Adobe Shares Plummet Amid Weak Earnings Forecast and AI Competition Concerns

Managing director says Adobe selloff is a 'knee-jerk reaction'

Bloomberg News reported that Adobe shares fell the most in six months after issuing sales guidance that fell short of Wall Street estimates and disappointed investors. Total revenue during the quarter is expected to come in as high as US$5.55 billion, below average analyst estimates of $5.6 billion. During early afternoon trading, Adobe shares fell just under 10 per cent. Alex Zukin, managing director and head of software research at Wolfe Research, said in an interview with BNN Bloomberg Friday that he thinks the selloff is a "knee-jerk reaction" and presents a "buying opportunity" for investors. "Nothing really changed towards the negative from a fundamentals perspective. I think a lot of the guidance nervousness is more driven by timing of some deals that originally may have been expected to fall in (the fourth quarter), they fell in (the third quarter)," he said. "So, the beat in Q3 was a little bigger and the guide for Q4 was a little smaller, but it really is no change in the fact that this is probably one of the best ways in our opinion to play the AI theme in the enterprise." Zukin also highlighted that he thinks the company is well positioned to execute on building out generative AI functionality into its Creative Cloud products and Document Cloud products. According to Bloomberg News, digital media net new annual recurring revenue is a closely tracked metric detailing the growth of recurring revenue in the company's creative software segment. Adobe said Thursday that this metric is expected to come in a $550 million during the fourth quarter, short of average analyst estimates of $561.1 million.

Adobe shares fall 9% on weak fourth-quarter guidance

Adobe reported $5.41 billion in revenue for the quarter, up 11% year-over-year and above the $5.37 billion expected by analysts according to LSEG. The company's net income for the period was $1.68 billion, or $3.76 per diluted share, up from $1.40 billion, or $3.05 per share, in the year-ago period. For its fourth quarter, Adobe said it expects revenue in the range of $5.50 billion and $5.55 billion, and earnings per share between $4.63 and $4.68. Analysts polled by LSEG were expecting a forecast of $5.61 billion in sales and $4.67 in earnings per share. Goldman Sachs analysts reiterated their buy rating and their $640 price target on the stock. They said they think Adobe's disappointing outlook overshadowed the strength of its core business, adding that the business is being bolstered by artificial intelligence adoption and its key growth drivers "remain intact." "While investors are likely concerned about guidance's effect on upcoming DM FY25 guidance and hesitant about where we are in the maturity of the business, we believe this reaction is overblown," they wrote in a note Friday. Analysts at Bank of America said Adobe reported results and outlook that were somewhat mixed, but healthy overall. They said Adobe is driving "meaningful AI generation," and they argued that it is the only company aside from Microsoft doing so "at scale at this point in the cycle." "No change to our positive view on Adobe," they wrote in a Friday note. "While we were hoping for a better Q4 digital media outlook, our FY26 estimates still move higher on more balanced creative cloud and document cloud strength." UBS analysts said that Adobe's fourth-quarter outlook is "uninspiring" but that the selloff seems overdone. "In our view the print was hardly a disaster," they wrote Friday.

Adobe shares slump 10% as weak earnings forecast sparks fears of delayed AI gains

Shares of Adobe fell nearly 10% on Friday, after the Photoshop maker's disappointing quarterly earnings forecast sparked fears that returns from its push towards artificial intelligence design will take longer to materialize. As one of the world's largest software companies, Adobe has been heavily investing in AI image and video generation to maintain its top spot in the design software industry amid rising competition from well-funded startups such as Stability AI and Midjourney. The company on Thursday projected fourth-quarter revenue between $5.50 billion and $5.55 billion, while analysts polled by LSEG expected $5.61 billion. Excluding items, quarterly profit is expected to be between $4.63 and $4.68 per share, compared with estimates of $4.67 per share. If current losses hold, Adobe is set to lose more than $25 billion in market value. The company's shares have fallen nearly 2% this year after rising over 77% in 2023. Despite guiding fourth-quarter revenue below estimates, Adobe said it expects to surpass its expectations for annual net new annual recurring revenue (NNARR), signaling that Adobe's subscription sign ups remain healthy. "Adobe remains on track to deliver Creative Cloud NNARR year-on-year growth in Q4 and is one of the rare software companies that is growing net-new bookings," JP Morgan analysts said in a note. The company said in June that it expects strong growth in the second half of the year, but the weak forecast indicates that the buying environment remains pressured. "We think that in the short term there lacks a clear catalyst for the stock, unless Adobe can somehow do a good job convincing investors of stronger growth next year," Bernstein analysts said.

Adobe shares slump as AI software competition hits earnings forecast

(Reuters) - Shares of Adobe fell over 8% in premarket trading on Friday, after the Photoshop maker's disappointing quarterly earnings forecast sparked fears that returns from its push towards artificial intelligence design will take longer to materialize. As one of the world's largest software companies, Adobe has been heavily investing in AI image and video generation to maintain its top spot in the design software industry amid rising competition from well-funded startups like Stability AI and Midjourney. The company on Thursday projected fourth-quarter revenue between $5.50 billion and $5.55 billion, while analysts polled by LSEG expected $5.61 billion. Excluding items, quarterly profit is expected to be between $4.63 and $4.68 per share, compared with estimates of $4.67 per share. If current losses hold, Adobe is set to lose more than $21 billion in market value. The company's shares have fallen nearly 2% this year after rising over 77% in 2023. Despite guiding fourth-quarter revenue below estimates, Adobe said it expects to surpass its expectations for annual net new annual recurring revenue (NNARR), signaling that adobe's subscription sign ups remain healthy. "Adobe remains on track to deliver Creative Cloud NNARR year-on-year growth in Q4 and is one of the rare software companies that is growing net-new bookings," JP Morgan analysts said in a note. The company said in June that it expects strong growth in the second half of the year, but the weak forecast indicates that the buying environment remains pressured. "We think that in the short term there lacks a clear catalyst for the stock, unless Adobe can somehow do a good job convincing investors of stronger growth next year," Bernstein analysts said. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Tasim Zahid)

Adobe shares slump as AI software competition hits earnings forecast

The company on Thursday projected fourth-quarter revenue between $5.50 billion and $5.55 billion, while analysts polled by LSEG expected $5.61 billion. Excluding items, quarterly profit is expected to be between $4.63 and $4.68 per share, compared with estimates of $4.67 per share. If current losses hold, Adobe is set to lose more than $21 billion in market value. The company's shares have fallen nearly 2% this year after rising over 77% in 2023. Despite guiding fourth-quarter revenue below estimates, Adobe said it expects to surpass its expectations for annual net new annual recurring revenue (NNARR), signaling that adobe's subscription sign ups remain healthy. "Adobe remains on track to deliver Creative Cloud NNARR year-on-year growth in Q4 and is one of the rare software companies that is growing net-new bookings," JP Morgan analysts said in a note. The company said in June that it expects strong growth in the second half of the year, but the weak forecast indicates that the buying environment remains pressured. "We think that in the short term there lacks a clear catalyst for the stock, unless Adobe can somehow do a good job convincing investors of stronger growth next year," Bernstein analysts said. (Reporting by Zaheer Kachwala in Bengaluru; Editing by Tasim Zahid)

Adobe shares slump as AI software competition hits earnings forecast

Sept 13 (Reuters) - Shares of Adobe (ADBE.O), opens new tab fell over 8% in premarket trading on Friday, after the Photoshop maker's disappointing quarterly earnings forecast sparked fears that returns from its push towards artificial intelligence design will take longer to materialize. As one of the world's largest software companies, Adobe has been heavily investing in AI image and video generation to maintain its top spot in the design software industry amid rising competition from well-funded startups like Stability AI and Midjourney. Advertisement · Scroll to continue The company on Thursday projected fourth-quarter revenue between $5.50 billion and $5.55 billion, while analysts polled by LSEG expected $5.61 billion. Excluding items, quarterly profit is expected to be between $4.63 and $4.68 per share, compared with estimates of $4.67 per share. If current losses hold, Adobe is set to lose more than $21 billion in market value. The company's shares have fallen nearly 2% this year after rising over 77% in 2023. Advertisement · Scroll to continue Despite guiding fourth-quarter revenue below estimates, Adobe said it expects to surpass its expectations for annual net new annual recurring revenue (NNARR), signaling that adobe's subscription sign ups remain healthy. "Adobe remains on track to deliver Creative Cloud NNARR year-on-year growth in Q4 and is one of the rare software companies that is growing net-new bookings," JP Morgan analysts said in a note. The company said in June that it expects strong growth in the second half of the year, but the weak forecast indicates that the buying environment remains pressured. "We think that in the short term there lacks a clear catalyst for the stock, unless Adobe can somehow do a good job convincing investors of stronger growth next year," Bernstein analysts said. Reporting by Zaheer Kachwala in Bengaluru; Editing by Tasim Zahid Our Standards: The Thomson Reuters Trust Principles., opens new tab

Adobe's stock falls after 'strong' Q3 as guidance leaves many 'questions'

Adobe's (NASDAQ:ADBE) stock fell about 9% premarket on Friday after the company's guidance saw some concerns from investors and analysts. Jefferies kept its Buy rating and $700 price target on the stock, noting that there were no questions on the strong print, but many on the guidance. Analysts led by Brent Thill said that the fiscal third net new annual recurring revenue, or ARR, beat guidance by $44M, but the fiscal fourth quarter outlook was $21M below consensus, which disappointed investor expectations that were buoyed by positive checks. While timing of large deals and Cyber Monday [a marketing term for e-commerce deals on the Monday after Thanksgiving] is a factor, the analysts also see extra conservatism versus seasonality and given accelerating AI usage. Thill and his team expect fiscal 2025 could be the year of AI monetization. Fiscal 2024 is already seeing some monetization, though early, as new users buy higher-priced plans, existing users upgrade, enterprises buy Firefly Services, and new products such as Acrobat AI Assistant get adopted. The analysts added that generative AI usage limits have not been enforced so far, but they believe this could change in early fiscal 2025, especially for higher-value gen AI processes for video, audio, 3D, and animation. Their checks suggest fiscal fourth quarter enterprise renewals will include a harder push to monetize AI usage. Morgan Stanley maintained its Overweight rating and $660 price target on the stock. The "results presented a tale of two quarters," said a team led by Analyst Keith Weiss. They said it was a strong fiscal third quarter highlighted by a 10% net new Digital Media ARR beat and solid margin upside compared to a well below seasonal guide for fiscal fourth quarter net new Digital Media ARR. However, the analysts said that with the building momentum behind a broadening portfolio of gen AI enabled solutions, they see this as conservatism and remain buyers. Key points were -- fiscal third quarter results beat consensus across revenues, ARR and margins, with the magnitude of the Digital Media net new ARR beat sustaining at about 10% versus the 11% second quarter beat; the initial guidance for fiscal fourth quarter Digital Media net new ARR at $550M was disappointing, coming below the $570M implied in the third quarter guidance, according to the analysts. In addition, Weiss and his team noted that the usage of Generative Credits ramped in the quarter, with direct monetization avenues like Firefly Services and Acrobat AI Assistant contributing well in the fiscal third quarter. They added that the enterprise and federal contracts in the Document Cloud pulling into the third quarter impacted the shape of the second half of the fiscal year, but the fiscal 2024 target still moves about $23M higher. Mizuho too said that Adobe's had a good fiscal third quarter net new ARR upside, but the guidance disappointed. Analysts said the company reported a very good quarter above Mizuho's expectations, as third quarter net new Digital Media ARR of $504M beat management's nearly $460M guidance by more than it expected. Consistent with Mizuho's above-Street estimates, this includes a return to year-over-year net new Creative Cloud ARR growth for the first time in four quarters. However, as Mizuho also expected, fourth quarter net new Digital Media ARR guidance was below its/consensus estimates. Meanwhile, JMP said Adobe posted strong fiscal third quarter results but the guidance raises questions. Adobe (ADBE) has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Meanwhile, the Seeking Alpha authors' average rating is more positive with a Buy and so is the average Wall Street analysts' rating, Buy.

Adobe forecasts downbeat quarterly earnings on cautious tech spending

Photoshop maker Adobe forecast fourth-quarter earnings below analysts' estimates on Thursday, signaling stiff competition and soft demand for its AI-integrated editing tools amid challenging economic conditions. Shares of the company fell 9.2% in extended trading. High interest rates and a tough economy have led enterprises and individuals to focus on cutting costs, putting pressure on Adobe's growth. Founded in 1982, Adobe is one of the largest suppliers of software for visual and video artists, which include household names such as Acrobat, Photoshop and Premiere Pro. The San Jose, California-based company also faces competition from startups such as Stability AI and Midjourney, which provide similar AI services - including generating images from text prompts. Adobe expects revenue for the fourth quarter to be between $5.50 billion and $5.55 billion, compared with LSEG estimates of $5.61 billion. Excluding items, it expects quarterly profit to be between $4.63 and $4.68 per share, compared with estimates of $4.67 per share. Adobe is set to launch a new generative AI-powered video creation tool called Adobe Firefly Video Model in a limited series later this year, which is expected to garner the attention of creative professionals. Revenue for the quarter ended Aug. 30 was $5.41 billion, above LSEG estimates of $5.37 billion. Operating expenses for the third quarter were $2.86 billion, compared with $2.61 billion a year earlier. (Reporting by Harshita Mary Varghese in Bengaluru; Editing by Krishna Chandra Eluri)