Adobe's divisive move towards the cloud appears to be paying off for the firm after it managed to smash Wall Street sales expectations thanks to cloud-fuelled growth in Q2.
For the three months to 30 May, the software giant's net income rose 15.7 per cent year on year to $88.53m (£52.16m) on revenue which jumped 5.7 per cent to $1.07bn over the same period – ahead of analysts' expectations of $1.023bn.
Over the past year, the firm has turned sharply towards the cloud-subscription model and Q2 marked the final availability of perpetual licences of its popular Creative Suite (CS) product on some commercial volume licensing programmes.
In its second quarter, its subscription sales rocketed 87.3 per cent annually to $476.7m while its product revenue slid by a quarter to $479.2m over the same period.
The soaring subscription sales were driven by strong demand for its Creative Cloud subscriptions, which were up by 464,000 to 2.3 million, the vendor said – "well ahead of the target we set for the quarter".
Adobe's move away from a traditional licensing model has caused some controversy among customers, particularly small businesses, which claim that a subscription model is too expensive for them.
Towards the end of Q2, the channel urged customers to take advantage of the final availability of perpetual CS products ahead of the cloud drive.
Adobe's chief financial officer Mark Garrett admitted perpetual sales did drive its growth last quarter.
"Q2 was the last quarter we broadly offered perpetual volume licensing of CS6 through the channel," he said on a conference call, transcribed by Seeking Alpha.
"As a result, there was a high demand by customers serviced by the channel who wanted to add to their perpetual seat capacity. This drove the upside relative to the high end of our total targeted Q2 revenue range."
He said in Q3 he expects Adobe's sales to come in between $975m and $1.25bn.
"We believe these customers will migrate to Creative Cloud over time. Beginning in Q3, the channel is solely focused on licensing Creative Cloud."
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