Adobe's Creative Cloud fuels profit beat, shares surge

Earnings Reuters

Adobe company logos are seen in this picture illustration taken in Vienna July 9, 2013. Picture taken July 9, 2013. To match Special Report TAX-BIGTECH/ REUTERS/Leonhard Foeger (AUSTRIA - Tags: BUSINESS SCIENCE TECHNOLOGY LOGO) - RTX11VPB

Adobe Systems Inc reported a better-than-expected quarterly profit as the company benefited from more customers subscribing to its Creative Cloud package, which includes the popular photo-editing software Photoshop.

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The company's shares were up 3.5 percent at $145.80 in after-market trading on Tuesday. If the gains hold, the stock is set to open at a record high on Wednesday.

Revenue in Adobe's digital media business, its largest by revenue, rose to $1.21 billion in the second quarter from $943 million, beating analysts' estimate of $1.17 billion, according to financial data and analytics firm FactSet.

The digital media segment includes the Creative Cloud business, which also consists of web video building application Flash.

The San Jose, California-based company has been benefiting from a shift to cloud-based subscription services, which have a more predictable revenue stream as opposed to revenue earned through the sale of packaged-licensed software.

Subscription revenue rose nearly 37 percent to $1.48 billion in the three months ended June 2.

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Digital Media Annualized Recurring Revenue has been on a steady uptick, exiting the latest quarter at $4.56 billion. Analysts had estimated revenue of $4.54 billion, according to FactSet.

Adobe forecast third-quarter adjusted profit of $1.00 per share and revenue of $1.82 billion, above analysts' average estimate for a profit of 97 cents and revenue of $1.80 billion, according to Thomson Reuters I/B/E/S.

Adobe's net income rose to $374.4 million, or 75 cents per share, in the second quarter, from $244.1 million, or 48 cents per share, a year earlier.

Excluding items, the company earned $1.02 per share.

Revenue jumped 26.7 percent to $1.77 billion.

Analysts on average had expected a profit of 95 cents per share and revenue of $1.73 billion.

Up to Tuesday's close, the company's shares had risen about 53 percent this year. 

(Reporting by Laharee Chatterjee and Pushkala A in Bengaluru; Editing by Sriraj Kalluvila)

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