Six years after shaking up the software world by announcing that it would abandon shrink-wrapped box sales in favor of cloud subscriptions, Adobe Systems Inc. continues to provide evidence of the wisdom of that strategy.

The maker of such design-world mainstays as Illustrator, Photoshop and Acrobat handily beat Wall Street estimates for its fiscal fourth quarter. It also recorded its first $2 billion quarter, with $2.01 billion in revenue representing 25 percent growth over the same period last year. Earnings per share of $1.26 easily beat Wall Street forecasts of $1.16 per share. Analysts had expected $1.95 billion in revenue.

As a result, Adobe’s share price rose about 1.3 percent in after-hours trading. In regular trading, shares had declined about 1 percent, to an even $175 a share.

“It’s the golden age of creativity and design,” said Chief Executive Shantanu Narayen (pictured), ticking off advances in augmented reality, virtual reality, mobile applications and artificial intelligence.

Officials used the company’s earnings call to stress repeatedly the soundness of its cloud-based business as measured by annualized recurring revenue or ARR, which are predictable revenue streams derived from subscription sales. Altogether, Adobe reported deferred revenue of $2.5 billion and a backlog of $3.9 billion, meaning that the company can count on $6.4 billion coming in the door next year without any substantial additional sales effort.

“The record quarterly earnings highlighted Adobe’s proactive move toward a SaaS business model with cloud services differentiated by its core software assets,” said Charles King, president and principal analyst at Pund-IT Inc. “All in all, 2017 appears to have been an excellent year for Adobe that should put it in good stead for 2018.”

The company’s mainstay Creative Cloud booked $1.16 billion in the quarter and $4.2 billion for the year, showing 30 percent annual growth. Creative Cloud’s ARR of $4.63 billion was the main contribution to $5.23 billion of recurring revenues for the Digital Media business unit at the end of the quarter.

Adobe Experience Cloud booked revenues of $550 million, up 18 percent over last year, and is on a $2.3 billion run rate for 2018, the company said. Adobe Document Cloud had revenues of $235 million and and ARR of $600 million. “The pipeline continues to be evergreen and we just continue to close deals,” Narayen said.

Profits are sound, too. Fiscal-year earnings jumped 43 percent, to $4.31 a share, and the company repurchased 8.2 million shares during the year at a cost of $1.1 billion.

“We continue to think of Adobe’s businesses in a more favorable light than all but a handful of the other companies we cover,” Brian Wieser, an analyst with Pivotal Research Group, wrote in a note to clients. “The company appears to be well run, its customers generally like them, their long-term strategy is consistent with views we have formed from our own industry experience and ongoing interactions with practitioners, and there are no particular reasons to say any of this changes any time soon.”

The only negative was Adobe’s growth rate, which is expected to slow from 25 percent in fiscal 2017 to 19.5 percent next year. However, maintaining its historical growth rate from a $7.3 billion base in what is essentially a vertical market would be a challenge.

Image: Adobe