Adobe Sees Creative Cloud Subscriptions Rise in Q3

Adobe Systems Inc's lower-than-expected revenue and profit forecast for the current quarter overshadowed a strong rise in net subscriptions for its Creative Cloud software suite, sending its shares down 3.5 percent in extended trading.

The company also said on Thursday that David Wadhwani, head of its digital media, was leaving to pursue a CEO opportunity.

Adobe has been switching to web-based subscriptions from traditional licensed software to help attract more predictable recurring revenue.

Recurring revenue had reached 73 percent of total revenue, Chief Financial Officer Mark Garrett said in a statement.

The company said it added 684,000 Creative Cloud net subscriptions in the quarter ended Aug. 28, compared with the 640,000 net additions that analysts had expected, according to research firm FactSet Street Account.

Creative Cloud, which includes Photoshop, Illustrator and Indexing, is the biggest of the company's cloud businesses. The other two are Marketing Cloud and Document Cloud.

Adobe said it had 5.3 million Creative Cloud subscriptions at the end of the third quarter.

Bryan Lamkin, who currently leads Document Cloud, will lead the combined digital media business, which includes Creative Cloud, the company said.

Adobe raised its full-year annualised recurring revenue forecast for the digital media to $2.95 billion (roughly Rs. 19,516 crores) from $2.93 billion (roughly Rs. 19,384 crores).

The company forecast an adjusted profit of 56-62 cents per share and revenue of $1.28 billion-$1.33 billion (roughly Rs. 8,468 crores to Rs. 8,798 crores) for the fourth quarter ending November.

Analysts on average were expecting a profit of 64 cents per share and revenue of $1.36 billion (roughly Rs. 8,997 crores), according to Thomson Reuters I/B/E/S.

"It quite obviously continues their trend of being highly conservative in guidance, especially when there are unknowns going on," Bernstein analyst Mark Moerdler said.

Adobe's net income rose to $174.5 million (roughly Rs. 1,154 crores), or 34 cents per share, in the third quarter, from $44.7 million (roughly Rs. 295 crores), or 9 cents per share, a year earlier.

Excluding items, the company earned 54 cents per share.

Revenue rose 21 percent to $1.22 billion (roughly Rs. 8,071 crores).

Analysts had expected a profit of 50 cents per share and revenue of $1.21 billion (roughly Rs. 8,000 crores).

Up to Thursday's close of $80.31, Adobe's shares had risen about 11 percent this year.

© Thomson Reuters 2015