Why Adobe Shares Jumped Nearly 13%

Shares of Adobe Systems  (NASDAQ: ADBE  ) closed out the week with healthy gains of nearly 13% after reporting earnings. Even though guidance for the current quarter came in slightly shy of Street forecasts, investors were still pleased nonetheless. The transition to a subscription model is beating expectations, with Adobe gaining over 400,000 Creative Cloud subscribers sequentially to end the quarter with more than 1.4 million subscribers.

Many software companies have been shifting toward subscription models; even Microsoft is doing likewise with Office 365. Subscription sales offer better visibility for the business, while generating recurring revenue. There was some early user backlash from Adobe's decision last year, as some creative professionals didn't want to pay every month. Adobe has shown that its transition is moving along quite nicely, though. In fact, it could even gain new customers since the upfront costs are much lower. A year ago, subscription revenue was just 17% of sales, but that figure has now risen to more than a third of total revenue.

In this segment of Tech Teardown, Erin Kennedy discusses Adobe's great quarter with Evan Niu, CFA, our tech and telecom bureau chief.

Get great growth for your portfolio
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 15, 2013, at 3:34 PM, EquityBull wrote:

    Profits were down a whopping 71%. I'd say the market got the price action way wrong. Also "Creative Cloud" is not any kind of Cloud play. They merely charge monthly for a license instead of a single one time fee license. The software itself is still downloaded and run on the local desktop same as it has been for the last decade.

    Right now many of the subs are in at intro prices. 30/month. soon to convert at 50/month. I think you will see attrition. I myself cancelled or tried to cancel but adobe gave me a free month. Next month I will try to cancel again and see if they lower the price, give me a free month or let me walk. Wonder how many others will walk at the non promotional pricing? $600/year versus $360 per year promotional we were paying.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2764762, ~/Articles/ArticleHandler.aspx, 10/25/2014 4:58:13 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement