Adobe Profit Tops Estimate; Outlook Disappoints

(RTTNews) - Publishing and design software maker Adobe Systems Inc. (ADBE) said Tuesday after the markets closed that its second quarter profit rose 67% from last year, helped by strong growth in subscription revenue amid robust demand for the company's cloud solutions.

The company's quarterly earnings per share, excluding items, also came in above analysts' expectations. However, the company gave a weak outlook for the current quarter.

"Strong execution against our Creative Cloud, Document Cloud and Marketing Cloud businesses drove record revenue," said Shantanu Narayen, Adobe president and chief executive officer.

Adobe shares are currently losing 1.79% in after hours trading after closing the day's regular trading session at $79.94, up $1.04 or 1.32%. The shares trade in a 52-week range of $58.51 to $80.74.

For the second quarter ended May 29, 2015, the San Jose, California-based company reported net income of $147.5 million or $0.29 per share, compared to $88.5 million or $0.17 per share for the year-ago quarter.

Excluding items, adjusted net income for the second quarter was $241.9 million or $0.48 per share, compared to $186.3 million or $0.37 per share in the prior year quarter.

On average, 25 analysts polled by Thomson Reuters expected the company to earn $0.45 per share for the second quarter. Analysts' estimates typically exclude special items.

Adobe, famous for its Photoshop editing and Acrobat document-sharing software, said total revenue for the second quarter rose 9% to $1.16 billion from $1.07 billion in the same quarter last year. Twenty-two analysts had a consensus revenue estimate of $1.16 billion for the second quarter.

For the second quarter, Adobe had forecast adjusted earnings of $0.41 to $0.47 per share and revenue of $1.13 billion to $1.18 billion.

Digital Media Annualized Recurring Revenue grew to $2.35 billion exiting the quarter, driven by an increase in Creative ARR of $230 million to $2.02 billion.

Products revenue for the quarter fell 43% from a year ago to $274.5 million, while subscription revenue surged 62% to $774.0 million and services and support revenue increased 1.2% from last year to $113.7 million.

The company repurchased about 2.6 million shares during the quarter, returning $200 million of cash to shareholders.

Looking forward to the third quarter, the company forecasts revenue of $1.175 billion to $1.225 billion, earnings of $0.23 to $0.29 per share and adjusted earnings of $0.45 to $0.51 per share. Analysts currently expect the company to earn $0.54 per share on revenue of $1.25 billion for the third quarter.

The company lowered its fiscal year 2015 revenue target to $4.845 billion from its prior guidance of $4.925 billion, solely due to the estimated $80 million impact of foreign exchange in the second half. However, the company continues to forecast fiscal 2015 adjusted earnings of $2.05 per share. Analysts currently expect the company to earn $2.08 per share on revenue of $4.88 billion for the fiscal year 2015.