Adobe Faces Antitrust Challenges, Predicts Revenue Below Expectations

Technology

On Wednesday, Adobe, the creator of Photoshop, announced it is under regulatory investigation regarding its subscription models. The company also projected annual and quarterly revenue below the estimated figures, resulting in a more than 5% decline in its shares during after-hours trading

Adobe, the creator of Photoshop, disclosed on Wednesday that it is under regulatory scrutiny for its subscription models and anticipates annual and quarterly revenue below estimates. This announcement led to a more than 5% drop in its shares during after-hours trading. The San Jose, California-based company revealed in a regulatory filing that it has been cooperating with the Federal Trade Commission (FTC) since June 2022 in response to a civil investigative demand related to its disclosure and subscription cancellation practices. In November 2023, the FTC staff claimed the authority to engage in consent negotiations for a potential settlement, and Adobe is currently in discussions with the FTC. The company acknowledged that this matter may result in significant monetary costs or penalties, impacting its financial results and operations.

Furthermore, Adobe’s $20 billion acquisition of the cloud-based designer platform Figma is also under scrutiny by Britain’s competition regulator. The European Commission issued a preliminary statement of objections, and the Competition and Markets Authority expressed provisional findings of competition concerns. Adobe asserted its disagreement with these findings and is actively responding to the respective regulators.

In terms of financial projections, Adobe forecasted revenue for the current quarter in the range of $5.10 billion to $5.15 billion, falling short of the average analyst expectation of $5.19 billion. The revenue forecast for fiscal 2024 was estimated to be in the range of $21.30 billion to $21.50 billion, also below estimates. The company attributed the challenges to reduced spending by individuals and firms grappling with inflation and higher interest rates. Adobe further noted that a price increase for some offerings initiated in November exacerbated the decline in demand.

In the fourth quarter, Adobe reported an adjusted profit of $4.27 per share, surpassing estimates of $4.14.

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