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Adobe Earnings Drop, but Top Forecasts

Adobe Systems reported first-quarter earnings that fell sharply from a year ago, but beat forecasts as revenue held above $1 billion.

Earnings excluding items fell to 35 cents a share from 57 cents a share in the year-earlier period.

Revenue decreased to $1.01 billion from $1.04 billion a year ago.

Still, both revenue and earnings beat. Analysts had expected earnings excluding items of 31 cents a share on $986 million in revenue, according to a consensus estimate from Thomson Reuters.

Adobe showed strengths in both of its growth objectives—creative cloud subscriptions and digital marketing.

Adobe Systems Inc. signage is displayed outside of the company's office in San Francisco, California, U.S.
David Paul Morris | Bloomberg | Getty Images
Adobe Systems Inc. signage is displayed outside of the company's office in San Francisco, California, U.S.

"In the creative business, the growth is coming from attracting a whole new set of creative professionals to the platform and making it far more predictable," Adobe's Chief Executive Office Shantanu Narayen told CNBC after the earnings announcement.

Adobe has been shifting to a web-based subscription service Creative Cloud from its traditional licensing model. Creative Cloud enables a customer to use the company's Creative Suite content remotely on a subscription basis. The suite includes its popular design titles such as Photoshop, Illustrator, InDesign, Flash and Dreamweaver.

A rapid adoption of subscription model tends to lower revenue in the short term as fees are collected monthly, instead of upfront one-time payment. Adobe moved to a subscription-based model last year.

"I would say in digital marketing, we are just at the beginning. This is going to be a multi-billion dollar opportunity for Adobe," said Narayen.

Adobe also said that Kevin Lynch, who led technology engineering at Adobe Systems, is leaving. Sources tell CNBC that Lynch will join Apple.

After the earnings announcement, the company's shares gained in extended-hours trading. (Click here to get the latest after-hours quote.)

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