/B/E/S.

The company's net income rose to $88.5 million, or 17 cents per share, in the second quarter, from $76.5 million, or 15 cents per share, a year earlier.

Excluding items, the company earned 37 cents per share, beating the average analyst estimate of 30 cents per share.

Revenue rose about 6 percent to $1.07 billion. Analysts on average had expected $1.03 billion.

Creative annualized recurring revenue more than tripled to $1.2 billion.

The company's shares were at $73.30 in extended trading after closing at $67.54 on the Nasdaq on Tuesday. The stock has gained 13 percent in the year so far.

© Thomson Reuters 2014

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