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Adobe Systems Inc. today issued fiscal fourth-quarter results that initially baffled investors, who first bid shares up by 3 percent in after-hours trading but then sent them down more than 1.3 percent, wiping out gains made during regular trading hours.

Update: Shares fell more than 7 percent Friday, on a day when the overall market swooned again, by more than 2 percent.

The maker of software and services for creative artists and marketers reported adjusted earnings of $1.83 per share on revenue of $2.46 billion for the quarter, up 23 percent from $2.01 billion in the same quarter a year ago.

Analysts had expected earnings of $1.88 per share on revenue of $2.43 billion. The confusion arose from Adobe’s accounting for its $4.75 billion acquisition of Marketo Inc. in September. With Marketo results factored out, revenue was $2.44 billion and earnings per share were $1.90, both exceeding Wall Street estimates.

That initially brought a smile to investors’ faces, but Adobe’s fiscal 2019 forecasts wiped it away with warnings of a slight contraction in quarterly operating margins and earnings-per-share growth. The company said it expects an adjusted profit of about $1.60 per share on revenue of about $2.54 billion for the first quarter, short of consensus estimates of $1.88 per share on revenue of $2.51 billion.

Adobe said the acquisitions of Marketo and e-commerce firm Magento Inc. in May resulted in “lost deferred revenue due to purchase accounting,” a hit that was compounded by adverse currency exchange rates. It said it expects the growth rates to increase sequentially through the year.

The company issued a revised fiscal 2019 revenue forecast of $11.15 billion, representing a 24 percent increase from $9.03 billion this year. Marketo and Magento collectively contributed $51 million in fourth-quarter revenue, according to Chief Financial Officer John Murphy.

“Adobe is well-positioned to build on [our] momentum, delight our customers and continue to deliver impressive long-term top and bottom-line growth,” Çhief Executive Officer Shantanu Narayen (pictured) said on the company’s earnings call.

If investors didn’t quite agree, at least some longer-term-oriented analysts did, partly because of Adobe’s focus on marketing technology more than ad tech, which has suffered recently from concerns about data use and the continued rise of a near-duopoly in digital advertising led by Google LLC and Facebook Inc.

“We continue to look at the marketing technology sector favorably given the myriad of ways marketers are looking to use related products to drive their own revenue growth,” Brian Wieser, an analyst with Pivotal Research Group, wrote in a note to clients. “Adobe itself is well-positioned within this space because of its capacity to bundle related and integrated products to its customers, even if most customers will only choose to use a subset of those products alongside others from Adobe’s competitors.”

Cloud shift pays off

The company continued to show strong growth in its subscription business, which was up 28 percent from last year. Sales of packaged software have almost disappeared to make up less than 7 percent of overall product revenues. Operating expenses grew 28 percent, slightly exceeding the growth rate in total sales, but Adobe said that included extraordinary acquisition costs.

Adobe has all but vaporized the competition in its traditional market of software for creative professionals. In search of growth, it has been shifting into software for marketing, advertising, analytics and commerce under the banner of Experience Cloud. The Marketo and Magento acquisitions are both part of that transition. Experience Cloud showed 25 percent growth in the quarter to $690 million.

As evidence of the company’s success in new markets, Narayen said Adobe’s retail reports powered by its analytics software “have become the industry bellwether for holiday shopping forecasts and other digital media, commerce and cultural trends.”

The company analyzed more than 1 trillion visits and 55 million unit sales over the Thanksgiving holiday. “We’re well-positioned to continue capitalizing on this growing opportunity that we estimate to have a total addressable market of more than $71 billion by 2021,” he said.

For the year, Adobe showed growth in all the right places. Revenue from sales of the flagship creative products rose 28 percent, to $5.34 billion. The annual run rate of sales of all digital media products grew by $1.45 billion to $6.83 billion for the year. Experience Cloud revenue for the year rose 20 percent, to $2.44 billion, but growth has accelerated in recent quarters.

The addition of marketing automation and e-commerce capabilities through the two recent acquisitions gives enterprise customers “the ability to close the loop,” Narayen said. “Every CIO is worried about getting a unified customer profile and we can help them do that.”

Adobe was one of the first software companies to all but abandon packaged software and moved to the cloud. Its early bet has paid off as recurring revenues made up 90 percent of fourth-quarter sales. The shift to the cloud has also dramatically reduced software piracy, which was historically a serious problem with Adobe’s premium-priced products.

“We don’t have boxes anymore, and that was a major factor in the gray market,” Narayen said.

With reporting from Robert Hof

Photo: Adobe/Twitter