Adobe Systems Q3 earnings soar, but shares drop on revenue forecast

Software maker's revenue outlook for Q4 disappoints investors

Well, that celebration was short-lived.

Adobe Systems Inc., maker of desktop, server and multimedia software, announced after Tuesday's market close a 69 percent increase in third-quarter net income.

Reporting increased revenue from all business units, Adobe earned $230.1 million, or 44 cents a share, in the quarter ended Sept. 3, up from $136 million, or 26 cents a share, a year ago. The company's adjusted per-share earnings of 54 cents surpassed consensus estimates of 49 cents per share.

Adobe's Q3 revenue of $990.3 million was up 42 percent from last year's $697.5 million and topped Wall Street estimates of $985 million for the third quarter. The company cited increased demand for its Creative Suite software for designers and web developers, its biggest seller. Product revenue totaled $829.1 million, up from $636.5 million a year ago, while subscription sales reached $98.6 million, way up from last year's $13.3 million. Q3 services revenue was $62.6 million, versus $47.6 million last year.

“Strong performance in each of our major businesses contributed to record revenue and strong earnings in Q3,” Shantanu Narayen, president and CEO of Adobe, said in a prepared statement. “We remain bullish about Adobe's long-term role in enabling the transformation of content and applications across industries.”

Not bullish enough, apparently. Adobe's Q4 forecast of $950 million to $1 billion in revenue fell short of Wall Street predictions of $1.03 billion, causing shares (NASDAQ: ADBE) to plummet in after-market trading. Shares closed during Tuesday's regular trading at $32.94 before falling as low as $27.70 after hours, a drop of 15.9 percent.

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