Adobe Systems Inc, maker of Photoshop and Acrobat software, said current-quarter earnings will decline or remain flat as customers take to the company's new subscription-based model faster than expected.
Adobe reported third quarter earnings of 58 cents per share, in line with estimates, and said in the current quarter EPS, excluding items, will range from 53 cents to 58 cents a share on revenue of $1.075 billion to $1.125 billion.
That's below analysts' average estimate of fourth-quarter EPS of 67 cents per share on revenue of $1.2 billion, according to equity research firm StarMine, which gives more weight to estimates from analysts with a better track record.
These targeted ranges factor in 25,000 additional new Creative Cloud subscriptions in the quarter, the company said on Wednesday.
Adobe launched its Creative Suite 6 - which includes Photoshop, Illustrator, InDesign, Flash and Dreamweaver - and the Web-based Creative Cloud products in the second quarter aimed at providing a more stable revenue model.
Analysts have expressed concern that the Web-based subscription service will hurt Adobe's financial growth at least over the short term.
Fourth-quarter targets indicate that Adobe's transition is happening faster than anticipated, Edward Jones analyst Josh Olson said.
"What happens with the subscription model is that revenue is recognized over time, so if adoption is faster there is more of a delay," he said. "The long term take away is that it's good thing."
Net income for the third quarter was $201.3 million. Revenue of $1.08 billion came below Wall Street expectations of $1.10 billion due to a currency hit of about $9 million.
Adobe shares fell 0.7 percent in after hours trading to $32.90, after closing up 1.69 percent at $33.12.
Our top photos from the last 24 hours.