Adobe Gives Rosy Forecast Signaling Creative Software Growth

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(Bloomberg) — Adobe Inc. gave an upbeat recurring revenue forecast for fiscal 2020 that reassured investors the software maker will see steady demand for its creative applications.

A measure of fresh demand for the company’s creative and document software, net new annual recurring revenue for digital media, will be $1.55 billion next fiscal year, the San Jose, California-based company said Monday at a financial analyst meeting. Analysts projected $1.53 billion, according to data compiled by Bloomberg. Wall Street is paying close attention to the metric amid slowing revenue growth overall.

Adobe unveiled new software products Monday at the company’s annual Max conference in Los Angeles, including versions of Illustrator and Photoshop apps for Apple Inc.’s IPad. While many of the applications cater to creative professionals seeking more sophisticated capabilities, Adobe also is trying to expand the appeal of its photo-editing and illustration software to hobbyists. The strategy may boost sales growth for the Creative Cloud unit. Adobe projected in September that sales growth for its smaller marketing software unit would slow down in the current period, raising pressure on the main creative business.

Profit will be $9.75 a share in fiscal 2020, Adobe said, compared with analysts’ estimates of $9.69. Revenue will be $13.15 billion, the company said. Analysts, on average, projected $13.14 billion.

The company expects revenue from its Creative Cloud and Document Cloud suites to jointly grow 19% in fiscal 2020, while its marketing software suite will grow 16%.

“Our expanding universe of customers, strong global brand, market-leading products and continued innovation position us for a stellar 2020,” Chief Executive Officer Shantanu Narayen said in a statement.

The software maker estimated that the total market for its products will grow to about $128 billion in 2022 from $108 billion a year ago. Most of that, $84 billion, represents marketing and customer experience software. The creative software industry would be worth $31 billion and the company’s Document Cloud would be part of a $13 billion market.

Adobe, founded in 1982, is among the best-performing software companies in the decade, with its stock increasing almost ninefold since the beginning of 2012. Shares jumped about 5% in extended trading following the release of the fiscal 2020 projections. The stock closed earlier at $277.50 in New York.