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Adobe raises revenue, profit forecasts above estimates on cloud momentum

Photoshop maker Adobe Systems raised its full-year profit and revenue forecast that topped market expectations, bolstered by strong demand for its Creative Cloud package of software tools.

The company's shares rose sharply Friday.

San Jose-based Adobe has been switching to web-based subscriptions from traditional licensed software to enjoy a more predictable recurring revenue stream.

Creative Cloud, which includes Photoshop, Illustrator and Indexing, is the biggest of the company's cloud businesses. The other two are Marketing Cloud and Document Cloud.

Adobe Creative Cloud
Source: Adobe
Adobe Creative Cloud

Adobe's Creative Cloud gained 20 million new IDs after users first experienced the applications on their mobile devices, according to Adobe's CEO Shantanu Narayen on CNBC's "Squawk Alley."

"Mobile is where people are interacting, whether it's for commerce or financial services or interacting with government…49 percent of the transactions that we're seeing,that we're delivering through our digital marketing products, are now also happening on mobile," said Narayen. "So mobile is driving more consumption of content and that's playing into our digital media and digital marketing trends."

Adobe, which is generally conservative with its forecast, said it now expects an adjusted profit of about $2.80 per share, on revenue of about $5.8 billion for its fiscal year 2016.

Analysts on average, were expecting a profit of $2.76 per share, on revenue of $5.74 billion, according to Thomson Reuters I/B/E/S.

It had previously forecast full-year revenue of about $5.7 billion and an adjusted profit of $2.70 per share.

"I think it's a culmination of all the execution that these guys have put in place for the last 2-3 years," Rosenblatt Securities analyst Kirk Adams said, adding that it was "unlike" Adobe to raise their numbers so early in the year.

It also reported quarterly revenue and profit that topped market expectations on Thursday.

Revenue from its digital media business, which houses Creative Cloud, jumped 33 percent to a record $932 million.

Revenue rose 24.7 percent to $1.38 billion, beating analysts' estimate of $1.34 billion.

The company's net income rose to $254.3 million, or 50 cents per share, in the first quarter ended March 4, from $84.9 million, or 17 cents per share, a year earlier.

Excluding items, it earned 66 cents per share, beating average analysts' estimate of 61 cents per share, according to Thomson Reuters I/B/E/S.

Adobe's shares have risen about 13 percent in the last 12 months through Thursday's close.

—CNBC.com contributed to this report.