According to Gartner, the global public cloud services market was estimated to have grown 20% last year to $109 billion. Business process services (BPS) was the largest segment in the market at $84.2 billion, with a 77% market share, compared with $72 billion a year ago. The software as a service (SaaS) market is estimated to be worth $14.4 billion, and infrastructure as a service (IaaS) reported the highest growth, from $4.3 billion in 2011 to $6.2 billion in 2012. Besides businesses, the industry is seeing increased adoption of cloud services by individuals. Digital services provider Adobe (Nasdaq:ADBE) is counting on this increased adoption to drive their own growth.
Adobe’s Q4 revenues were flat over the year at $1.15 billion, marginally ahead of the Street’s target of $1.1 billion. EPS of $0.61, however, dropped from $0.67 a year ago while still managing to surpass market expectations of $0.57 for the quarter.
By segment, revenues from Digital Media Solutions grew 5% over the quarter to $810.7 million. Growth was attributed to the increased adoption of Creative Cloud services. Revenues from Adobe’s Digital Marketing segment grew 32% over the year to $220.4 million. The segment’s growth was attributed to the increased adoption of mobile services. During the quarter mobile transactions grew to 22%, compared with 18% a quarter ago.
Adobe projects current quarter revenues of $0.95 billion-$1.00 billion, with EPS of $0.26–$0.32. The Street projects EPS of $0.56 on revenues of $1.07 billion for the quarter. Adobe expects to end the current year with revenues of $4.1 billion and EPS of $1.40, falling short of the market’s projections of revenues of $4.5 billion with EPS of $2.37.
Adobe’s Expanding Portfolio
As part of their expanding digital portfolio, Adobe is now focusing on the cloud segment. Recently they announced the acquisition of privately held social media company, Behance, for an undisclosed sum. New York–based Behance’s solutions help creative professionals like designers and artists to build a web portfolio without managing a website. Behance boasts of a membership base of more than one million subscribers. Adobe plans to leverage the acquisition to enhance their Creative Cloud services offering, which they released earlier last year. Creative Suite applications include services like Photoshop, Illustrator, and Dreamweaver, and members can download the apps, create and save their work online. With the addition of Behance, users can now even share their projects with their connections.
Adobe’s Creative Cloud services have seen strong growth since release. They are continuing to expand the availability of the service worldwide. Last quarter, they brought the service to Australia and New Zealand. Earlier this year, Adobe launched the suite in Asia as well, with Singapore being the first market, followed by Malaysia and Thailand. Adobe plans to launch the offering soon in other Asian markets, including the Philippines, Indonesia, India, and Korea. Since its launch, the Creative Suite has helped Adobe strengthen their move to a subscription-based revenue model. During the last quarter, they reported an addition of 10,000 Creative Cloud subscriptions per week. Within seven months of the launch of the service, more than one million professionals globally have adopted the Adobe Creative Cloud.
Adobe’s movements toward the cloud are being appreciated by the market. Their stock is trading near 52-week highs of $41.296, with a market capitalization of $20.59 billion.