NEW YORK (TheStreet) –– Adobe (ADBE) shares fell sharply after the company reported fiscal third-quarter results that were below Wall Street estimates, including the company's number of paid subscribers to its Creative Cloud suite, as it transitions to a software-as-a-service (SaaS) company.
The stock fell 2.4% in early trading Wednesday.
For the third quarter, Adobe earned 28 cents a share on a non-GAAP basis on sales of $1.01 billion in sales, as it added 502,000 paid subscribers to its Creative Cloud suite, which includes Photoshop, Illustrator and InDesign.
"Adoption of Creative Cloud and Adobe Marketing Cloud continues to accelerate," said CEO and President Shantanu Narayen in a statement. "We are the leader in both of these high-growth categories and have a rapidly growing pipeline, setting us up for a strong finish to the year in Q4."
Analysts surveyed by Thomson Reuters were expecting earnings of 26 cents a share on $1.015 billion in revenue.
Adobe is transitioning to be a SaaS company so that it can generate more predictable recurring revenue, something investors have favored. Over the past year, shares of Adobe have gained 48.1%, severely outpacing the 22.3% gain in the NASDAQ.
For the fiscal fourth quarter, which ends in November, Adobe said it expects to earn between 26 cents and 32 cents a share on an adjusted basis, with revenue expected to be between $1.03 billion and $1.08 billion. Analysts expect an adjusted profit of 31 cents a share and $1.09 billion in sales.