Adobe Systems (ADBE) reported a 59% jump in earnings for the third quarter as the fast-paced subscription growth, specifically Digital Media, drove the revenue higher. The top and bottom line, as expected, came in above analysts’ expectations. Investors remained unsatisfied with the results and forecast as the stock turned lower in the after-hours by 1.5%.
Earnings for the quarter climbed by 59% to $666.3 million or $1.34 per share. On an adjusted basis, earnings surged by 57% to $1.73 per share.
Revenue soared by 24% to $2.3 billion. The top-line results were benefited by the strong performance in Adobe Document Cloud and Creative Cloud. Subscription revenues jumped 29% to $2 billion, while Products revenue declined by 6.2% to $149 million.
Digital Experience segment revenue climbed by 21% helped by success in its Analytics Cloud, Marketing Cloud and Advertising Cloud offerings. The company’s data management platform Audience Manager and Adobe Campaign too remained as the key driver to the Digital Experience segment revenue growth.
Digital Media division’s net new annual recurring revenues (ARR) grew by $339 million to $6.4 billion. Creative Cloud continued its strong performance with a 29% increase in revenues touching $5.7 billion.
The company’s recently acquired Magento is off to a strong start by contributing $27 million to the subscription and services revenue in the third quarter. This was due to strength in demand, longer-than-expected stub period, and smaller-than-expected write-down of deferred revenue.
For the fourth quarter, Adobe expects its revenue to be nearly $2.42 billion, GAAP EPS of $1.42 and adjusted EPS to be $1.87. The Photoshop maker expects its Digital Media and Digital Experience divisions to witness 22% and 20% growth over the prior year period with new ARR for Digital Media segment to come in at $385 million.
According to a Reuters report, Adobe has been in talks to purchase privately-held Marketo, a cloud-based marketing software company. The company is gearing up to make the cloud-based software division strong enough to give a tough fight to Microsoft (MSFT) and Oracle (ORCL).
Experts believe that Adobe is likely to pay more than $2 billion as Vista Equity Partners Management had paid $1.8 billion two years ago when taking Marketo private. The negotiations have remained confidential.
Shares of Adobe ended Thursday’s regular session up 0.27% at $268.52 on the Nasdaq. The stock had surged by 53% so far this year and more than 71% in the past 12 months.