Adobe reported stronger revenue for its third quarter (ended Aug. 30) that included continued growth across its Creative Cloud, Document Cloud and Experience Cloud businesses, along with strong growth for its Adobe Lightroom complete system for photo editing on mobile devices.
Within Digital Media, the company “achieved another strong quarter” with its Creative business as revenue grew 22% year-over-year and it increased Creative annual recurring revenue (ARR) by $314 million, according to CFO John Murphy.
“Strong acquisition, upsell and retention of Creative Cloud subscriptions continued during Q3, and were driven by various factors,” including user growth that he told analysts on an earnings call Sept. 17 were “helped by many global initiatives to generate demand, including targeted campaigns and promotions, a large funnel of users coming from desktop and mobile, and leveraging Adobe’s brand and new products to expand into adjacent creative categories.”
Also driving the Creative Cloud subscription growth were: Increasing adoption of single app offerings, including Adobe Premiere Pro for video and Adobe Illustrator for artwork; continued growth in international markets, including greater than 40% year-over-year unit growth in key emerging markets; ongoing success in the enterprise, including new logos, seat expansion and services adoption creating higher contract value; and adoption of creative services including Adobe Stock, where revenue grew greater than 30% from Q3 last year, he said.
Adobe’s “momentum with Document Cloud accelerated in Q3” also, he said, noting the company achieved Document Cloud revenue of $307 million, which represented 24% year-over-year growth, and it added a record $72 million of net new Document Cloud ARR during the quarter.
The strong Document Cloud performance in Q3 was “driven by subscription demand across key routes to market with individuals, small and mid-market businesses, and large enterprises, the continued migration of Acrobat perpetual customers to subscriptions, enterprise services adoption and the conversion of free mobile Reader users to paid subscriptions,” he said.
In the Digital Experience segment, Adobe achieved quarterly Experience Cloud revenue of $821 million, representing 34% year-over-year growth, he said. Experience Cloud subscription revenue, meanwhile, jumped 37% from Q3 last year to a record $679 million, he said.
The company also made major strides on the mobile front in Q3, according to Shantanu Narayen, the company’s CEO and president.
“Our Document Cloud customers increasingly expect business processes to be seamless across desktop and mobile devices,” and, in Q3, “more than 2.5 billion PDFs were opened in Adobe Reader on mobile devices,” he said. Adobe Scan, which has become the top document scanning app for both iOS and Android, had close to 35 million installs, with downloads increasing more than 30% year-over-year in Q3, he told analysts.
Meanwhile, “strong uptake of our Document Cloud mobile applications, as well as continued strength in Acrobat subscription adoption, is driving momentum” in the business, he said.
“Adobe’s vision is that mobile devices and tablets should be used for creation in addition to consumption,” he went on to say.
As an example, Adobe Lightroom “achieved significant growth on mobile devices with Q3 monthly active users growing 130% year-over-year,” he told analysts, adding that, during Q3, “new Adobe IDs created from Adobe mobile apps rose more than 40% year-over-year, showing that mobile continues to be a healthy onramp for subscriptions.”
Also during Q3, the company announced Adobe Fresco, a drawing and painting app that he said “will be available first on iPad later this fall.” Fresco “digitally reimagines the process that artists have traditionally used – whether it’s chalk, pastels, oil, or watercolor paint,” he explained, adding that, like Photoshop “transformed and democratized photography, we believe Fresco will change how artists use digital to draw and illustrate.” Apple plans to feature Fresco in “hundreds of its retail stores as part of its iPad Pro ‘Big Draw’ campaign,” he said.
The company also expanded its Adobe Ambassador Network to target more than 100 colleges, he pointed out, explaining that, at Adobe, “we believe that creative skills should be a core part of school curricula and that STEAM” (Science, Technology, Engineering, Art and Math) – “not just STEM — should be a focus in education.”
Adobe also recently launched a new program with Reddit to “encourage young creators to contribute their personal designs to a giant, global canvas” on the Reddit front page, he said, adding: “These types of partnerships give us an opportunity to introduce Creative Cloud to millions of next-generation creators.”
Total Adobe Q3 revenue increased 24% from a year ago to $2.83 billion, with revenue in the Digital Media segment growing 22% to $1.96 billion and Digital Experience revenue jumping 34% to $821 million. Profit grew to $793 million ($1.61 a share) from $666.3 million ($1.34 a share). The company expects to report Q4 revenue of $2.97 billion, with Digital Media revenue increasing 20% and Digital Experience revenue growing 23%, it said.