Adobe's revenue forecast disappoints growth-hungry investors

Wed Jun 22, 2016 2:16pm EDT
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(Reuters) - Adobe Systems Inc's (ADBE.O: Quote) second-quarter revenue and full-year revenue forecast just about met analysts' estimates, disappointing investors hoping demand for the company's Creative Cloud package of software tools would outpace expectations.

For the past few years, Adobe has been focused on selling its software through web-based subscriptions, which ensures a predictable and recurring revenue stream compared with the lumpy revenue earned through the sale of packaged-licensed software.

While that has helped Adobe's revenue rise for nine straight quarters, growth would be predictable going forward as most of the company's clients were now on the subscription model, Wunderlich Securities analyst Ryan MacDonald said.

"People were expecting more of a "beat and raise" and they got an in-line and an in-line guide. I think its more about expectations," MacDonald said, noting Adobe has been one of the best performing large-cap software stocks.

The company's shares fell 4.1 percent, to $95.60, in trading after the bell on Tuesday. They had risen nearly 11 percent from last quarter's report through Tuesday's close.

Adobe's second-quarter revenue met analysts' estimates, according to Thomson Reuters I/B/E/S, while the company's forecast for the current quarter was largely below estimates.

Though Adobe, which is generally conservative with its outlook, said it expected to "meet or exceed" its full-year 2016 forecast, the company did not raise its revenue and profit expectations for the period as it did in March.

Adobe's second-quarter revenue rose 20.4 percent to $1.40 billion as more customers subscribed for Creative Cloud, which includes graphic design tool Photoshop, web design software Dreamweaver and web video building application Flash.

Revenue from the digital media business, which houses Creative Cloud, jumped 26 percent to $943 million, but fell just short of analyst's estimates of $944.3 million, according to FactSet StreetAccount.   Continued...

Adobe company logos are seen in this picture illustration taken in Vienna July 9, 2013. REUTERS/Leonhard Foeger/File Photo