Adobe tops estimates on higher Creative Cloud subscriptions

(Reuters) - Adobe Systems Inc ADBE.O topped analysts' profit and revenue estimates for the seventh straight quarter on higher subscriptions for its Creative Cloud suite of software, and pointed to rising average revenue per user.

FILE PHOTO - An Adobe Systems Inc software box is seen in Los Angeles, California, U.S., March 13, 2017. REUTERS/Lucy Nicholson

Shares of the company, known for its image-editing software Photoshop, rose 3.5 percent to $226.5 in after-hours trading on Thursday.

Adobe has been getting a lift from its switch to a web-based subscription service for its flagship Creative Cloud products, which it launched in the second quarter of 2012.

“Clearly, a lot of the new customer acquisition is a result of the Single App adoption,” Chief Executive Shantanu Narayen said on a post-earnings call with analysts, adding the company has succeeded in encouraging customers to use the entire suite.

This has also helped improve average revenue per user, Narayen said.

Revenue from Adobe’s digital media business that includes Creative Cloud jumped about 28 percent to $1.46 billion, ahead of analysts’ average estimate of $1.43 billion, according to Thomson Reuters I/B/E/S.

“Adobe’s strong quarter strengthens our conviction that its two businesses can generate sustainable double-digit revenue growth, with even greater profit growth,” said Christopher Rossbach, chief investment officer at private investment firm J Stern, which holds a position in Adobe.

Adobe has hiked subscription fees for the Creative Cloud, its largest business by revenue that houses popular image- and video-editing software such as Photoshop, Premiere Pro and Illustrator.

Net income rose to $583.1 million or $1.17 per share in the first quarter ended March 2, from $398.5 million or 80 cents per share, a year earlier. Excluding one-time items, Adobe earned $1.55 per share, beating analysts’ estimates of $1.44.

Revenue jumped nearly 24 percent to $2.08 billion, ahead of estimates of $2.05 billion.

Adobe said it expects adjusted earnings of $1.53 per share and revenue of $2.15 billion for the second quarter.

Analysts were expecting earnings of $1.51 per share and revenue of $2.14 billion.

Reporting by Munsif Vengattil in Bengaluru; Editing by Sai Sachin Ravikumar and Sriraj Kalluvila