Thanks to customers’ growing inclination towards subscription based mode, Adobe Systems Inc (NASDAQ: ADBE) handed better-than-expected fiscal first quarter results and lifted its outlook on full-year results.
For the current fiscal, Adobe expects adjusted or non-GAAP earnings of $1.45 per share up from its earlier guidance of $1.40 per share. Analysts’ consensus estimate was for earnings of $1.41 per share.
Shares leaped about 7% in afterhours trading on Tuesday.
Since last year, the Company has switched to a new business model, drifting away from licensing model to web-based subscription service called as Creative Cloud.
Under a Creative Cloud model, the customers are able to choose and subscribe to Creative Suite, depending on their requirements. Some of the popular design titles at its Creative Cloud include Dreamweave, Flash, Illustrator and Photoshop.
The Company said that its subscription base for Creative Cloud was more than 500,000 while free and trial memberships surpassed 2 million. The Company said that the trend point towards growth in paid membership.
During the quarter, Adobe added 153,000 net paid subscribers and expects the subscribers’ base to reach 1.25 million by the end of 2013.
“I would say in digital marketing, we are just at the beginning. This is going to be a multi-billion dollar opportunity for Adobe,” said CEO, Shantanu Narayen while speaking to CNBC
For the fiscal first quarter, net income came at $65.1 million or 13 cents per share down from $185.2 million or 37 cents per share, in the year-earlier quarter.
Adjusting onetime items, Adobe reported earnings of 35 cents a share.
Revenue during the period declined 4% to $1 billion as the Company is adapting to a subscription based model. Earlier under the licensing model, the Company used to collect onetime upfront fees which tended to boost revenue as opposed to monthly fees collected under Creative Cloud model.
Analysts polled by Thomson Reuters were expecting earnings of 31 cents a share on revenue of $986 million.
Revenue from subscriptions jumped more than two times to $224.3 million.
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