Adobe's subscription gamble pays off
Adobe's moves to get its clients to shift to a subscription model appear to be paying off.
The outfit raised its full-year adjusted earnings forecast claiming that more customers chose its subscription-based model than expected.
Adobe has been shifting to web-based subscription service Creative Cloud since last year from a traditional licensing model.
Edward Jones analyst Josh Olson told Reuters that not only did customers convert to the new business model, the package appeared attractive enough to bring in new business.
Adobe said its Creative Cloud has 500,000 paid individual members and free and trial memberships exceeded two million, which the company said could lead to more paid membership.
The outfit added about 153,000 net paid subscriptions during the first quarter and that it expects to reach 1.25 million paid subscriptions by the end of this year.
The rest of the results were not great but generally better than most people expected, given the current climate.
Net income fell to $65.1 million in the first quarter from $185.2 million last year a year earlier. This is still better than Wall Street expected.
Total revenue fell four percent to $1 billion due to the transition to the subscription model, but beat analysts' expectation of $986 million.
Subscription revenue more than doubled to $224.3 million.
Accountants think that the adoption of subscription model tends to lower revenue in the short term as fees are collected monthly, instead of upfront one-time payment.