Adobe Creative Cloud continues to enjoy strong momentum. Image source: Adobe Systems Incorporated.

Adobe Systems Incorporated (ADBE -1.43%) announced fiscal first-quarter 2016 results Thursday after the market close, and investors are rightly pleased with the continued strength of its cloud-based software business. Let's take a closer look at what Adobe achieved this quarter:
Adobe Systems results: The raw numbers

Fiscal Q1 2016 Actuals

Fiscal Q1 2015 Actuals

Growth (YOY)


 $1.38 billion

 $1.11 billion


GAAP net income

 $254.3 million

 $84.9 million


GAAP earnings per share (diluted)





What happened with Adobe Systems this quarter?

  • Excluding one-time items (primarily stock-based compensation, amortization of intangibles, and income tax adjustments), adjusted net income rose 48.3% year over year, to $332.6 million, or $0.66 per diluted share.
  • Both Adobe's top and bottom lines were above guidance provided in December, which called for revenue of $1.30 billion to $1.35 billion, GAAP earnings per share of $0.33 to $0.39, and adjusted EPS of $0.56 to $0.62.
  • Digital media segment revenue climbed 33% year over year, to $932 million, including a 44% increase in creative revenue, to $733 million.
  • Digital media annualized recurring revenue increased $246 million, to $3.13 billion, exiting the quarter, driven by continued strong adoption of creative cloud.
  • Added 798,000 net new Creative Cloud subscriptions, bringing total Creative Cloud subscribers to roughly 6.97 million.
  • Adobe marketing cloud revenue grew 21% year over year, to $337 million.
  • Cash flow from operations was $498 million.
  • Deferred revenue increased to a company-record $1.61 billion, up sequentially from $1.49 billion last quarter, and up 36% year over year.
  • Adobe repurchased 1.5 million shares for $133 million during the quarter, leaving $1.48 billion remaining under its current repurchase authorization.

What management had to say 
Adobe CEO Shantanu Narayen stated: "Every day, more brands, government agencies and educational institutions globally are choosing to base their digital strategies on Adobe's content and data platforms. Our exceptional performance in Q1 is an indicator of the strong momentum we are seeing across our cloud businesses as we drive the experience economy."

Adobe CFO Mark Garrett elaborated, "Strong Cloud adoption drove record Creative and Marketing Cloud revenue in Q1, and better-than-expected Digital Media ARR. Based on our strong Q1 results and business momentum, we are increasing our annual revenue and earnings targets for the year."

Looking forward 
Last quarter, Adobe increased its digital media ARR growth target for fiscal 2016 to $1 billion (from $738 million two quarters ago), bringing its total digital media ARR target for the year to $3.875 billion. Now, however, Adobe is targeting digital media ARR of $4 billion exiting fiscal 2016. 

For the full fiscal year, Adobe also increased its target for revenue of $5.8 billion (up from $5.7 billion previously), GAAP net income of $2.00 per share (up from $1.80), and adjusted net income of $2.80 per share (up from $2.70). In the meantime, for the current fiscal second-quarter 2016, Adobe expects revenue of $1.365 billion to $1.415 billion, GAAP earnings per share of $0.42 to $0.48, and adjusted EPS of $0.64 to $0.70.

In the end, this was another solid quarter for Adobe as it continues to enjoy sustained momentum in its transition to a cloud-based model. Given its relative quarterly beat and raised guidance, it's no surprise to see Adobe stock up more than 6% in Thursday's after-hours trading as of this writing.