Adobe shares slip 10% on soft sales forecast

Adobe
shares
tumbled
as
much
as
11%
in
extended
trading
Thursday
after
the
design
software
maker
issued
strong
fiscal
first-quarter
results
but
came
up
slightly
short
on
quarterly
revenue
guidance.

Here’s
how
the
company
did,
compared
with
estimates
from
analysts
polled
by
LSEG,
formerly
known
as
Refinitiv:

• 
  Earnings
  per
  share: $4.48
  adjusted
  vs.
  $4.38
  expected
• 
  Revenue: $5.18
  billion
  vs.
  $5.14
  billion
  expected

Adobe’s
revenue
grew
11%
year
over
year
in
the
quarter,
which
ended
March
1,
according
to
a statement.
Net
income
decreased
to
$620
million,
or
$1.36
per
share,
from
$1.25
billion,
or
$2.71
per
share,
in
the
same
quarter
a
year
ago.

During
the
quarter,
Adobe

abandoned
its
$20
billion
acquisition
of
design
software
startup
Figma
after
U.K.
regulators
found
competitive
concerns.
The
company
paid
Figma
a
$1
billion
termination
fee.

Adobe announced an
early
version
of
an
artificial
intelligence
assistant
for
its
Reader
and
Acrobat
apps.

Meanwhile,
in
February,
OpenAI
announced
Sora,
which
can
generate
a
video
based
on
a
person’s
written
description.
Adobe
will
work
with
OpenAI
around
Sora,
David
Wadhwani,
president
of
Adobe’s
digital
media
business,
said
on
the
earnings
call.

“You’re
going
to
see
us
obviously
developing
our
own
model,”
he
said.
“You’re
going
to
see
others
developing
a
model.
All
that
creates
a
tailwind,
because
the
more
people
generate
video
clips,
the
more
they
need
to
edit
that
content.”

Adobe
sees
fiscal
second-quarter
earnings
of
$4.35
to
$4.40
per
share
on
an
adjusted
basis,
with
$5.25
billion
to
$5.30
billion
in
revenue.
The
middle
of
the
range
implies
9%
growth.
Analysts
polled
by
LSEG
had
been
looking
for
$4.38
in
earnings
per
share
and
$5.31
billion
in
revenue.

Product
enhancements
in
the
Adobe
Express
app,
the
Firefly
Services
AI
offering
and
the
new
Acrobat
assistant
should
lead
to
acceleration
in
digital
media
annualized
recurring
revenue
in
the
second
half
of
the
year,
Wadhwani
said.

The
company
said
it
was
setting
aside
$25
billion
for
share
buybacks.

Leaving
out
the
after-hours
movement,
Adobe
shares
have
fallen
4%
so
far
this
year,
while
the
S&P
500
index
has
gained
8%
during
the
same
period.