Adobe CEO Shantanu Narayen speaks during an interview with CNBC on the floor of the New York Stock Exchange on Feb. 20, 2024.
Brendan Mcdermid | Reuters
Adobe shares fell 13% on Thursday and headed for their steepest drop since March after the software vendor issued disappointing revenue guidance.
Sales in the fiscal first quarter will be between $5.63 billion and $5.68 billion, Adobe said in its fourth-quarter earnings report late Wednesday. Analysts on average were expecting revenue of $5.73 billion, according to LSEG.
Analysts at TD Cowen downgraded the stock to hold from buy, while Wells Fargo kept its buy rating following what it called a “frustrating ’24” for the company. The stock is now down 20% for the year, badly trailing the Nasdaq, which is up 33% and crossed the 20,000 mark for the first time on Wednesday.
While Adobe’s forecast trailed estimates, the company’s fourth-quarter results exceeded expectations.
Adjusted earnings per share came in at $4.81, topping the average analyst estimate of $4.66, according to LSEG. Revenue in the fourth quarter increased 11% to $5.61 billion, beating the average estimate of $5.54 billion.
Monetizing generative artificial intelligence, especially in stand-alone offerings such as Firefly image generation or additional offerings across the Creative Cloud, has been central to Adobe’s growth strategy.
Analysts at Deutsche Bank maintained their buy rating but lowered their target price from $650 to $600.
“These results and guidance require a bit of faith in the full year next year,” the analysts wrote. Still, they said, “We see tangible evidence that Adobe is one of few application software companies in our coverage successfully monetizing generative AI today.”
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