Total revenues sank 0.8% year over year to $1.0 billion, amid a shift toward subscription-based software licenses. Analysts were looking for sales near $973 million.
Non-GAAP earnings stopped at $0.30 per share, down from $0.35 per share a year ago. Free cash flows fell 15% to $222 million, even though capital expenses were halved year-over-year to $30 million.
Adobe CEO Shantanu Narayen explained that the unexpectedly strong sales came from rapid adoption of Adobe's new cloud-based software suites. The shift away from straight-up license purchases and into renewable contract subscriptions is also working out better than planned.
"We achieved a significant milestone with our transition to the cloud in our first quarter with more than half of Adobe's total revenue coming from recurring sources such as Creative Cloud subscriptions and Adobe Marketing Cloud adoption," said CFO Mark Garrett.
In after-hours trading, Adobe shares jumped 2.5% higher on the news before falling back to a 0.8% drop instead. Adobe shares headed into this report on a full head of steam, having gained 16% in the last three months and 66% over the past year. Adobe continues to trade near all-time record highs.