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Adobe's Revenue Trails Estimates, Hurt by 'Cloud' Model

NEW YORK ( TheStreet) -- Adobe (ADBE - Get Report) trailed Wall Street's revenue estimates in its third quarter as the company ramps up its subscription business.

The San Jose, Calif.-based firm reported revenue of $1.081 billion, below analysts' expectations of $1.10 billion and at the low end of its own guidance of $1.075 billion to $1.125 billion. Adobe took a $9 million hit from currency losses.

Excluding items, Adobe earned 58 cents a share, in line with the forecast from analysts surveyed by Thomson Reuters.

Adobe, however, said that as customers migrate from its older Creative Suite perpetual licensing model to new Creative Cloud subscriptions, revenue is recognized over a longer period of time.

"We're on a path to drive millions of subscribers to our Creative Cloud offering, as well as build a billion dollar SaaS [software as a service] business in Digital Marketing," said Mark Garrett, Adobe CFO's, in a statement. "This will drive higher long-term growth and create a large recurring revenue stream."

The Apple (AAPL - Get Report) and Microsoft (MSFT - Get Report) rival expects fourth-quarter revenue between $1.075 billion and $1.125 billion, compared to analysts' forecast of $1.21 billion. Excluding items, Adobe's looking for fourth-quarter earnings between 53 cents and 58 cents a share. Analysts surveyed by Thomson Reuters are predicting earnings of 67 cents a share.

Adobe shares slipped 0.7% to $32.90 in extended trading on Wednesday.

--Written by James Rogers in New York.

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