Adobe's Q1 strong: 1.84 million Creative Cloud subscriptions

Adobe's Q1 strong: 1.84 million Creative Cloud subscriptions

Summary: Adobe delivered a strong first quarter and upped its outlook for the second as it continues to garner cloud momentum.

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Adobe's first quarter earnings and revenue came in at the high end of the company's expectations as it continues to land cloud subscriptions.

The company reported first quarter earnings of $47.05 million, or 9 cents a share on revenue of $1 billion. Adjusted earnings were 30 cents a share, a nickel better than estimates.

The main takeaway from Adobe is that it added 405,000 Creative Cloud subscriptions from a year ago and has annualized recurring revenue approaching $1 billion for its Creative business.

In a presentation, Adobe CEO Shantanu Narayen said the company's new features to its Creative Cloud have been well received.

As for the outlook, Adobe projected second quarter revenue of $1 billion to $1.05 billion with non-GAAP earnings per share of 26 cents a share to 32 cents a share. Wall Street is looking for earnings of 26 cents a share.

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On a conference call, Narayen noted that Adobe's marketing cloud, which many analysts argue is the best in the industry, is gaining traction. "When we look at it big picture we just continue to see great awareness, good traction with all of our solutions, people adopting the new solutions rather than point products," he said.

Other key points:

Contracts for subscriptions are about 18 months on average, but some are three years.

  • Overall, customers are signing up for the full Creative Cloud over point products such as PhotoShop.
  • Executives think that the next update to the Creative Cloud will tilt the customer base to the subscription model. Why? Creative Suite 6, the last on-premise suite, will look long in the tooth.

By the numbers:

  • Adobe's marketing cloud revenue growth was 24 percent compared to a year ago. Adobe said it is on pace to hit its 30 percent bookings growth target.
  • 54 percent of revenue came from Americas followed by 30 percent in EMEA and 16 percent in Asia.
  • Deferred revenue at the end of the quarter was $881 million.
  • Adobe ended the quarter with $3.13 billion in cash and equivalents.

Topics: Enterprise Software, Cloud

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3 comments
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  • But the Interwebs claimed they don't want subscription software!

    Or maybe, just maybe, in the real world people *gasp* like the idea of software-as-a-service and paying for the latest & greatest only when they want it, only for as long as they want it.

    I think it makes even more sense for a corporate perspective, with people changing jobs frequently a company is no longer stuck with expensive software purchases.
    aep528
    • You're witnessing "The Network Effect", which was what Adobe was banking on

      I still think that there are plenty of people who don't like subscription software. Few, however, are principled enough to stay on CS6 long enough to make Adobe reverse course.

      The network effect is that if you're collaborating with someone who has the CC release, if you're on CS6 still, you're probably going to feel pressure to be on the same release as them in order to ensure file compatibility. Similarly, your statement about getting latest and greatest only when it's desired falls flat when you consider that the software completely stops working if you don't pay them.

      Adobe got the most grief from people who wanted new plastic-disc releases, but Adobe said 'no'. It's not the addition of CC that got everyone upset, but CSx releases. Even if they did annual "code freeze releases", I think there would have been much less public outcry, along with a much better baseline of comparison. How many CC subscribers are, for example, college students who only have the option of getting the CC release? Coming from nothing (or cracked copies), that makes plenty of new subscribers to inflate the numbers look good while also conveniently ignoring whether they are getting professional graphic/video/print designers to take the plunge.

      The corporate perspective line makes even less sense. If the human sitting in the graphic design chair changes once or ten times over the course of a CSx release life cycle, that doesn't change the fact that the company keeps the license and the next person uses it, regardless of who that is. Why would they be "stuck" with an expensive software purchase? They're not buying it every time they hire someone new, they buy it once, and whoever does the graphics work, uses it. If they go on-and-off having a graphic designer in-house vs. farming it out, it makes more sense for the freelance designer to bring their copy to the table as it's a contract like any other. If the company alternates between having someone in-house and having all their graphics work completely farmed out, then they've got bigger problems than a $1,500 Creative Suite license.

      Joey
      voyager529@...
      • In the long run.....

        ........subscription services are a far better investment. I don't care what anyone says. $50 bucks a month for every single Adobe program? I said "count me in" 6 months ago and I haven't regretted the decision. Software updates are instantaneous, adding new features and additions that I'd have to buy a whole new version of the program to get. The old way made no sense. I like to have the absolute best and most up-to-date toolset available at any given second. CC gives me that. $50 bucks a month is chump change for a professional like myself, and when you factor in the addition of Business Catalyst as a means to host client sites, as well as cloud syncing your data, font database and Behance, it's just added layers on top of an already-excellent deal. It discourages (or rather, it SHOULD) pirated software, as there's really no excuse to be so absolutely stingy as to refrain from paying such a meagre subscription fee for every single Adobe product.
        Ekwensu214