Sunday 18 March 2018

Adobe profit beats on strong subscriptions for Creative Cloud

Adobe Systems reported a profit that topped market expectations for the ninth straight quarter on strong subscriber growth for its Creative Cloud package of software tools, which includes Photoshop.

Adobe's shares jumped 4.7pc to $93.10 in extended trading on Thursday and are set to hit a record high on Friday.

The company said 833,000 subscribers signed up for Creative Cloud in the fourth quarter ended November 27, more than the 678,200 additions analysts were expecting, according to research firm FactSet StreetAccount.

Creative Cloud includes graphic design tool Photoshop, web design software Dreamweaver and web video building application Flash, among other software.

Adobe, which has seen strong growth from Creative Cloud, has been nimble enough to attract users other than enterprises and professionals to the software suite.

About 52pc of customers subscribe to the highest-priced full Creative Cloud while the rest subscribe to individual products. Of those, Photoshop Lightroom was the fastest growing, Chief Financial Officer Mark Garrett said in an interview.

"It's growing the most because it's attracting new users ... hobbyists and consumers and people that would never buy the Creative products before, so it's expanded our market opportunity," Garrett said.

San Jose-based Adobe has been switching to web-based subscriptions from traditional licensed software to enjoy a more predictable recurring revenue stream.

"(Adobe has) largely completed this transition to a recurrent revenue model. You are starting to see revenue stack even though your expenses aren't rising as quickly," said FBR Capital Markets analyst Samad Samana.

Revenue from its digital media business, which houses Creative Cloud, jumped 35pc to $875.3m.

The business – also home to Acrobat, which enables the ubiquitous PDF format for e-books – makes up the bulk of Adobe's revenue.

Revenue from its digital marketing business, which offers tools for businesses to analyze customer interactions and manage social media content, rose 2.3 percent to $382.7m.

Total revenue rose to $1.31bn.

Despite the 21.7pc increase in fourth-quarter revenue only matching analysts' estimates, a much lower 3.4pc bump in total operating costs also helped Adobe's profit beat estimates.

Adobe's net income soared to $222.7m, or 44c per share, in the quarter, from $88.1m, or 17c per share, a year earlier.

Excluding items, it earned 62c per share, beating average analyst estimate of 60c, according to Thomson Reuters I/B/E/S.

Adobe's shares have risen 22.4pc this year through Thursday's close.

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