Adobe stock

Creative Cloud subscriptions are expected to continue accelerating the rest of this year, Credit: Adobe Systems.

Heads up, Adobe Systems Inc. (NASDAQ:ADBE) shareholders, because your company's future is in the cloud. Of course, Adobe has long made clear its plans for shifting away from license-based sales and toward a subscription-based cloud model. Consequently, that meant weathering a temporary lull in top-line growth as subscribers gradually migrated to their new subscription plans. Those plans recognize smaller chunks of revenue over time, rather than through larger, one-time purchases of perpetual licenses.

This cloud is bigger than they thought...
But if this quarter's numbers are any indication, those efforts are going much better than even Adobe was anticipating. Specifically, Adobe's fiscal second-quarter revenue rose roughly 5.7% year over year, to $1.07 billion, which was well above its own expected range of $1.00 billion to $1.05 billion. That translated to adjusted net income of $186.3 million, or $0.37 per share. Meanwhile, analysts were looking for earnings of just $0.30 per share on sales of $1.03 billion.

If you're wondering about the primary driver behind Adobe's outperformance, look no further than -- you guessed it -- its cloud-based offerings. Adobe gained 464,000 paid Creative Cloud subscribers last quarter alone, good for a more than 25% sequential increase, to 2.308 million. What's more, this represents a significant acceleration over the already impressive 405,000 cloud subscribers Adobe added in fiscal Q1. Finally, the icing on the digital cake came from Adobe Marketing Cloud revenue, which rose 23% year over year, to $283 million.

All told, 53% of Adobe's second-quarter revenue came from recurring sources like Creative Cloud and Adobe Marketing Cloud. And if that wasn't enough, management expects sequential growth to continue for the rest of this year, which should result in Adobe gaining another 1 million net new Creative Cloud subscriptions by the end of fiscal 2014. When all is said and done, that would bring Adobe's total Creative Cloud subscribers to 3.3 million, or 300,000 higher than the 3 million subscriber target that management first provided back in December.

As a result, Adobe provided third-quarter guidance for revenue of $975 million to $1.025 billion, and adjusted earnings per share of $0.22 to $0.28. Curiously, though, analysts were already optimistically modeling earnings of $0.27 per share on sales of $1.02 billion -- both at the high end of Adobe's expected ranges.

Foolish takeaway
So where does that leave investors today? Call me crazy, but I still think Adobe Systems stock is an attractive bet. And yes, I say that even with shares trading at a steep nine times trailing 12-month sales, and 35 times next year's expected earnings. To be fair, those expectations may well increase from here given Adobe's strong Q2 results, but I'll admit the stock still doesn't look "cheap" at first glance. 

However, Adobe's "painful" transition to its cloud-based business model is all but done. From here on out, Adobe is free to focus not only on both easier-to-implement incremental improvements to its software, but also driving revenue and earnings growth from a more sustainable, predictable base. In the end, and even after today's pop, I think Adobe Systems stock should be able to continue rewarding patient, long-term investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.