Creative software giant Adobe has reported record Q3 revenue in an earnings beat fuelled by demand for its Digital Media business and solid subscription growth.

For the quarter ended 28 August, Adobe’s overall revenue grew by 14% year-over-year to $3.23bn.

Q3 profits came in at $955m, while adjusted net income was $1.25bn. This translated to adjusted earnings per share of $2.57, a year-on-year jump of 25%. Its diluted GAAP earnings per share were $1.97, reflecting growth of 22% year-over-year.

Analysts had been expecting earnings per share of $2.41 on revenue of $3.16bn.

Adobe, which develops a suite of software tools used by creatives, has reported record revenue in every quarter going back more than five years. This run continued as the company benefited from the ongoing shift to remote working and online learning.

Revenue from Adobe’s Digital Media unit was $2.34bn while its Digital Experience segment revenue was $838m.

Annual recurring revenue from Adobe’s Creative segment grew to $8.29bn. Over the years Adobe has also expanded into more enterprise-focused areas. Adobe Document Cloud, which allows customers to save and store PDFs in the cloud, reported growth in annual recurring revenue to $1.34bn.

Adobe Q3 revenue driven by subscription growth

Adobe, one of the early pioneers of the software as a service (SaaS) model, brought in the bulk of its Q3 revenue – $3bn – from subscriptions. This marks an 18% year-on-year increase. Elsewhere its product segment brought in $109m while services and support netted $116m in sales.

“Adobe delivered the best Q3 in our history in a challenging macroeconomic environment, demonstrating the global demand for our innovative solutions,” said Shantanu Narayen, president and CEO of Adobe in a statement. “We are confident that our leadership in the creative, document and customer experience management categories will drive continued momentum in 2020 and beyond.”

Adobe’s cash flows from operations grew to a record $1.44bn.

Logan Purk, senior analyst at financial services firm Edward Jones, said: “Adobe reported a strong quarter based on strength in its Digital Media business, in particular its Document Cloud product.

“The company delivered another quarter of solid growth in Annualized Recurring Revenue, which shows continued strong demand for Adobe’s products and reinforces our long-term growth outlook for the company. Adobe remains well-positioned to benefit as more companies embrace digital tools and digital transformation initiatives.”

Adobe anticipates revenue of $3.35bn in the next quarter, with adjusted earnings per share of $2.64.

Adobe bought back approximately 1.5 million shares during the quarter. Its share price rose by nearly 1% following the publication of its Q3 results. The company has seen its value increase by nearly 50% since the start of the year, outpacing the Nasdaq and S&P 500.


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