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Clouds rain revenue on Adobe's business

Q2 2016 ahead of 2015 by 20 per cent

Adobe's reported continued growth in its cloud subscriptions, but not enough to satisfy investors.

Its Q2 2016 revenue rose 20.4 per cent year-on-year to US$1.4 billion on the back of Creative Cloud subscriptions: the digital media business piled on 26 per cent year-on-year to hit $943 million, with Creative Cloud chipping in $755 million, up 37 per cent year-on-year.

Net income for the quarter was $244.1 million.

Analysts had expected slightly more out of Creative Cloud, and according to Reuters this, combined with a failure to upgrade its profit forecasts (as it did in the March quarter), led investors to mark down the stock. It fell 4.1 per cent to $95.60 in after-hours trading.

The company offered a Q3 forecast of between $1.42 and $1.47 billion, which would keep it on track for year-on-year growth between 16.4 and 20.5 per cent.

In line with its move to subscription-based revenue, product sales – the stuff you buy in boxes with a drink coaster inside – continued to fall, from $275 million for Q2 2015 to $197 million in the quarter just ended.

The cloud is also giving Adobe a nice annuity revenue: it says the digital media business' annualised recurring revenue was $3.41 billion exiting the quarter, a $285 million quarter-on-quarter increase.

Adobe's financial publications are here. ®

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