Adobe Inc. (Nasdaq: ADBE) reported better-than-anticipated fiscal 2024 first-quarter revenues and earnings. The 2Q 2024 earnings outlook was in line with analysts’ anticipations. However, the content creation solution provider’s second-quarter revenue guidance was slightly below Wall Street expectations. The stock of Adobe ended Friday’s trading session at $492.46, a decrease of $77.99, or 13.67%, from the prior close.
The San Jose, California-based company reported first-quarter revenues of $5.18 billion, an increase of 11% from $4.66 billion in the similar quarter of fiscal 2023.
For the recent quarter, which ended March 1, 2024, Adobe posted net income of $620 million, or $1.36 per share, compared with $1.25 billion, or $2.71 per share, in the quarter ended March 3, 2023.
Excluding stock-based and deferred compensation expenses, amortization of intangibles, acquisition-related expenses, loss contingency, investment (gains) losses, and net income tax adjustments, among others, the 1Q 2024 non-GAAP net income was $2.05 billion, or $4.48 per share, up from $1.75 billion, or $3.80 per share, in 1Q 2023.
Analysts surveyed by LSEG had anticipated Adobe to record earnings of $4.38 per share on revenues of $5.14 billion.
Commenting on the results, Adobe Chief Executive Shantanu Narayen stated, “We’ve done an incredible job harnessing the power of generative AI to deliver groundbreaking innovation across our product portfolio.”
Segment wise:
- Subscription revenues surged 12.40% y-o-y to $4.92 billion.
- Product revenues remained almost flat at $119 million.
- Services and other revenues declined to $147 million from $162 million.
During Q1 2024, Adobe unilaterally terminated the $20 billion agreement to take over design software firm Figma after the UK watchdog expressed competitive concerns. Adobe paid $1 billion in termination fees to Figma.
Furthermore, the company also unveiled a preliminary version of an artificial intelligence-powered assistant built for its Reader and Acrobat applications.
In February, OpenAI introduced Sora, a technology capable of producing a video from a textual description of a person. During the earnings call, David Wadhwani, President of Adobe’s digital media division, stated that Adobe intends to collaborate with OpenAI on Sora.
Looking ahead, Adobe projects 2Q24 revenues in the range of $5.25 billion to $5.30 billion. The midpoint of the forecast range translates into 9% annual growth. Likewise, the company expects Q2 earnings to be between $4.35 and $4.40 per share. Analysts surveyed by LSEG expect Adobe to report earnings of $4.38 per share on revenues of $5.31 billion.
During the quarter, Adobe had set aside $25 billion for its share repurchase program.
The earnings beat and slightly weaker Q2 revenue guidance are expected to keep the stock of Adobe range-bound in the short term.
The historical price chart indicates that the stock of Adobe has broken the support level at $575. Additionally, the stock has also formed a bearish gap pattern. The next major support is anticipated to be only near $450. While the stock is trading below its 50-day moving average, the MACD indicator is showing a negative reading. Therefore, we anticipate Adobe’s stock to remain in a downtrend in the short term.
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