Digital media and marketing software firm Adobe late Thursday beat Wall Street's targets for its fiscal third quarter, but its guidance for the current period missed estimates. ADBE stock fell in extended trading.
The San Jose, Calif.-based company earned an adjusted $4.65 a share on sales of $5.41 billion in the quarter ended Aug. 30. Analysts polled by FactSet had expected earnings of $4.53 a share on sales of $5.37 billion in fiscal Q3. On a year-over-year basis, Adobe earnings increased 14% while revenue rose 11%.
For the current quarter, Adobe forecast adjusted earnings of $4.66 a share on sales of $5.53 billion. That's based on the midpoint of its outlook. Wall Street was modeling earnings of $4.67 a share on sales of $5.6 billion in the fiscal fourth quarter. Adobe's guidance would translate to year-over-year growth of 9% in earnings and 10% in sales.
Adobe's earnings growth has decelerated for four straight quarters, with the streak expected to stretch to five consecutive quarters in fiscal Q4.
Adobe Stock Breakout Fake-Out
In after-hours trading on the stock market today, Adobe stock tumbled more than 9% to 528.93. During the regular session, ADBE stock climbed 1.1% to close at 586.55.
On Sept. 3, ADBE stock hit a buy point of 580.55 from a cup-with-handle base, according to IBD MarketSurge. But it ended the regular session that day below the buy point. It returned to the buy zone on Tuesday.
The after-hours trading activity Thursday points to another failed breakout attempt.
Adobe Touts Leadership In Artificial Intelligence
"Adobe's record Q3 performance is a testament to our relentless innovation and commitment to delivering value to our customers," Chief Executive Shantanu Narayen said in a news release. "With groundbreaking advancements in AI across Creative Cloud, Document Cloud and Experience Cloud, we are empowering millions of users worldwide."
Chief Financial Officer Dan Durn highlighted the company's cash flow and remaining performance obligations (RPO).
"In Q3, Adobe delivered cash flows of over $2 billion and exited the quarter with record RPO, demonstrating the power of combining growth with world-class profitability," Durn said. "Given the massive markets we are catalyzing, I'm confident in our ability to drive growth and industry leadership."
ADBE Stock Ranks First In Group
Adobe has been adding generative artificial intelligence tools to its creative and marketing software products. Among application software companies, Adobe is one of the few that have been successfully monetizing generative AI, Deutsche Bank analyst Brad Zelnick said in a client note last week.
On Wednesday, Adobe previewed advancements to its generative AI video capabilities, powered by its Adobe Firefly Video Model. Firefly-powered text-to-video and image-to-video capabilities will be available later this year, the company said.
ADBE stock ranks first out of six stocks in IBD's Computer Software-Desktop industry group, according to IBD Stock Checkup. Adobe has an IBD Composite Rating of 89 out of 99.
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