Adobe’s shift to the subscription model continues to serve the company well, as indicated by the company’s record revenue for the fourth quarter of fiscal year 2017 for the period ended December 1, 2017. Along with celebrating the company’s 35^th anniversary, Adobe (NASDAQ: ADBE) reported total quarterly revenue of $2.01 billion, a 25 percent increase year-over-year, including subscription revenue of $1.7 billion, a 34 percent increase year-over-year. Subscription revenue now accounts for 84.5 percent of Adobe’s total revenue, compared to 78.4 percent for the same period last year.

‘FY17 was another strong year for Adobe, highlighted by record Creative Cloud, Document Cloud and Experience Cloud revenue, and capped-off by the first ever $2 billion quarter in company history,’ said

Adobe CEO Shantanu Narayen in an earnings call. ‘The pride in what we’ve accomplished is exceeded by our excitement about Adobe’s future. With our strong brand, our compelling strategy, and our culture of innovation, our best days remain ahead of us. We’re looking forward to a fantastic 2018.

Other highlights from the fourth quarter include:

• Digital Media segment revenue was $1.39 billion with Creative and Document Cloud posting record quarterly revenue of $1.16 billion and $235 million, respectively.
• Digital Media Annualized Recurring Revenue was $5.23 billion, a $359 million increase from the prior quarter.
• Adobe Experience Cloud achieved record revenue of $550 million, representing 18 percent growth year-over-year.
• Cash flow from operations was $833 million, also a record.
• Deferred revenue was $2.49 billion, an all-time high for Adobe.
• The company reported net income of $501.5 million, or $1.00 per diluted share (GAAP), compared to $399.6 million, or $0.80 per diluted share, for the same period last year.
• The company repurchased 1.9 million shares during Q4, returning $297 million in cash to stockholders.
• Scott Belsky, co-founder of Behance, returned Adobe as chief product officer and executive vice president of Creative Cloud.
• Adobe Experience Cloud processed approximately 64 trillion data transactions in Q4 and 186 trillion data transactions in the trailing four quarters.

Highlights for the year ended December 1, 2017 include:

• Adobe reported record total annual revenue of $7.30 billion, representing 25 percent growth year-over-year.
• Subscription revenue was the full year was $6.1 billion, representing 33.8 percent growth year-over-year.
• Digital Media segment revenue was $5.01 billion, with Creative and Document Cloud posting record annual revenue of $4.17 billion and $837 million, respectively.
• Digital Media ARR increased by $1.24 billion during fiscal year 2017.
• Adobe Experience Cloud achieved record revenue of $2.03 billion, representing 24 percent growth year-over-year.
• The company reported net income of $1.7 billion, or $3.38 per diluted share (GAAP), compared to $1.2 billion, or $2.32 per diluted share, for fiscal year 2016.
• The company repurchased 8.2 million shares during the year, returning $1.10 billion in cash to stockholders.

In Adobe’s earnings call, Mark Garrett, executive vice president and CFO shared the company’s financial outlook for fiscal year 2018:

• Total revenue of approximately $8.725 billion
• Digital Media segment growth of approximately 23 percent
• Net new Digital Media ARR of approximately $1.1 billion
• Adobe Experience Cloud subscription revenue growth of approximately 20 percent
• Adobe Experience Cloud total revenue growth of approximately 15 percent
• Adobe Experience Cloud subscription bookings growth of approximately 20 percent
• GAAP earnings per share of approximately $4.40

‘In summary, 2017 was another strong year for Adobe. We are the market leader across our key businesses, and are executing well against a large and growing addressable market,’ Garrett said. ‘We’re excited about what lies ahead for Adobe and look forward to sharing more progress with you in the coming year.’

Despite record revenues and strong net income, investors were less than impressed. Adobe’s financial report came out on December 14. On that day, stock opened at $176.83 per share, and closed at $175.00 per share. As of 6:34 PM EST yesterday, Adobe stock was valued at $176.74 per share.

Insider Take:

In 2011, Adobe announced that it was going to shift away from the traditional license-based software model to a subscription-based business model. This shift gives the company more long-term financial stability and more predictable revenue. Based on 2017’s results, the transition has been successful thus far with additional growth projected for 2018. The company may be only 35 years old, but it is positioning itself to be around for many years to come. Happy anniversary, Adobe!