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Adobe Reports Sales That Top Estimates on Creative Software

Nico Grant

(Bloomberg) -- Adobe Inc. reported revenue that topped analysts’ estimates, signaling robust demand for the software maker’s cloud-based creative tools during the coronavirus pandemic.

Sales jumped 14% to $3.23 billion in the quarter ended Aug. 28, the San Jose, California-based company said Tuesday in a statement. Analysts, on average, estimated $3.16 billion, according to data compiled by Bloomberg.

Chief Executive Officer Shantanu Narayen has tried to continue Adobe’s rapid pace of growth despite the company’s newfound status as one of the world’s highest-valued cloud software makers. The maker of Photoshop continues to invest heavily in designing new tools for creative professionals and hobbyists. The company said it has strengthened the marketing of these products to keep demand high during the pandemic.

In the fiscal third quarter, sales of the company’s flagship creative offerings rose 19% to $1.96 billion. Adobe’s Document Cloud, which has benefited from the increase in remote work during the pandemic, generated $375 million, a 22% rise.

Fiscal third-quarter profit, excluding some items, was $2.57 a share. Analysts were looking for $2.41.

“Adobe delivered the best Q3 in our history in a challenging macroeconomic environment, demonstrating the global demand for our innovative solutions,” Narayen said in the statement. “We are confident that our leadership in the creative, document and customer experience management categories will drive continued momentum in 2020 and beyond.”

The company’s shares climbed about 2% in extended trading after closing at $497.67 in New York. The stock has advanced 51% this year.

Adobe projected sales of $3.35 billion in the period that ends in November, in line with analysts’ average estimate of $3.36 billion. Adjusted profit will be $2.64 a share in the current quarter, matching analysts’ expectations.

Adobe said that revenue from its Digital Media division, including the creative and document clouds, will rise 18% in the current period, while sales of its marketing and advertising suite will be flat year-over-year.

After years of acquiring businesses to bolster its marketing and customer-experience capabilities against rival Salesforce.com Inc., Adobe has acknowledged that corporate interest in some elements of that product suite has waned. The software maker said it will focus on higher-value customers that adopt multiple offerings, and has decided to leave a part of the advertising-technology market.

The company will ramp up hiring in the current quarter and fiscal 2021 to capitalize on its large addressable market, according to prepared remarks from executives ahead of a conference call with analysts. Educational institutions and students have become a more valuable client base during the pandemic, when most learning in the U.S. is virtual, the software maker said.

(Updates with Adobe’s forecast starting in eighth paragraph.)

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