San Francisco - Adobe Systems issued a fiscal third-quarter sales forecast that fell short of estimates as a stronger US dollar cut into overseas income, even as the company added more subscribers to its cloud services.
The San Jose, California-based company projected third-quarter sales of $1.175 billion to $1.225 billion for the period ending in August, short of analysts’ average projection for $1.25 billion, according to estimates compiled by Bloomberg. Adobe also lowered its annual revenue forecast to $4.845 billion, from $4.925 billion, it said in a statement on Tuesday.
The outlook is “solely due to the estimated $80 million impact of foreign exchange in the second half”, according to a transcript of remarks by Chief Financial Officer Mark Garrett for the earnings conference call. Adobe is keeping its full year earnings per share forecast, excluding some costs, at $2.05.
“We are dealing with the forex in our cost structure and still driving the same level of profitability,” Garrett said in an interview with Bloomberg News.
Adobe has spent the past three years shifting its business from selling packaged software to persuading customers to sign up to use software on the web. While revenue and profit declined in 2013, the year after the transition began, they have recovered as longtime customers got used to the new model and the company attracts new buyers.
Adobe shares fell 1.5 percent in extended trading. The stock advanced 1.3 percent to $79.94 at the close in New York, leaving it up 10 percent so far this year.
Subscriber growth
Profit, excluding some items, was 48 cents a share in the second quarter, which ended on May 29, Adobe said. The result beat analysts’ average projection for profit of 45 cents, according to data compiled by Bloomberg. Revenue was $1.16 billion, matching analysts’ average projection.
Adobe has forecast 5.9 million subscribers for Creative Cloud by the end of this fiscal year. For the second quarter, Adobe increased the number of subscribers to the service by 639 000, exceeding analysts’ estimates of around 589 000. The company is also seeking to boost the number of users for its marketing cloud and a new service called the Document Cloud which debuted last quarter.
New products
“The only question that everyone wonders is how many existing customers are still out there with existing licences products that need to migrate and come forward,” said Steven M. Ashley, an analyst at Robert W. Baird & Company, who has a neutral rating on the stock.
The company is also developing new services for its cloud products and on Tuesday introduced a photo-archive service called Adobe Stock, based on its acquisition in January of Fotalia LLC for about $800 million in cash.
“The addition of the new services is continuing to attract a brand new set of customers that is expanding the overall install base,” Adobe Chief Executive Officer Shantanu Narayen said in the conference call.
Getting more customers to use different products from across the Adobe portfolio “represents an untapped opportunity,” Narayen said. Over time, there’s room for these different services to get bound up together and generate more sales from existing customers, said Jay Vleeschhouwer, an analyst at Griffin Securities who has a buy rating on the stock.
“That duality of dominating on the digital media side, coupled with the breadth of the digital marketing portfolio, I think is a specific competitive differentiator for them,” Vleeschhouwer said.
Bloomberg