Adobe delivered better-than-expected third quarter financial results on Tuesday but its outlook fell below analyst targets and its shares dropped slightly after hours. The cloud giant reported fiscal third quarter earnings of $793 million, or $1.61 a share. Non-GAAP earnings in the quarter were $2.05 a share on revenue of $2.83 billion, up 24% from a year ago.
Wall Street was looking for earnings of $1.97 a share on revenue of $2.82 billion.
The Photoshop maker said subscription revenue was $2.55 billion, product revenue was $157 million, and that services and support revenue came to $130 million.
Revenue from Adobe's Digital Media unit overall was $1.96 billion and Digital Experience segment revenue was $784 million. Broken out, Creative Cloud revenue reached $1.65 billion in Q3, while Document Cloud was $307 million. Meanwhile, Adobe said annualized recurring revenue in its Digital Media unit grew to $7.86 billion, a quarter-over-quarter increase of $386 million.
On a call with analysts, Adobe CFO John Murphy acknowledged several challenges in Q3 related to Marketo and its Analytics Cloud. Specifically, Murphy said subscription bookings growth for Marketo in the midmarket "did not meet our expectations" and that the company is adjusting its focus on demand generation and inside sales.
"In addition, there were Analytics Cloud subscription bookings delays with related shortfalls in consulting services bookings and revenue associated with the launch of our new Adobe Experience Platform," Murphy said. "We are confident the enhanced innovation in Analytics Cloud, the introduction of our Real-Time CDP product, and the ongoing global roll-out of the Adobe Experience Platform will convert strong customer demand and the current pipeline into bookings starting in Q4. We now expect to grow our total Digital Experience subscription bookings in fiscal 2019 by greater than 20 percent year-over-year."
For the current quarter, analysts are looking for earnings of at least $2.30 a share on revenue of $3.03 billion. Adobe responded with a revenue estimate of $2.97 billion with non-GAAP earnings of $2.25.
Adobe's shares were down around 4% after hours.