Adobe beats estimates on strong overall growth
Despite a slight seasonal dip, the software maker surpasses earnings expectations, as year-over-year growth comes in strong.
The company reported net income of $104.5 million, or 42 cents a share, for its third quarter, which ended Sept. 3. That compares with $64.5 million, or 27 cents a share, in the same period a year ago and $108.8 million, or 44 cents a share, in the previous quarter. Analysts surveyed by Thomson First Call had expected a profit of 39 cents per share in its third-quarter results reported today.
Net revenue for the quarter was $403.7 million, compared with $319.1 million a year ago and $410.1 million in the previous quarter.
Adobe attributed the robust year-over-year growth to continued strong sales for Creative Suite, a collection of graphics and publishing products centered on the Photoshop image-editing application, and Acrobat products for publishing in Adobe's portable document format, or PDF. Acrobat is the cornerstone of Adobe's "intelligent document" strategy to make PDF a general-purpose container for exchanging enterprise data.
Adobe has made particular headway in the publishing industry, said Shantanu Narayen, executive vice president of worldwide products. The company's InDesign layout program has competed against long-time market leader Quark in that sphere, and within the past year, Adobe has gotten major accounts such as Hearst Magazines and the BBC to centralize on InDesign and the rest of Creative Suite, Narayen said.
"We've been investing a lot in getting publishers to move to the Creative Suite platform, and that's clearly paying off," he said. "They're talking about Creative Suite as a standard publishing solution."
Adobe is also trying to make headway in consumer markets with hobbyist versions of its photo and video tools, including the new Premiere Elements. Such cut-rate applications don't make much money for Adobe, Narayen said, but they help introduce a new type of customer to the company's products.
"We want to expose them to our brand," he said. "The real revenue opportunity is with the hobbyist who wants to use professionals tools."
The sequential revenue and profit declines had been widely expected given the relative age of both Creative Suite and the current generation of Acrobat products. Analysts have suggested Adobe may speed up its usual production schedule and have a new version of Acrobat ready by the end of the year.
For its fourth quarter, Adobe forecast revenue of $400 million to $415 million and earnings per share of 38 cents to 41 cents.