Adobe results beat as subscription model gains traction

Adobe Systems Inc , maker of Photoshop and Acrobat software, reported quarterly results that beat analysts' average estimates as revenue from subscriptions more than doubled, sending its shares up 7 percent in extended trade.

Adobe has been shifting to web-based subscription service Creative Cloud from its traditional licensing model.

"It looks like consumers are choosing the Creative Cloud... and that's what seems to be driving the results, driving the stock," Macquarie Research analyst Brad Zelnick told Reuters.

Creative Cloud enables a customer to subscribe to the company's Creative Suite that includes its popular design titles such as Photoshop, Illustrator, InDesign, Flash and Dreamweaver.

"The growth is coming from attracting a whole new class of creative professionals," chief executive Shantanu Narayen said of Creative Cloud on CNBC.

"In digital marketing, we're just at the beginning. This is going to be a multibillion-dollar opportunity for Adobe."

Adobe said its Creative Cloud exceeded 500,000 paid individual members, and free and trial memberships exceeded 2 million, which the company said could lead to more paid membership.

Net income fell to USD 65.1 million, or 13 cents per share, in the first quarter, from USD 185.2 million, or 37 cents per share, a year earlier.

Excluding items, the company earned 35 cents per share.

Analysts on average expected adjusted earnings of 31 cents per share, according to Thomson Reuters I/B/E/S.

Total revenue, however, fell 4 percent to USD 1 billion due to the transition to the subscription model, but beat analysts' expectation of USD 986 million.

Subscription revenue more than doubled to USD 224.3 million. Adobe's revenue beat analysts' estimates for the second consecutive quarter.

A rapid adoption of subscription model tends to lower revenue in the short term as fees are collected monthly, instead of upfront one-time payment. Adobe moved to a subscription-based model last year.

Adobe shares, which have risen about 10 percent in the last three months, were up 7 percent at $43.45 in aftermarket trading. They closed at USD 40.75 on the Nasdaq on Tuesday.