Adobe lowers 2022 forecast, blames Ukraine war, strong dollar

Extended 'summer season' also at fault, says software slinger as share price slides


Creative software slinger Adobe booked in double-digit revenues rises in its latest quarter but lowered forecasts due to conflict in Ukraine and and currency challenges. As such, Wall Street frowned and the share price went down.

The Photoshop maker reported turnover from sales of $4.39 billion for Q2 ended June 3, up 14 percent year-on-year. The vast bulk of this, some $4.07 billion, was subscription-based, something other software vendors must eye with some envy because investors love recurring revenues.

The Digital Media division, which includes Creative Cloud and Document Cloud products, jumped 15 percent to $3.20 billion, higher than analysts had estimated. The Digital Experience wing was $1.1bn, up 17 per cent, again trumping analysts' projections of $1.08 billion.

"The digital economy runs on Adobe tools," trilled chairman and CEO Shantung Narayen.

Adobe still finds itself in that most rarefied of positions in that it has very few major competitors so was able to call the shots more easily all those years ago when it decided to ditch perpetual licenses and jump into the cloud.

What lies ahead, however, isn't quite what financial analysts were hoping for. Adobe issued a revenue forecast for 2022 of $17.65 billion, compared to the $17.9 billion estimated in December, and lower than the $17.85 billion that has been projected. Similarly EPS was lowered and disappointed Wall Street.

CFO Dan Durn, on a conference call, outlined the case for rowing back on previous forecasts: lower than expected tax benefits related to stock-based compensation and ceasing new sales in Russia and Belarus, a decision Adobe made in Q1.

"Third," he added, "result of the continued strength of the US dollar, we are now factoring in an incremental effects headwind of $175 million across Q3 and Q4 revenue. And fourth, while demand for our products remains strong, we now expect the second half of the fiscal year to show more pronounced summer seasonality in Q3 and the enterprise business with a stronger sequential increasing Q4."

Microsoft and Salesforce also disappointed recently with their financial year estimates. Both those companies and more are also starting to hire more cautiously or freezing headcount, as is the case with Intel's PC division.

Adobe's share price went down 5 percent following publication of its results and are down 33 percent in the year to date as tech stocks continue to have a torrid time following the pandemic boom. ®

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