Cloud atlas: Oh dear. Now Adobe has mapped out a slowdown

Pricey software suite with no real rivals thinks growth will slow

Adobe, maker of pricey software for artsy types, is still growing like a weed but last night joined a list of tech titans to forecast a slowdown.

Revenue for Q1 ended 1 March (PDF) grew 26 per cent year-on-year to $2.6bn, beating guidance of $2.54bn: subscriptions were up 29 per cent to $2.3bn; product revenue dipped 0.6 per cent to $171m; and service & support climbed 10 per cent to $125m.

Adobe moved from ASC 605 to ASC 606, a new revenue recognition standard, and this helped plump the top line by a couple of per cent.

Broken down, the Digital Media division hauled in $1.78bn, up 22 per cent. Within this, Creative Cloud jumped to $1.49bn and Document Cloud by 22 per cent to $282m.

CFO John Murphy told financial analysts on a conference call that "notable drivers" for Creative Cloud included "subscription momentum" in "enterprise deployments"; growth in emerging markets; and an increase in average revenue per paying user (APRU).

Document Cloud was lifted by growing Acrobat subs, "helped by a steady on-ramp and conversion of free mobile app usage to paid subscriptions, and bigger businesses buying into the cloud".

Digital Experience turned over $743m in sales, up 34 per cent, boosted by the firm's purchase of Marketo.

Adobe made the move to the cloud five years ago and hasn't really looked back, converting more and more clients onto services contracts. It helps that there aren't any viable alternatives for its massive interconnected software portfolio on the market.

Total expenses for the quarter went up considerably from $1.117bn to $1.508bn, with increases to R&D, sales and marketing and general admin staff. This winded operating profit, which fell to $694.8m from $702.7m.

The prediction for the next quarter is for revenue grow slower at 23 per cent to $2.7bn, below market estimates of $2.72bn. That $200m shortfall caused Adobe's share price to fall 3 per cent. For the year, Adobe expects sales of $11.15bn, but again this was light on analyst forecasts of $11.17bn.

Dell Technologies, HP Inc, Fujitsu, NetApp and a bunch of other tech firms are forecasting a slowdown this year as the economy in China slows and political uncertainty leads to business uncertainty. ®

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