Adobe CEO Shantanu Narain speaks during an interview with CNBC on the floor of the New York Stock Exchange on February 20, 2024.
Brendan McDiarmid | Reuters
Adobe Shares fell 13% on Thursday and were headed for their biggest drop since March after the software vendor issued disappointing revenue guidance.
Adobe said in the fiscal fourth quarter that sales in the first fiscal quarter would range between $5.63 billion and $5.68 billion. Earnings report Late Wednesday. Analysts on average were expecting revenue of $5.73 billion, according to LSEG.
Analysts at TD Cowen downgraded the stock to hold from buy, while Wells Fargo maintained a buy rating after what they called a disappointing “24” for the company. The stock is now down 20% on the year, lagging badly behind the Nasdaq, which is up 33% and surpassed the 20,000 mark for the first time on Wednesday.
While Adobe's forecasts lagged estimates, the company's fourth-quarter results exceeded expectations.
Adjusted earnings per share were $4.81, beating analysts' average estimate of $4.66, according to LSEG. Revenue in the fourth quarter rose 11% to $5.61 billion, beating the average estimate of $5.54 billion.
Monetizing generative AI, especially in standalone offerings like Firefly photo creation or add-on offerings via Creative Cloud, has been central to Adobe's growth strategy.
Analysts at Deutsche Bank maintained a buy rating, but lowered their price target from $650 to $600.
“These results and guidance require little confidence in the full year ahead,” the analysts wrote. However, they said, “We see tangible evidence that Adobe is one of the few application software companies in our coverage that has successfully monetized generative AI today.”
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