Adobe reaps rewards of recurring revenue

Posted by Ron Miller on Mar 22, 2017 1:50:40 PM

14927504381_a57e41d043_b.jpgIt's been a good month for Adobe. Last week, the company had a wildly successful earnings report. This week it held its Digital Marketing Summit in Las Vegas, making all kinds of high-profile announcements.

Let's start with the earnings report, as Adobe continued its string of 12 straight consecutive revenue gains. It closed at a record high last Thursday at of $130.30 following the report, and although it's fallen back a bit since then to $126.30, it's still doing quite well historically.

All of that growth is being driven by the cloud. Adobe reported quarterly revenue of $1.68 B for Q1 2017 with creative revenue of $947 M (presumably from Creative Cloud) and Marketing Cloud revenue of $477 million.

With the stock price flying high and the money rolling in, it certainly shows that the company made a good decision when it moved its Creative Software Suite, which includes PhotoShop, Illustrator, InDesign and other software design tools to a cloud-based subscription service in 2013. Since its inception, as one of the earliest PC software companies, Adobe sold traditional boxed software, but when it moved to the cloud it really took off.  Subscribe to the Intronis blog

To give you a sense of historical perspective, when Adobe announced its cloud plans for the Creative Suite May, 2013, the company's stock price was $47 per share. While it would probably be unfair to attribute its rise in the four years since moving completely to the cloud, the subscription model with its recurring revenue has certainly played a significant role.

In fact, in the earnings report, the company announced Digital Media Annualized Recurring Revenue (“ARR”) to $4.25 B.

Adobe unveils new cloud services

Meanwhile, on the heels of that great earnings report, the company got to show off in Las Vegas this week  with some major announcements. For starters, it united all of its digital properties under a single umbrella cloud it's calling the "Experience Cloud."

Adobe also discussed its deepening relationship with Microsoft to integrate data from that Experience Cloud into Microsoft tools like Microsoft Azure, Dynamics 365, and Power BI.

The company unveiled a new advertising cloud made up of its recently purchase TubeMogul and Adobe Media Optimizer, a tool it's had for some time. The company claims the combination of these tools provides a way to manage ads across TV and digital environments, giving customers an "end-to-end" solution.

Adobe is a company that has managed to make a successful transition from the old boxed software of the past into a modern cloud company, and it has reaped the rewards of that transformation with record revenue, soaring stock prices and a future buffeted by the comfort of recurring revenue.

It's up to Adobe to keep those creative customers happy, of course, but the model offers them a path to a steady source of income, and investors and customers seem to be recognizing the power of that.

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Photo: sikeri on Flickr. Used under CC by 2.0 license.

Topics: Cloud Trends

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