(By Balaseshan) Adobe Systems Inc. (NASDAQ:ADBE) reported in-line quarterly earnings on Creative Cloud subscriptions growth and 40% jump in its Digital Marketing Suite revenue. However, the company guided fourth quarter below Street's view.
Earnings for the third quarter were $201.36 million or $0.40 per share, compared to $195.10 million or $0.39 per share last year. Adjusted earnings per share (EPS) declined to $0.58 from $0.60.
Revenue increased 6.6% to $1.081 billion. Creative cloud subscriptions accelerate and digital marketing suite revenue grew 40% year-over-year.
Analysts, on average, polled by Thomson Reuters had expected a profit of $0.58 per share on revenue of $1.10 billion for the third quarter.
Products revenue increased to $810.46 million from $811.92 million, while subscription revenue grew to $172.92 million from $114.56 million. Services and support revenue rose to $97.20 million from $86.74 million.
Adobe Creative Cloud paid subscriptions grew to about 200,000 in the third quarter. Adobe added about 8,000 Creative Cloud subscriptions per week during the quarter, exceeding the addition of 5,000 subscriptions per week that was assumed in its third quarter financial targets.
Gross margin for the third quarter declined to 88.9% from 89.7% previous year.
Looking ahead into the fourth quarter, the company expects adjusted earnings of $0.53 to $0.58 per share and revenue of $1.075 billion to $1.125 billion, while Street analysts predict profit of $0.67 per share on revenue of $1.21 billion. Adobe said the guidance reflects the effect of higher migration of customers to Creative Cloud than forecast earlier in the year.
The earnings and revenue forecast ranges factor in the addition of 125,000 new Creative Cloud subscriptions in the quarter, which represents about $94 million in Q4 perpetual revenue which would effectively move to subscription and ratable monthly recognition.
ADBE closed Wednesday's regular session up 1.69% at $33.12. The stock has been trading between $22.89 and $34.78 for the past 52 weeks.