With a net increase of 331,000 subscribers in its most recent quarter, Adobe attracted enough customers to its $50-per-month Creative Cloud subscription plan to bring the total past 1 million, the company announced Tuesday.
"We exceeded one million subscriptions during Q3, demonstrating that the transition to Creative Cloud is happening sooner than expected," Chief Executive Shantanu Narayen said in a statement.
Investors liked the news, which came along with Adobe's report of $995.1 million in revenue and earnings of 32 cents per share for the quarter ended August 30. The company's stock popped 5 percent in after-hours trading, providing some evidence that investors are linking the company's fortunes to its controversial subscription plan.
In contrast, the financial performance fell short of Wall Street expectations for $1.01 billion in revenue and 34 cents per share, excluding some items, according to Thomson Reuters. Net income declined 8 percent from the year-earlier quarter.
The subscription shifts Adobe's revenue from bursts of upgrade activity to a more even stream of money -- if Adobe can convince enough people of benefits like frequent updates to Adobe's full range of software along with online services like Web hosting and cloud storage. To make it work, Adobe must convince existing subscribers to stay on board and attract new ones. Adobe currently offers Creative Suite a promotional discount that costs only $30 a month for earlier Creative Suite customers, but it expires after the customer's first year.
However, many customers are unhappy that Adobe has stopped developing new versions of its Creative Suite software under the earlier perpetual-license mechanism. One major complaint: unlike with perpetually licensed software, the Creative Cloud versions stop working when the customer stops paying.
But Adobe likes what it sees. A "majority of customers [are] moving away from perpetual licenses," Adobe said.
Adobe's goals are to reach 1.25 million Creative Cloud subscribers by the end of 2013 and 4 million by the end of 2015.
Separately, Adobe announced its foray into hardware with its Mighty stylus, which it'll begin selling in the first half of 2014 in cooperation with stylus maker Adonit.