Adobe's Shares Drop After 2016 Forecast Misses Estimates

Adobe Systems Inc. shares declined after the software maker forecast fiscal 2016 sales and profit that fell short of analysts’ estimates, citing currency fluctuations and a change in how it charges customers.

Revenue for the year that ends in November 2016 will be about $5.7 billion and profit excluding certain costs will be about $2.70 a share, the San Jose, California-based company said in a statement Tuesday after the close of regular trading. Analysts on average projected annual sales of $5.94 billion and per-share profit of $3.20, according to data compiled by Bloomberg.

After shifting most of its business from packaged software to programs distributed via the Web, Adobe is seeking to build its position in cloud-related software in areas such as documents and marketing. The company is facing a revenue hit of about $200 million from currency challenges in fiscal 2016, and sales will be crimped by about $100 million as Adobe shifts its billing practices, Chief Financial Officer Mark Garrett said at a meeting with financial analysts.

“We’re going to need to invest,” he said, noting the opportunities for the company’s future. “We really feel that that’s necessary to drive that kind of growth as we look out.”

Adobe’s shares fell 5.3 percent to $80.65 at the close Wednesday in New York. The drop, the sharpest since Aug. 24, left the stock up 11 percent this year.

Despite the stock’s recent decline, Pat Walravens, an analyst at JMP Securities, said in an e-mail that the “tone of the business seems very strong.” He also noted the shortfall is coming from currency challenges and Adobe’s change in charging customers, and didn’t point to any fundamental issues with the company’s business.

New Model

While revenue declined in 2013, the year after the transition to subscriptions began, Adobe’s sales have recovered as customers got used to the new model and the company attracted new buyers.

The company said last month that subscribers to Adobe’s Creative Cloud rose more than estimated, climbing by 684,000 to 5.33 million during the quarter that ended in August. Analysts on average had predicted an increase of 640,000, Mark Moerdler, an analyst at Sanford C. Bernstein & Co., said at the time. Adobe also said revenue in the current quarter, which ends in November, will be $1.28 billion to $1.33 billion, less than analysts’ $1.36 billion average estimate at the time. Profit, excluding some items, also missed analysts’ projections.

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