By Maria Armental
Adobe Systems Inc. profit surged in the first quarter as the
software maker continued its shift to subscriptions, which are more
predictable than product sales.
In the current quarter, Adobe projects a profit of 41 cents to
47 cents on $1.13 billion to $1.18 billion in revenue, compared
with 48 cents a share on $1.18 billion in revenue, according to
analysts surveyed by Thomson Reuters.
Shares fell nearly 4% to $76.51 in recent after-hours
trading.
The maker of Photoshop and Illustrator design software has been
switching its revenue base to subscription cloud services as
customers increasingly opt for monthly subscriptions, rather than
buying the software outright, which is recorded as an upfront
license fee.
Recurring sources, such as Creative Cloud and Adobe Marketing
Cloud, accounted for 70% of revenue in the latest period, compared
with 52% a year earlier.
Meanwhile, Adobe added a net 517,000 Creative Cloud subscribers,
which represents a 28% year-to-year increase.
Overall, for the period ended Feb. 27, Adobe reported a profit
of $84.9 million, or 17 cents a share, up from $47 million, or nine
cents a share, a year earlier. Excluding stock-based compensation
and other items, profit rose to 44 cents from 30 cents.
Revenue rose nearly 11% to $1.11 billion.
Adobe had projected a profit of 34 cents to 40 cents a share on
$1.05 to $1.1 billion in revenue, excluding the impact of its
acquisition of Fotolia, which closed during the quarter.
Subscription revenue rose 68% to $713.4 million, while product
revenue fell 38% to $290.8 million.
Gross margin narrowed to 85% from 85.2% a year earlier.
Through Tuesday's close, the company's stock had risen nearly
17% over the past 12 months.
Write to Maria Armental at maria.armental@wsj.com
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