Adobe Systems beats estimates with Q2 forecast

Adobe Systems reported a better-than-expected quarterly profit and forecast current-quarter above analysts’ estimates, as the software maker benefits from a rapid switch to the cloud.

The company’s shares were up about 4% at record level of $146 in after-market trading on Tuesday.

Adobe has been pushing deeper into cloud-based subscription services, which have a more predictable revenue stream as opposed to revenue from the sale of packaged-licensed software.

Revenue in Adobe’s digital media business, whose flagship product is the Creative Cloud, rose 29% to $1.21 billion in the second quarter, beating analysts’ estimate of $1.17 billion, according to financial data and analytics firm FactSet.

Creative Cloud includes the company’s popular photo-editing software Photoshop and web video building application Flash. The company’s Behance online creative community has over 9 million members.

Robust demand for Creative Cloud also helped revenue in the overall creative business exceed the $1 billion mark for the first time in the latest quarter.

Digital Media Annualized Recurring Revenue at $4.56 billion also edged past analysts’ estimate of $4.54 billion, according to FactSet.

Adobe said 86% of revenue in the latest quarter came from recurring sources.

Strong adoption and retention of Document Cloud, which includes the Acrobat Reader, also boosted annualised recurring revenue, the company said.

Adobe said it expects Digital Media Annualized Recurring Revenue to increase by $300 million in the third quarter.

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

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.

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% to $1.77 billion.
Analysts on average had expected a profit of 95 cents per share and revenue of $1.73 billion.

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