Did Adobe’s Digital Revolution UPSET Revenue?

Adobe Systems Inc (NASDAQ:ADBE) trimmed its revenue forecast for the full year in light of weaker demand in Europe, currency headwinds, and a decline in revenues from its digital media unit as flagship products are made available on the cloud.

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Adobe launched its Creative Suite 6 (a bundle of the Photoshop, Illustrator, InDesign, Flash and Dreamweaver programs) in its second quarter, along with a new cloud-based Creative Cloud offering. According to analysts, the subscription-based cloud service could affect revenues because customers would not be paying the cost of the software in one go, at the time of purchase. The company confirmed this on its conference call with analysts, admitting third-quarter sales at the digital media unit could see a fall compared to the second quarter.

Revenue from legacy enterprise products, namely Adobe Connect and Adobe LiveCycle, is also expected to fall marginally to just $150 million, prompting the company to discontinue investments on these products.

Given all this, Adobe expects full-year revenue to grow by only 6-7 percent to $4.47 billion to $4.51 billion, with profit expected at an adjusted $2.40 to $2.46 per share.

The revised guidance is down slightly from the earlier $2.38 to $2.48 a share, excluding items, based on revenues expected to grow 6-8 percent.

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