Digital media and marketing software firm Adobe easily beat Wall Street's estimates for its fiscal second quarter. It also vowed to lead the "new era of generative AI" with its expertise in creative software and digital content workflows. ADBE stock rose on the news.
The San Jose, Calif.-based company late Thursday said it earned an adjusted $3.91 a share on sales of $4.82 billion in the quarter ended June 2. Analysts polled by FactSet had expected Adobe to earn $3.79 a share on sales of $4.77 billion. On a year-over-year basis, Adobe earnings jumped 17% while sales climbed 10%.
But Adobe offered mixed guidance for the next two quarters.
For the current quarter, Adobe forecast adjusted earnings of $3.98 a share on sales of $4.85 billion. That's based on the midpoint of its guidance. Wall Street was modeling earnings of $3.89 a share on sales of $4.86 billion for the fiscal third quarter.
Its guidance for the full year implied fiscal fourth-quarter adjusted earnings of $4.01 a share on sales of $4.98 billion. Analysts had been looking for earnings of $4.05 a share on sales of $5 billion.
ADBE Stock Is A Recent Breakout
On the stock market today, ADBE stock advanced 0.9% to close at 495.18. During the regular session Thursday, ADBE stock rose 2.4% to close at 490.91.
On June 9, ADBE stock broke out of a cup base at a buy point of 451.15, according to IBD MarketSmith charts. The move happened after Adobe announced new enterprise applications for its Firefly software for generative artificial intelligence.
"Adobe achieved record Q2 revenue demonstrating strong demand across Creative Cloud, Document Cloud and Experience Cloud," Chief Executive Shantanu Narayen said in a news release.
He added, "Adobe's groundbreaking innovation positions us to lead the new era of generative AI given our rich data sets, foundation models and ubiquitous product interfaces."
Adobe Likely Key AI Beneficiary
Adobe has three cloud computing businesses. Its largest, Creative Cloud, includes software for creative professionals such as Photoshop and Illustrator. Document Cloud includes its Acrobat and e-signature offerings. Experience Cloud provides marketing software and services.
"This is a seminal moment in Adobe's history, given the technologies that we're bringing to life," including Firefly generative AI, Chief Financial Officer Dan Durn told Investor's Business Daily. "Generative AI is a very strong thematic trend playing out in the market right now and Adobe is a clear leader."
At least 22 Wall Street firms raised their price targets on ADBE stock after the company's earnings report.
Goldman Sachs analyst Kash Rangan said Adobe's fiscal Q2 report validated his view that Adobe is a "key generative AI beneficiary." Rangan rates ADBE stock as buy with a price target of 550.
"Its extensive data-driven platform and product-led growth should enable Adobe to seize this opportunity," Rangan said in a note to clients.
Adobe is on the IBD Tech Leaders list. ADBE stock has an IBD Composite Rating of 98 out of 99, according to IBD Stock Checkup.
Adobe ranks first out of six stocks in IBD's Computer Software-Desktop industry group.
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