Adobe released better-than-expected financial results for the latest quarter and raised its full-year outlook.
CEO Shantanu Narayen said the “breakthrough innovation” positions the company to “lead the new era of generative AI.”
Adobe shares, up 2.4% in regular trading, posted another gain of 2.5% in after-hours trading.
This is breaking news. Preview Adobe’s earnings below and check back soon for more analysis.
Adobe Systems reports its financial results after the close on Thursday, but the stock is more likely to move on any news from the company about its foray into artificial intelligence — and the status of its pending $20 billion acquisition of collaborative design software company Figma .
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Adobe (ticker: ADBE) stock is up 42% since mid-May as investors have grown confident that generative AI will fuel Adobe’s growth rather than posing a major new competitive threat.
In March, a week after the last earnings report, Adobe announced the launch of Firefly, a “generative AI co-pilot” that will leverage the company’s suite of content creation tools. A website has been launched to give people a chance to try out the tools, including text-to-imaging software similar to DALL-e offered by OpenAI, the creators of ChatGPT.
Adobe has also unveiled new generative AI capabilities for Photoshop, the company’s popular photo-editing product. And in early June, Adobe announced plans to offer a commercial version of Firefly and charge for it.
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This news sparked a fresh bounce in Adobe’s recent rally.
Meanwhile, Adobe has vowed to aggressively defend its upcoming Figma deal, which is under scrutiny by regulators in the European Union and the United Kingdom. Earlier in the year there were reports that the Justice Department intends to file a lawsuit to block the deal.
Jefferies analyst Brent Thill wrote in a research note previewing the latest quarter that he expects positive results given a resilient economy and “solid controls” with Adobe’s channel partners. But he agrees that the bigger focus is on AI and figma.
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Thill said that while investors are skeptical that the Figma deal will go through, the company is likely to ramp up share buybacks if a deal doesn’t materialize. And he pointed out that while there’s still debate on the street about whether AI will help or hurt Adobe, the consensus has shifted to a more positive view.
Thill maintains a buy rating on the stock. He recently raised his price target from $440 to $530. Shares closed at $479.53 on Wednesday.
TD Cowen analyst Derrick Wood is also bullish, reporting that a recent survey of Adobe partners “notes stability in end-market conditions” after a strong first quarter. “We anticipate solid success and modest upside, and a very bullish tone around monetizable GenAI innovation coming to market in 2019.” [the second half]”Wood wrote.
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For the second fiscal quarter, Adobe is forecasting revenue of $4.75 billion to $4.78 billion, non-GAAP earnings per share of $3.75 to $3.80, and GAAP earnings of $2.65 to $2.70 per share. Adobe projects annual recurring net revenue from new digital media, a closely monitored measure of the health of the company’s subscription-based software business, of $420 million.
Wall Street’s estimates are roughly in line with management’s forecasts. Analyst consensus expects revenue to reach $4.77 billion, up 8.8%; Non-GAAP Earnings of $3.79 per share; and a new digital net ARR of $422 million.
For the third fiscal quarter ending August, analysts polled by FactSet are expecting sales of $4.86 billion and earnings per share of $3.88.
Adobe’s most recent guidance for fiscal year November 2023 calls for non-GAAP earnings per share of $15.30 to $15.60.
Write to Eric J. Savitz at [email protected]