Marketing and creative cloud software provider Adobe Systems Inc. reported increased profits in its first quarter thanks to higher recurring revenues from its Creative Cloud suite.
The maker of Photoshop and Illustrator, which has pivoted in recent years toward becoming a software-as-a-service force in marketing services as well, said its earnings topped $398 million, or 80 cents per share. Adobe also reported revenues of $1.68 billion, or 94 cents per share before certain costs such as stock compensation, up 25 percent from a year ago.
That far exceeded Wall Street’s expected earnings of 87 cents per share on revenue of $1.65 billion. Investors liked the results, as Adobe’s stock rose by more than 3 percent in after-hours trading to $122.35 per share.
Adobe put its success down to its continued shift from its old licensing business model to offering subscription-based services. The company has been offering most of its software as a service under the Creative Cloud banner, which allows users to pay by monthly or annual subscriptions, as opposed to paying a onetime licensing fee to purchase individual products.
The company said its revenues from Creative Cloud hit a new record high in the quarter, rising by 44 percent from a year ago, to $492 million. According to Adobe, this growth was fueled by interest from small and medium-sized businesses, as well as strong adoption of its Creative Cloud Teams product.
Another major earner for the company is its Adobe Marketing Cloud, which raked in $477 million in the quarter, up 26 percent from a year ago. Document Cloud pulled in $196 million thanks to a rise in Acrobat subscriptions and new add-on services such as Adobe Sign. Overall revenues from Adobe’s Digital Media unit hit $1.14 billion.
“Adobe achieved record revenue, profit and cash flow in Q1,” said Adobe Chief Financial Officer Mark Garrett. “Our solid execution and business momentum combined with strong market tailwinds give us confidence in our ability to continue to deliver strong financial results. We remain bullish about our prospects for the rest of 2017 and beyond.”
Adobe’s guidance for the current quarter is more or less in line with analysts’ expectations. The company said it projects revenues of $1.73 billion, which includes 24 percent year-over-year growth in Digital Media segment revenues and 26 percent growth in Adobe Marketing Cloud revenues. Wall Street said it’s looking for earnings of 91 cents per share on revenues of $1.72 billion.