Adobe falls short on cloud target

Earnings, revenue below analysts’ estimates for Q1

Adobe Systems shares fell a day after the company reported lower- than- expected subscription growth for its cloud service and forecast earnings and revenue below analysts’ estimates.

Adobe increased its Creative Cloud subscriptions 28 percent to 517,000 in the fiscal first quarter, missing the 575,000 average of two analysts’ estimates by Bloomberg.

The company on Tuesday projected second- quarter sales of $ 1.125 billion to $ 1.175 billion and profit, excluding some items, of 41 cents to 47 cents a share. Analysts expected $ 1.18 billion and 48 cents, according to the average of 19 estimates.

Adobe’s stock fell 3.5 percent to close at $ 76.89 Wednesday, recovering from a drop of as much as 6.2 percent. The San Jose- based company’s shares are up 14 percent in the past 12 months.

Adobe has introduced cloud- based marketing and

compiled creative- design tools as part of its push to generate more sales from subscriptions instead of software installed on computers. Revenue and profit declined in 2013, the year after the transition began, but have recovered as customers are getting used to the new way of buying software.

“People are realizing they don’t necessarily need the full suite,” said Norman Young, an analyst with Morningstar, who has a hold rating on the stock. “Our worry is, how are they going to raise prices over time and get people to move over from the point solutions to the full suite?”

To encourage people to buy more products, Adobe will add more services, such as stock photos from Fotolia, a company it acquired last quarter. The new offerings should lead to a boost in revenue per user “this year” from that integration, Chief Financial Officer Mark Garrett said in an interview.

Sales were $ 1.11 billion and profit, excluding some items, was 44 cents a share in the period ended Feb. 27, Adobe said Tuesday. Analysts had on average projected revenue of $ 1.09 billion and profit of 39 cents, according to data compiled by Bloomberg.

“Given they missed on subscriber numbers, I think investors are responding to the fact that it was a good, not great quarter,” said Samad Samana, an analyst at FBR Capital Markets.

Adobe has forecast 5.9 million subscribers for Creative Cloud by the end of the year. The company remains on target to meet the goal as it anticipates greater subscription growth in the second quarter, Garrett said during a conference call with analysts.