It was not as if the results were bad, in fact Adobe Systems second-quarter revenue and full-year revenue forecast just about met analysts’ estimates, it is just that Wall Street hoped that they would see increased demand from the outfit’s Creative Cloud package of software tools.
Adobe has been focused on selling its software through web-based subscriptions, which ensures a predictable and recurring revenue stream. This helped Adobe’s cash rise for nine straight quarters and should mean that growth would be predictable going forward as most of the company’s clients were now on the subscription model
However Adobe’s forecast for the current quarter was largely below estimates – mostly because Adobe is always conservative on its outlooks and Wall Street suddenly seems to think that is a weakness.
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.
Adobe forecast third-quarter total revenue of $1.42-$1.47 billion, implying year-over-year growth of 16.4-20.5 percent. But the forecast was largely below analysts expectations of $1.47 billion.
Wall Street analysts expect the company’s revenue to rise between 19-22 percent over the next four quarters.
Adobe’s second-quarter net income rose 65 percent to $244.1 million, or 48 cents per share. Excluding items, Adobe earned 71 cents per share, beating analysts’ estimates of 68 cents.