Adobe’s Lackluster Forecast Suggests Growing Competition

(Bloomberg) — Adobe Inc. gave a disappointing outlook for the current period, suggesting increased competition is making a dent against the company’s prominent design software.

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Revenue will be about $4.34 billion in the fiscal second quarter, the San Jose, California-based software vendor said Tuesday in a statement. On average, analysts projected $4.4 billion, according to data compiled by Bloomberg. Adobe said profit, excluding some items, will be about $3.30 a share. Analysts, on average, estimated $3.35 a share.

While Adobe is one of the industry’s longtime success stories, the maker of creative and marketing software has faced rare investor skepticism recently over fears that businesses are reducing their spending on such tools and rivals such as Canva Inc. and Lightricks Ltd. are making in-roads among new customers. The stock has dropped 18% since its last earnings report on Dec. 16, closing Tuesday at $466.45 in New York. Shares declined about 2% in extended trading.

Adobe is in the midst of revising prices for its signature creative suite, the first major overhaul since 2017, said Chief Executive Officer Shantanu Narayen. The new structure will reflect features Adobe has added in the past five years, including new collaboration capabilities, executives said. The impact will be seen in revenue in the second half of the fiscal year, they said.

“It was time to take a very comprehensive look,” Narayen said on a conference call after the results were released. “We want to continue to attract hundreds of millions to the platform, but we also want to get value for the tremendous innovation we’ve provided.”

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Earlier, the company said it expected the war in Ukraine would reduce revenue by $75 million in the fiscal year, which includes a halt to all new product sales in Russia and Belarus.

In the fiscal first quarter, Adobe’s revenue grew 9.1% to $4.26 billion. The sales topped analysts’ estimates, but marked the first quarter since 2015 that Adobe had reported less than double-digit growth. Revenue in digital media, the division that includes Photoshop, increased 9% to $3.11 billion in the period ended March 4. Meanwhile, revenue from its analytics and marketing software rose 13% to $1.06 billion.

(Updates with rivals in the third paragraph.)

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