Adobe
shares were losing ground in late trading Wednesday after the provider of creative and marketing software provided disappointing revenue guidance for its February quarter and the full fiscal year ending in November 2024.
While the company said it is seeing strong early adoption for its suite of AI-powered content creation tools, Wall Street was apparently expecting a bigger boost to near-term revenue. In remarks prepared for its earnings conference call, Adobe said the guidance reflects “current expectations for the macroeconomic and foreign exchange environments.”
Adobe shares were down 6.5% in after-hours trading.
Adobe CFO Dan Durn said in an interview with Barron’s that the company has “an incredible amount of momentum after a phenomenal year,” and pointed out that it sees another year of double-digit revenue growth ahead. On the company’s earnings call, the Street focused intently on the guidance, trying to ferret out if there were any operating issues, but the reasons for the shortfall weren’t entirely clear, other than the impact of the timing and rollout of some pricing changes.
Asked about how the company’s AI software push affected guidance, Durn said it isn’t teasing apart how AI is reflected, other than to say that it added to the financial performance in the latest quarter.
For the fiscal fourth quarter ended Dec. 1, Adobe posted revenue of $5.05 billion, up 12% from a year ago, within the company’s guidance range of $4.975 billion to $5.025 billion and about in line with the Wall Street consensus of $5 billion. Adobe noted that this was its first quarter with revenue above $5 billion.
On an adjusted basis, Adobe earned $4.27 a share in the quarter, ahead of both the company’s forecast of $4.10 to $4.15 a share, and the Street consensus of $4.13 a share. Under generally accepted accounting principles, the company earned $3.23 a share.
For the quarter, Adobe posted revenue from its core digital media segment of $3.72 billion, up 13%, and a little above its guidance range of $3.67 billion to $3.7 billion. Digital experience segment revenue was $1.27 billion, up 10%, at the high end of the company’s guidance range of $1.25 billion to $1.27 billion.
But here’s where things get sticky: For the February quarter, Adobe is projecting revenue of between $5.1 billion and $5.15 billion, just below the previous Wall Street consensus of $5.16 billion.
Adobe sees profits for the quarter on an adjusted basis of $4.35 to $4.40 a share, above consensus at $4.26 a share.
Adobe sees digital media segment revenue for the quarter of $3.77 billion to $3.8 billion, a little shy of the Street at $3.82 billion, with digital experience segment revenue of $1.14 billion to $1.16 billion, also missing the Street consensus of $1.31 billion. Adobe sees net new digital media annualized recurring revenue—a measure of the company’s subscription business—of $410 million, above the consensus of $396 million.
Adobe sees full year fiscal 2024 revenue ranging from $21.3 billion to $21.5 billion, falling short of the Street consensus at $21.7 billion. Guidance calls for non-GAAP profits of $17.60 to $18 a share; at the midpoint of the range that falls below the Wall Street consensus of $17.99 a share.
The guidance reflects Adobe’s forecast for digital media revenue of $15.75 billion to $15.85 billion, missing consensus at $15.96 billion, with digital experience revenue of $5.275 billion to $5.375 billion, below consensus at $5.478 billion. Adobe sees new digital media ARR of $1.9 billion, about in line with estimates.
On the company’s pending acquisition of the collaborative design tool company Figma, Adobe noted that it “strongly” disagrees with preliminary findings from both European Commission and U.K. regulators which have raised competitive concerns. Adobe said the European Commission has a Feb. 5 deadline to issue a decision, while the UK’s deadline is Feb. 25.
CEO Shantanu Narayan said in comments prepared for the post-earnings conference call that the company is seeing “tremendous usage” of the AI tools that Adobe unveiled earlier in the year.
“We believe that every massive technology shift offers generational opportunities to deliver new products and solutions to an ever-expanding set of customers,” he says. “AI and generative AI is one such opportunity…we have delivered against this strategy and are pleased that a number of our groundbreaking innovations…are now seeing tremendous usage by customers.”
Write to Eric J. Savitz at [email protected]
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