Adobe beats estimates with momentum from Creative Cloud

Adobe Systems topped analysts' profit and revenue estimates for the eighth straight quarter driven by strength in its digital media business, which houses its flagship product Creative Cloud.

Adobe's shares, which have gained over 47 percent so far this year, fell 3.5 percent at US$249 in extended trading after the company forecast third-quarter revenue nearly in line with estimates.

The maker of image-editing software Photoshop said it expects third-quarter revenue of US$2.24 billion and adjusted earnings of US$1.68 per share. This compares with analysts' estimate of a revenue of US$2.22 billion and adjusted earnings of US$1.61 per share.

"The third-quarter guidance looks to be an in-line guide, which we would expect them to beat given how strong the business is. But, it is nothing we are worried about," said Christopher Rossbach, chief investment officer at private investment firm J Stern, which holds a position in Adobe.

Last month, in a move to bolster its Experience Cloud business, Adobe agreed to buy e-commerce services provider Magento Commerce from private equity firm Permira for US$1.68 billion.

"We expect the closing of Magento to be slightly dilutive to our Q3 GAAP earnings per share target", chief financial officer John Murphy said on a conference call with analysts.

Adobe's second-quarter net income rose to US$663.2 million, or US$1.33 per share, from US$374.4 million, or 75c per share, a year earlier.

The company's digital media business, that includes Creative Cloud, posted revenue of US$1.55 billion, compared with US$1.21 billion, a year earlier.

Revenue in Adobe's Experience Cloud business, which provides services including analytics, advertising and marketing, rose to US$586 million, above estimates of US$570.4 million.

Adobe's quarterly revenue rose to US$2.20 billion from US$1.77 billion, beating analysts' estimate of US$2.16 billion.

Excluding certain items, Adobe earned US$1.66 per share, beating analysts' estimate of US$1.54 per share.

(Reporting by Vibhuti Sharma in Bengaluru; Editing by Shailesh Kuber)