Instead of being paid upfront in a lump-sum payment, customers are opting to compensate the voice-recognition technology company on an on-demand basis, meaning that they will pay only for the services they use over the life of their contracts. As a result, Nuance was forced to lower guidance for its next-quarter and current-year results, indicating that this revenue shift is putting pressure on near-term results. Going forward, Nuance expects that this shift will ultimately benefit the company on a mid-term and long-term basis.
In the following video, Fool contributor Steve Heller discusses Nuance's revenue transition and how investors can tell whether the longer-term revenue growth story will remain intact.
Fool contributor Steve Heller owns shares of Nuance Communications. The Motley Fool recommends and owns shares of Nuance Communications. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.