Adobe Systems Incorporated (NASDAQ:ADBE) Has Cloudy Concerns Ahead

Adobe Systems Incorporated (NASDAQ:ADBE) could not help its fall after reporting below-par earnings and revenue outlook and softer subscription growth for its cloud service. The software company added only 28% Creative Cloud subscribers in the first quarter that totaled 517,000, way below the market consensus of 575,000.

Analyst predict major swings in the market… will it affect ADBE?

Missed on subscriptions numbers

In addition, the company forecasted second quarter sales in the range of $1.125 billion to $1.175 billion and profits in between $0.41-$0.47 per shares. The projections missed meeting the analysts’ targets of $0.48 profit on $1.18 billion revenues. Resultantly, the stock of Adobe Systems Incorporated (NASDAQ:ADBE) nosedived by nearly3.50% to $76.89 on Wednesday.

Over the last few months, the software company has been increasingly emphasizing on pushing sales for cloud-based services and creative design tools. The shift in the approach comes as Adobe Systems Incorporated (NASDAQ:ADBE) strives to reduce its dependence on sales of software installed on computers to cloud subscriptions. Though the revenue and profits declined in 2013 but the transition has won back customers, who are adapting to a new way of buying software. According to a Morningstar analyst, Norman Young, people realize that they don’t need complete set of software anymore for their computers.

Affirms higher growth in second-quarter

Adobe Systems Incorporated (NASDAQ:ADBE) reported an upbeat first quarter, posting $1.11 billion sales and $0.44 per share of profits. Analysts had estimated $1.09 of revenues and $0.39 of EPS. But, the concerns remain as to how the company will raise prices of its products over time and increase customer base simultaneously. As the stock of the company tumbled, FBR Capital Markets analyst said that investors are giving higher weight to the company’s failure to report subscriber numbers in line over its quarterly performance. In the meantime, Adobe Systems Incorporated (NASDAQ:ADBE) has reaffirmed that it will achieve higher subscription growth in the second quarter.

About the Author

Terrel is US Markets Daily's business news reporter. She joined US Markets Daily after five years as a print reporter.

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