Adobe CEO Shantanu Narayen said during an interview with CNBC on the floor of the New York Stock Exchange on February 20, 2024.
Brendan McDermid | Reuters
Adobe Shares rose 15% on Friday, the biggest gain since March 2020, after the software maker reported revenue and earnings that beat analysts’ estimates.
After the bell on Thursday, Adobe reported adjusted earnings per share of $4.48, beating the LSEG consensus estimate of $4.39 per share. Revenue increased 10% from a year earlier to $5.31 billion, beating analysts’ estimates of $5.29 billion.
CEO Shantanu Narayen attributed Adobe’s record revenue to its strong growth in Creative Cloud, Document Cloud and Experience Cloud and advances in artificial intelligence.
“A radically different approach to AI and innovative product delivery is appealing to emerging customers and providing more value to existing users,” Narayen said in a press release on Thursday.
New annual recurring revenue for the Digital Media business, which includes Creative Cloud subscriptions, came in at $487 million, beating the StreetAccount consensus of $437.4 million.
Adobe’s results provide a contrast to what software investors from many industries have seen of late. Salesforce Shares suffered their worst plunge since 2004 last month after the cloud software vendor posted weaker-than-expected revenue and issued disappointing guidance. In the same week, MongoDBSentinelOne, UiPath and Veeva all pulled their full-year revenue forecasts.
However, there are positive signs in the sector this week. Oracle stocks rallied after the database company announced its cloud offering Google and OpenAI, although fourth-quarter results fell short of Wall Street expectations. CrowdStrike jumped on Monday following the announcement after the close last Friday that the cybersecurity company would be added to the S&P 500.
JMP analysts, who have the same hold rating on Adobe, wrote in a note after the earnings report that the company’s results were uplifting despite the challenging economic environment and increased competition in design software.
“We like how Adobe is integrating AI functionality into its product portfolio,” the analysts wrote.
Meanwhile, analysts from Piper Sandler raised their revenue estimates slightly to $73 million for fiscal 2024 and $71 million for 2025.
“Customer reaction to new innovations is encouraging, as increasing availability of AI-powered solutions will increase user acquisition” and better average revenue per user, wrote analyst Piper Sandler, who recommended buying the stock.
Even after Friday’s rally, Adobe shares are still down 12% for the year. closed at 525.31 US Dollars.
