Adobe Faces Regulatory Scrutiny and Revenue Concerns Over Subscription Models

Adobe, the creator of Photoshop, has found itself under regulatory scrutiny due to its subscription models, leading to a revision in forecast of annual and quarterly revenues.
Adobe Firefly generative image generatorThe San Jose-based company revealed in a regulatory filing that it has been collaborating with the Federal Trade Commission (FTC) since June 2022, responding to a civil investigative demand probing its disclosure practices and methods of subscription cancellation.

“FTC staff asserted authority in November 2023 to engage in consent negotiations for a potential settlement concerning their investigation into these matters,” Adobe stated, highlighting ongoing discussions with the FTC.

Acknowledging the potential ramifications, Adobe cautioned that this regulatory matter might entail substantial financial costs or penalties, significantly impacting its financial outcomes and operations.

In addition to FTC scrutiny, Adobe’s acquisition of cloud-based designer platform Figma for $20 billion has also come under the microscope of Britain’s competition regulator.

The European Commission has issued a preliminary statement of objections, and the Competition and Markets Authority has raised provisional concerns about competition related to this acquisition.

Disputing these findings vehemently, Adobe asserted its disagreement and stated it is actively engaging with the respective regulators.

The company’s revenue projections for the current quarter stand in the range of $5.10 billion to $5.15 billion, falling short of expectations. Similarly, its fiscal 2024 revenue forecast spans from $21.30 billion to $21.50 billion, also below initial estimates.

Adobe faces a challenging market landscape as individuals and businesses curtail spending amid persistent inflation and higher interest rates. The company’s decision to increase prices for certain offerings since November has exacerbated the situation by further dampening demand.

Despite reporting a fourth-quarter adjusted profit of $4.27 per share, slightly surpassing estimates, Adobe’s revenue for the period ending Dec. 1 marginally exceeded expectations. However, the looming regulatory concerns and the impact on its financial prospects cast a shadow over its performance in the upcoming quarters.

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