Ten straight quarters of revenue growth
Adobe Systems (ADBE) announced its fiscal 3Q16 earnings on September 20, 2016. As expected, Adobe’s fiscal 3Q16 earnings surpassed estimates. It reported revenues and non-GAAP (generally accepted accounting principles) EPS (earnings per share) of ~$1.5 billion and $0.75, respectively, which beat analysts’ expectations by $10 million and $0.02.
In fiscal 3Q16, Adobe’s revenue and EPS grew 20.2% and 38.9%, respectively, on a YoY (year-over-year) basis. Fiscal 3Q16 marked the tenth consecutive quarter of revenue growth for Adobe.
Unlike peer IBM (IBM), which has not reported revenue growth for 16 straight quarters, Adobe has seen success with its transition toward the subscription model. Oracle (ORCL), which recently announced its fiscal 1Q17 earnings, is also reeling under the pressure of revenue decline. In the past ten quarters, Oracle’s revenues have missed analysts’ expectations eight times.
Consistent increase in subscriptions
The above graph shows the contribution of subscriptions toward Adobe’s overall revenue in fiscal 3Q16. The contribution of subscriptions toward overall revenues rose to 80% in fiscal 3Q16, compared with ~68% in fiscal 3Q15.
Subscription revenue grew 41% in 3Q16. The increase in subscription revenue made up for the 34% decline in Adobe’s product revenue. It is this consistent increase in subscription revenue that enabled Adobe to exceed analysts’ expectations. Adobe’s subscriptions include software, selected services for file sharing and publishing, and access to Apple (AAPL) iOS and Google (GOOG) (GOOGL) Android apps. In its earnings call, Adobe stated that 83% of its revenue in fiscal 3Q16 was recurring, which is “an all-time high.”