Adobe shares fall 9% on weak fourth-quarter forecast
Adobe CEO Shantanu Narayen speaks during an interview with CNBC at the New York Stock Exchange in New York City, Feb. 20, 2024.
Brendan Mcdermid | Reuters
Shares of Adobe fell more than 9% on Friday, a day after the software company released Q3 results issued worse-than-expected guidance for the fourth quarter.
Adobe reported revenue of $5.41 billion for the quarter, up 11% from the year-ago period and above the $5.37 billion analysts expected, 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 the fourth quarter, Adobe said it expects revenue of $5.50 billion to $5.55 billion and earnings per share of $4.63 to $4.68. Analysts polled by LSEG expected sales of $5.61 billion and earnings per share of $4.67.
Goldman Sachs analysts reiterated their buy rating and $640 price target on the stock, saying they think Adobe’s disappointing outlook overshadows the strength of the company’s core business, adding that the business is being bolstered by artificial intelligence Its adoption and key growth drivers “remain intact.”
“While investors may be concerned about the impact of the guidance on our upcoming FY25 DM guidance and hesitant about where we stand in the evolution of the business, we believe this reaction is overdone,” they wrote in a note on Friday.
Adobe reported mixed but overall positive results and outlook, analysts at Bank of America said.
They say Adobe is driving “meaningful AI generation,” and they argue that it is the only company outside of Microsoft do it “at scale at this point in the cycle”.
“There is no change to our positive view on Adobe,” they wrote in a note on Friday. “While we expect a better Q4 digital media outlook, our FY26 estimates remain higher on the strength of Creative Cloud and a more balanced Document Cloud.”
Adobe’s fourth-quarter outlook is “not very positive” but the sell-off appears overdone, UBS analysts said.
“In our view, this print can hardly be considered a disaster,” they wrote on Friday.
— CNBC’s Michael Bloom and Kif Leswing contributed to this report.
