Adobe Sales Forecast Beats Estimates With Creative Products Leading

(Bloomberg) -- Adobe Systems Inc., the maker of Photoshop, gave a sales forecast that topped analysts' estimates, signaling that strong demand for its creative products continues to drive growth, even as the company pushes more into software for businesses.

Revenue in the current quarter will be about $2.42 billion, and profit, excluding some costs, may reach $1.87 a share, the San Jose, California-based company said Thursday in a statement. Analysts projected $2.41 billion in sales and earnings of $1.86 a share, according to data compiled by Bloomberg.

Chief Executive Officer Shantanu Narayen has sought to boost Adobe's growth with a two-pronged approach -- doubling down in its core creative software and bolstering a suite of business offerings. While the company goes toe-to-toe with Salesforce.com Inc. in marketing and e-commerce technology, the digital media products continue to grow at a faster clip. Still, growth rates for the company's digital media software have slowed, a potential concern for investors, who have pushed Adobe's shares to a record.

“Creative Cloud growth is slightly diminished off of its peak growth rates which, in our opinion, should be a key point of interest since this is the bedrock of the company's competitive strength,” Sterling Auty, an analyst at JPMorgan Chase & Co., wrote in a note ahead of the results.

Adobe's creative and digital media segment still represents the majority of its revenue. The company projected sales from the unit will increase about 22 percent from a year earlier in the current period. Division sales grew almost 29 percent in the fiscal fourth quarter of 2017.

Revenue from the segment climbed 27 percent to $1.61 billion in the period ended Aug. 31. To power future growth, the company has launched more mobile apps to boost its appeal among hobbyists. The software maker has also pursued a strategy to make its traditional apps available on mobile devices, starting with Photoshop next year.

The shares were little changed in extended trading after the results were released. The stock closed at a record $268.52 in New York, and has jumped more than 50 percent this year.

Total revenue increased 24 percent to $2.29 billion in the fiscal third quarter. Profit, excluding some items, was $1.73 a share. Analysts estimated sales of $2.25 billion and adjusted earnings of $1.69 a share.

Sales from the company's experience cloud unit, which includes marketing, data and e-commerce programs, increased 21 percent to $614 million. The division got a boost from Adobe's acquisition of Magento Inc. in June, which is supposed to match Salesforce's software that helps manage online commerce.

San Francisco-based Salesforce bought Datorama Inc. in July, hoping to leverage its artificial intelligence software and existing customers as the company's marketing battle with Adobe heats up.

To contact the reporter on this story: Nico Grant in San Francisco at ngrant20@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Andrew Pollack

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