On Tuesday, Adobe (NASDAQ: ADBE) reported financial results for the third quarter of fiscal year 2017 for the period ended September 1. The company posted record quarterly revenue of $1.84 billion, a 26 percent increase year-over-year. Digital Media revenue represented the most significant portion of total revenue at $1.27 billion, a 28 percent increase year-over-year. Digital Media annualized recurring revenue (ARR) grew to $4.87 billion at the end of the quarter, a net increase of $308 million. This growth in net ARR was driven by strength in Adobe’s Creative Cloud and Adobe Document Cloud businesses.

Other financial highlights include:

• Creative revenue was $1.06 billion. Creative Cloud growth was driven by net-new subscriptions.
• Adobe Experience Cloud revenue was $508 million, a 26 percent increase year-over-year.
• Cash flow from operations was $704 million.
• Subscription revenue was $1.57 billion, or 85.3 percent of total revenue. Products and services and support made up the remaining portion.
• Deferred revenue was $2.20 billion.
• GAAP net income was $419.6 million, compared to $270.8 million for the same period last year.
• Diluted earnings per share were $0.84 (GAAP), compared to $0.54 EPS for the same period last year.
• Adobe repurchased 2.1 million shares during the third quarter, returning $298 million in cash to shareholders.

‘Adobe delivered another record quarter with stellar year-over-year revenue growth of 26 percent,’ said Adobe president and CEO Shantanu Narayen in a press release. ‘The imperative to deliver intelligent, intuitive and effective customer experiences is key to the C-suite agenda of digital transformation, and Adobe’s cloud offerings are critical to that business mandate.’

‘Digital transformation has become the top agenda item for C-suites across the globe, and Adobe’s Cloud offerings are mission-critical for CMOs, CIOs, CTOs and CEOs charged with moderating their businesses and the way they engage with their customers,’ said Narayen in the earnings call. ‘At the same time, we are significantly growing our footprint in the creative space well beyond our loyal base of creative professional customers.’

Mark Garrett, executive vice president and chief financial officer, also commented on the company’s strong quarter.

‘Our results in Q3 once again reflect the leverage of our financial model, with record revenue driven by our cloud-based subscription offerings, strong earnings and cash flow from operations,’ said Garrett.

The company provided the following financial outlook for the fourth quarter of fiscal year 2017:

• Revenue of approximately $1.95 billion
• Net new Digital Media ARR of approximately $330 million
• GAAP earnings per share of $0.86

‘Our strong results coupled with our Q4 targets demonstrate that fiscal year 2017 will be another record year for Adobe,’ said Garrett on the earnings call.

Despite the strong quarter, investors were not impressed. The financials were released on Tuesday, September 19. That day at 4 PM Eastern, stock was valued at $156.60 per share. As of 9:35 AM yesterday, September 21, Adobe stock was valued at $150.96. According to The Motley Fool, Adobe’s quarterly financials are better than expected. Despite this dip, it has still grown appreciably since this time last year. On September 21, 2016, Adobe stock was just $107.78 per share.

Insider Take:

Adobe has had another strong quarter, and it is expecting to finish its fiscal year 2017 in a similar fashion. When we reported its second quarter financials, Adobe stock was at $126.21 (March 22), so investors are still liking what they see. With strong subscription sales, a growing ARR and good retention, Adobe has made the move to a subscription-based model worth everyone’s while.