Long-term investors who like software firms might consider adding Adobe (ADBE) to their 2016 portfolio. Adobe remains the undisputed champion when it comes to creative/design-related software. Adobe’s Photoshop, Illustrator, After Effects, Premiere, and Dreamweaver products are industry-standard software in the enterprise and creative market.

ADBE outperformed Autodesk’s (ADSK) stock this year but I still see more upside potential for Adobe in 2016.

As per the latest quarterly earnings report of Adobe, this company now boasts 6.17 million paying customers for its Creative Cloud suite of software. The affordability of Adobe’s monthly fees for its Creative Cloud software helped the company increase its subscribers by 2.71 million this year.

(Source: Google Finance)

I again expect the affordability of its subscription-only software to help Adobe post continuous growth in individual and team subscriptions next year. Since switching to a subscription-only business model in June 2013, Adobe has rapidly increased its software subscribers. The last quarter saw Adobe adding 833,000 new paying subscribers.

The chart below from ProDesignTools.com greatly illustrates the impressive growth momentum of Adobe’s Creative Cloud business. From less than 500,000 subscribers in 2013, Adobe could eventually hit 8-10 million subscribers within the next 12 months.

The impressive growth rate of paying customers of Adobe Creative Cloud is even more notable considering that there are now numerous free alternatives to Adobe’s software suite. The overwhelming success of Creative Cloud only confirmed that creative print/web design professionals are too accustomed to Adobe’s software to consider switching to other software.

Why It Matters

Photoshop and other Creative Cloud software remains the main source of income of Adobe. The Digital Media ARR (Annualized Recurring Revenue) division responsible for Creative Cloud sales posted $2.99 billion in FY 2015 sales – up by $1.12 billion Year-over-Year. The other division, Adobe Marketing Cloud, only generated $1.36 billion in FY 2015 revenue.

I therefore love any report that announces growth in subscribers of Adobe Creative Cloud. The subscription-based or software-as-a-service method adopted by Adobe two years ago help eliminate/greatly reduce the rampant piracy of the company’s Creative Suite CS6 product.