Adobe has cut its profit forecast for the next three years but stocks of the company rose as it reported a 22 percent jump in the number of subscribers to its Creative Cloud suite.
On Thursday, December 12, Adobe announced its financial results for the quarter ended November 29. The company confirmed that it added 402,000 subscribers for Creative Cloud, which includes Photoshop, Illustrator and Flash, in Q4 2013 an increase from 331,000 when compared to Q3 2013
"Adobe has redefined the Creative and Digital Marketing categories and its industry-leading Cloud offerings," said Shantanu Narayen, president and chief executive officer of Adobe. "Creative Cloud and Adobe Marketing Cloud are the clear market leaders and are poised for accelerated growth."
The company has shifted to a web-based subscription service Creative Cloud from a licensing model since 2012. This shift from the Creative Suite license business to the Creative Cloud subscriptions has made many customers unhappy, but investors seem pleased with the company's decision.
Subscription model usually generates less money upfront when compared to the traditional packaged software. However, with the subscription model, the company gets payment which is evenly distributed over the entire period of use, ensuring more predictable recurring source of revenue.
"We are leading the software industry in transitioning our business to the Cloud, which is enabling us to target higher top-line growth and greater recurring revenue," said Mark Garrett, executive vice president and chief financial officer of Adobe. "We are raising our long-term revenue growth targets, with a compound revenue growth rate of 20 percent between fiscal year 2014 and fiscal year 2016."
For Q4 2013, Adobe reported net income of $65.3 million, or 13 cents per share, on revenue of $1.04 billion. However, for Q1 2014, the company estimates lower revenue between $950 million and $1 billion. The company also adjusted forecast earnings of 28 cents to 22 cents per share.
Analysts had previously made an earning estimation of 34 cents per share on revenue of $1.02 billion for Q1 2014.
Adobe's net income fell to $65.32 million, or 13 cents per share, in Q4 2013, when compared to $222.3 million, or 44 cents per share, in Q4 2012.
The shares closed up 12.78 percent at $60.89 on the NASDAQ on Friday.
