Adobe 2Q Results Beat Expectations but Outlook Disappoints

Adobe Systems ADBE, the diversified software company, reported second-quarter results that beat analyst expectations, though the full-year forecast saw the company lower the top end of its guidance range for revenue and earnings per share. The lower full-year forecast comes as Adobe begins selling products via subscriptions, with the company hoping to make sales growth more predictable. That strategy began in April with the release of Creative Cloud, software which allows users to rent graphics software like Photoshop over the web for a monthly fee. Adobe reported second-quarter net income of $223.9 million, or 45 cents per share, which is down from the $229.4 million, or 46 cents per share, that it reported a year ago. For the current, third-quarter, Adobe expects adjusted earnings between 56 cents and 61 cents per share and revenue between $1.075 billion and $1.125 billion. That range is lower than analyst expectations of 61 cents per share on revenue of $1.13 billion. The company narrowed its forecast for the full year to between $2.40 and $2.46 per share. Adobe had previously forecast $2.38 to $2.48 per share. It also narrowed its full-year revenue growth outlook to between 6% and 7%, compared to previous guidance of between 6% and 8%. Analyst expectations seem to agree, at $2.44 per share on revenue growth of 6.6%. In a statement, CEO Shantanu Narayen said that, "Our strong Q2 results were driven by the successful launch of Creative Cloud and Creative Suite 6, strong Acrobat revenue and 35 percent year-over-year revenue growth in our Digital Marketing Suite business. These results demonstrate our leadership in the Digital Media and Digital Marketing markets.” In extended trading on Tuesday, Adobe dropped 5.9%, to $30.94. The stock has climbed 16% this year. “The initial transition to Creative Cloud exceeded our targets, demonstrating that creative professionals see significant value in the new subscription-based offering,” said CFO Mark Garrett. “Over the long-term, this bodes well for our business, as it increases our recurring revenue and enables Adobe to interact more closely with our customers.” On Wednesday, Adobe is trading at about $32.80, up roughly 0.8%. Follow me @BCallwood.