Adobe +4.6% AH, Creative Cloud strength overshadows soft guidance

|About: Adobe Systems Incorporated (ADBE)|By:, SA News Editor

In addition to missing FQ3 estimates, Adobe (ADBE) is guiding for FQ4 revenue of $1B-$1.05B and EPS of $0.28-$0.34, below a consensus of $1.08B and $0.41.

However, the company also states it added 331K paid Creative Cloud subs in FQ3, easily more than FQ2's 221K and FQ1's 153K, and leading the total base to grow to 1.031M. Enterprise CC adoption was stronger than expected.

Creative annual recurring revenue (ARR) +53% Q/Q to $546M. Adobe expects to add "slightly more" CC subs in FQ4 than were added in FQ3, and is on track to top its FY13 Digital Media ARR target of $800M.

The shift to cloud subscriptions from up-front licenses has the effect of making Adobe's near-term revenue and earnings trail its bookings and free cash flow, as cloud revenue is recognized over the life of a subscription. Thus, thanks to the CC shift, Adobe's recognized Digital Media revenue fell 16% Y/Y to $636.7M.

Marketing Cloud (ad tech) had another strong quarter, growing 28% Y/Y (25% exc. Neolane) and reaching a $1B/year run rate. Total Digital Marketing revenue +18% to $311.7M.

CC at 5PM ET. FQ3 results, PR.