Adobe’s Cloud Push Sets Share Price at New Record

Adobe’s meteoric rise in the cloud computing space drove its share price to a new all-time high after reporting earnings for the second quarter.
Its digital media business, which includes the Adobe Creative Cloud, beat analysts’ revenue expectations of $1.17 billion by reporting $1.21 billion in revenue from that segment. Last year, that segment brought in a little over $1 billion dollars by comparison.
Adobe has long been a juggernaut software company with recognizable products like PhotoShop and Acrobat gracing the desktops of professionals everywhere. Its penetration into cloud computing expands its reach and allows the company to bundle other popular software products into one convenient subscription service. One of the most popular bundle packages, Adobe’s Creative Cloud software, allows individuals to access the apps they need across their library of devices for access anytime, anywhere. The Creative Cloud makes up the majority of Adobe’s digital media business.
Business experts contend that a shift from packaged license software to cloud-based subscription services offers a smoother, more predictable revenue stream because subscribers pay monthly to continue their use of the included products. In Adobe’s case, its most popular products are included in the Creative Cloud at varying price-points depending on how many of the programs one needs.
Previously, software companies offered the rights to use a specific program and then the user had to repurchase that program every year. The idea was that every year, the product improved and offered new features to entice customers to return for the fresh feel.
With cloud-based software, individuals pay for software located off-site, as is the case for software as a service and Adobe cloud. A subscription to these services means the programs are constantly updated and refined to enhance the user’s experience. Since data is maintained somewhere else, access is not based on one specific computer or device, and the data is automatically saved so a local crash will not affect the project.
For Adobe, this means that instead of making a new version of Adobe Acrobat every year, updates are regular and subscribers to the Adobe Creative Cloud will always have the latest version and Adobe will maintain a steady stream of revenues from these subscribers.
Growth in other cloud software bundles, like Experience Cloud and Document Cloud, helped Adobe report its higher than expected financials, though Creative Cloud is still the largest segment within the digital media business.
The proliferation of software as a service is lucrative for companies looking to enter the space, but some worry about growth opportunities becoming scarce as competitors, like Oracle, offer their own subscription based bundles. Eventually, subscribers will run out, or let their subscriptions lapse, something that was not as much of an issue when individuals had to spend more money on an updated product year after year.
Regardless, Adobe’s outlook for quarter three remains high with their revenue estimates at $1.815 billion, higher than market expectations of $1.8 billion and continuing on an already positive year. Through the second quarter, Adobe’s shares rose 52% for the year.

Leave a reply:

Your email address will not be published.

Site Footer