Adobe Systems Incorporated Earnings: Great Results, but Timid Guidance

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Adobe just reported results for the first quarter of fiscal year 2015. Despite beating analyst estimates across the board, Adobe shares fell as much as 6% in after-hours trading before stabilizing at a more modest 4% loss.

Led by surging subscriptions fees amid fading one-time license sales, Adobe saw total sales rising 10.9% year over year to $1.1 billion. Analysts would have settled for 8.5% growth on the top line.

On the bottom line, Adobe's adjusted earnings rose 47% higher to land at $0.44 per diluted share. Here, the Wall Street consensus pointed to $0.39 per share.

The company also exceeded its own guidance ranges for both sales and earnings.

The transition to a subscription model also yielded big changes in what kind of revenues Adobe is collecting. In the first quarter, 70% of the company's total sales came from recurring sources. In the year-ago quarter, subscriptions accounted for just 52% of the overall till.

Adobe CEO Shantanu Narayen. Source: Adobe.

"Adobe Marketing Cloud and Creative Cloud continue to be growth engines for Adobe," said Adobe CEO Shantanu Narayen in a prepared statement. These are the subscription-based versions of Adobe's biggest sellers, including cloud versions of moneymakers like Photoshop and Adobe Illustrator.

Looking ahead, Adobe's management set the midpoint of its second-quarter revenue guidance at $1.15 billion. Adjusted earnings should land near $0.44 per share again.

For this period, analysts currently expect sales and earnings just above the top end of Adobe's new guidance ranges. Combining the somewhat soft guidance figures with strong first-quarter results works out to a mixed report overall.

Don't cry for Adobe's shareholders. The deepest after-hours dip on Tuesday brought shares prices back to levels not seen since last week. The subscription-based payments model has helped Adobe shares just about doubling in value over the past two years.Running a bit hot lately, the stock could use a splash of cool water right here.

The article Adobe Systems Incorporated Earnings: Great Results, but Timid Guidance originally appeared on

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Adobe Systems and Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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