Adobe (NASDAQ: ADBE) Grapples with Regulatory Scrutiny Impacting Revenue Projections and Stock Performance

Adobe (NASDAQ: ADBE) Grapples with Regulatory Scrutiny Impacting Revenue Projections and Stock Performance

Adobe (NASDAQ: ADBE) disclosed on Wednesday its encounter with regulatory scrutiny over subscription models, which has impacted both its revenue projections and stock performance. The San Jose-headquartered company revealed its collaboration with the Federal Trade Commission (FTC) since June 2022, responding to a civil investigative demand related to its disclosure practices and subscription cancellations.

Acknowledging the potential for substantial financial implications and penalties, Adobe highlighted the possibility of a significant impact on its financial outcomes and operational dynamics due to this ongoing matter. Additionally, the company’s acquisition of Figma, a cloud-based designer platform valued at $20 billion, has drawn scrutiny from Britain’s competition regulator.

The European Commission issued preliminary objections, while the Competition and Markets Authority expressed provisional concerns regarding competition related to this acquisition.

Looking ahead, Adobe’s projected revenue for the current quarter stands between $5.10 billion to $5.15 billion, falling short of the average analyst expectation of $5.19 billion according to LSEG data. Similarly, its fiscal 2024 revenue forecast ranges from $21.30 billion to $21.50 billion, also falling below market estimates.

Factors such as consumer and corporate belt-tightening in response to persistent inflation and rising interest rates have contributed to reduced spending. Adobe further aggravated the situation by implementing price hikes on some of its offerings starting in November, which further dampened demand.

However, despite these challenges, Adobe reported a fourth-quarter adjusted profit of $4.27 per share, surpassing estimates of $4.14 per share. While its revenue for the three months ended Dec. 1 slightly exceeded expectations, the company faces an uncertain landscape influenced by both regulatory scrutiny and market conditions.

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