Adobe's Strong Subscriber Growth Overshadows 3Q Miss

Adobe (NASDAQ:ADBE) disclosed weaker-than-expected third-quarter profits and revenue on Tuesday, but the tech company’s shares rallied around upbeat subscriber growth numbers.

The customer numbers, which revealed more than 1 million cloud subscribers, have grown in importance as Adobe shifts to a subscription-based business model.

Shares of Adobe soared more than 5% in extended trading Tuesday afternoon, putting them on track to extend their impressive 12-month surge of 44%.

The company said it earned $83 million, or 16 cents a share, last quarter, compared with a profit of $201.36 million, or 40 cents a share, a year earlier.

Excluding one-time items, Adobe earned 32 cents a share, trailing the Street’s view by two pennies.

Revenue dipped 7.9% to $995.12 million, compared with consensus calls from analysts for $1.01 billion.

Yet Wall Street zeroed in on Adobe saying stronger-than-expected enterprise adoption boosted Creative Cloud subscriptions by 331,000 quarter-over-quarter to 1.031 million.

Analysts polled by StreetAccount projected growth of 327,000 subscribers after Adobe added 221,000 subscribers in the second quarter.

“We exceeded one million subscriptions during Q3, demonstrating that the transition to Creative Cloud is happening sooner than expected,” Adobe CEO Shantanu Narayen said in a statement.

Shares of San Jose-based Adobe jumped 4.30% to $50.24 in extended trading on Tuesday.

Adobe has outperformed the markets since it last reported quarterly results on June 18, rallying 11% over that span, compared with a gain of just 2.8% for the S&P 500.