Adobe Q2 earnings soar thanks to Creative Cloud

Amid a solid second quarter, Adobe cuts back its fiscal year outlook due to a weaker demand forecast in Europe.

Amid optimistic predictions for the software giant, Adobe rose to the challenge with solid second quarter earnings announced on Tuesday after the bell.

Adobe reported a net income of $224 million, or 45 cents a share (statement). Non-GAAP earnings were 60 cents a share on a revenue of $1.124 billion -- a 10 percent year-over-year increase.

Wall Street was expecting Adobe to report second quarter earnings of 48 cents a share on revenue of $1.11 billion. For the fiscal year, revenue was expected to be $4.5 billion with earnings of $1.99 per share.

CEO Shantanu Narayen attributed the higher-than-expected earnings to some of Adobe's newer projects, as explained in prepared remarks:

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.

For the outlook, Adobe is predicting a revenue of $1.075 billion to $1.125 billion at the end of the third quarter with non-GAAP earnings between 56 to 61 cents a share.

For the full fiscal year, Adobe cutback on the outlook with an annual revenue growth target within the range of six to seven percent, versus its prior target range of six to eight percent.

Adobe also adjusted its annual GAAP diluted earnings per share target range to $1.69 to $1.76 from its prior targeted range of $1.63 to $1.73; and its non-GAAP diluted earnings per share target range to $2.40 to $2.46 from its prior targeted range of $2.38 to $2.48.

Adobe attributed the less optimistic outlook to a weaker demand forecast in Europe.

By the numbers:

  • Cash flow from operations was $448.2 million.
  • Operating income was $404.4 million and net income was $299.6 million on a non-GAAP basis.
  • Deferred revenue grew by $43.9 million quarter-over-quarter to a total of $592.8 million.
  • Adobe is targeting its Q3 share count to be between 501 million and 502 million shares