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UPDATE 1-Adobe's Creative Cloud fuels profit beat, shares surge

(Adds details, shares)

June 20 (Reuters) - Adobe Systems Inc reported a better-than-expected quarterly profit as the company benefited from more customers subscribing to its Creative Cloud package, which includes the popular photo-editing software Photoshop.

The company's shares were up 3.5 percent at $145.80 in after-market trading on Tuesday. If the gains hold, the stock is set to open at a record high on Wednesday.

Revenue in Adobe's digital media business, its largest by revenue, rose to $1.21 billion in the second quarter from $943 million, beating analysts' estimate of $1.17 billion, according to financial data and analytics firm FactSet.

The digital media segment includes the Creative Cloud business, which also consists of web video building application Flash.

The San Jose, California-based company has been benefiting from a shift to cloud-based subscription services, which have a more predictable revenue stream as opposed to revenue earned through the sale of packaged-licensed software.

Subscription revenue rose nearly 37 percent to $1.48 billion in the three months ended June 2.

Digital Media Annualized Recurring Revenue has been on a steady uptick, exiting the latest quarter at $4.56 billion. Analysts had estimated revenue of $4.54 billion, according to FactSet.

Adobe forecast third-quarter adjusted profit of $1.00 per share and revenue of $1.82 billion, above analysts' average estimate for a profit of 97 cents and revenue of $1.80 billion, according to Thomson Reuters I/B/E/S.

Adobe's net income rose to $374.4 million, or 75 cents per share, in the second quarter, from $244.1 million, or 48 cents per share, a year earlier.

Excluding items, the company earned $1.02 per share.

Revenue jumped 26.7 percent to $1.77 billion.

Analysts on average had expected a profit of 95 cents per share and revenue of $1.73 billion.

Up to Tuesday's close, the company's shares had risen about 53 percent this year. (Reporting by Laharee Chatterjee and Pushkala A in Bengaluru; Editing by Sriraj Kalluvila)