Adobe Systems (ADBE 128.99, +6.64) has spiked 5.4% in pre-market after beating estimates and guiding ahead of market expectations.
The software company reported above-consensus first quarter earnings of $0.94 per share on a 21.6% year-over-year jump in revenue to $1.68 billion, which was also ahead of market expectations.
Like many other software companies, Adobe has encouraged its customers to select cloud and subscription-based products as opposed to buying software that runs locally. Accordingly, product sales declined 8.8% year-over-year to $183.39 million while subscription revenue grew 29.3% to $1.38 billion. Services and support revenue increased 2.2% to $114.41 million.
Although subscription revenue grew at a sharp rate, it is worth noting that cost of subscription revenue increased a bit faster, rising 31.6% to $141.18 million. However, gross margin improved to 85.88% from 85.65% one year ago.
Digital Media Annualized Recurring Revenue increased $265 million quarter-over-quarter to $4.25 billion.
The company's cash flow from operations hit $730 million, which was a record. Deferred revenue grew to $2.10 billion.
Adobe expects to see continued strength, priming the market for above-consensus second quarter earnings of $0.94 per share on revenue of roughly $1.73 billion, which is on the high end of current estimates. Digital Media Annualized Recurring Revenue is expected to increase by about $290 million during the second quarter.
With a solid pre-market gain, Adobe is set to begin the day at a fresh record high, extending its 2017 gain to 25.0%.