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September 18, 2013

Adobe Reports $995M 3Q Revenue, But Disappoints Analysts

Subscriptions for Adobe Systems’ Creative Cloud are on the rise but the company’s profits are not.

The firm reported fiscal third-quarter sales and profits that failed to meet Wall Street expectations. Adobe did, however, meet its own prediction with a revenue of $995.1 million. The company at the end of its last quarter  forecasted a revenue range of $975 million to $1.025 billion.

Net income fell to $83 million from $201.4 million during the same period the previous year. Cash flow from operations sit at $215.5 million for the quarter.

The acquisition of Neolane, meanwhile, contributed approximately $6 million of revenue to third quarter results.

The company also added 331,000 paid subscribers to its Creative Clouds ranks in the third quarter bringing its total to 1.3 million paid subscribers.

Adobe image

Adobe image

“We exceeded one million subscriptions during Q3, demonstrating that the transition to Creative Cloud is happening sooner than expected,” Adobe CEO Shantanu Narayen said in a press release. “We successfully completed the acquisition of Neolane, adding a critical cross-channel campaign management solution to the Adobe Marketing Cloud, which will further extend our leadership position in digital marketing.”

Adobe Systems abandoned its boxed Creative Suite software in May in favor of a subscription-only model with its Creative Cloud technology. Adobe, at that time, said it intended to put its full focus on its “flagship offering” due to its popularity. The firm launched Creative Cloud last spring.

“Our customers are overwhelmingly choosing subscriptions instead of perpetual model licenses which is accelerating our business model transition,” said Adobe executive vice-president and chief financial officer, Mark Garrett. “During Q3, 41 percent of our revenue was recurring and we exited the quarter with record deferred revenue on our balance sheet. These results are building a stronger, more predictable revenue model for Adobe which will drive higher long-term growth.”

Creative Cloud includes Photoshop, Illustrator, InDesign, Dreamweaver and After Effects to name a few of the tools incorporated into the service.

Adobe also launched a major update of the program in May to include Behance, an online creative community that is integrated with Creative Cloud to allow users to display and receive feedback on their work. Creative Cloud also offers the ability to create and run websites, mobile apps, tablet publications, online portfolios and content.

A Creative Cloud monthly subscription is $50 for individuals. A team version of Creative Cloud — $70 per month per member — includes all of the same features individual members receive in addition to 100GB of storage and centralized deployment and administration capabilities.