Shares of Adobe Inc. (ADBE) fell sharply after the software company provided a revenue outlook for its new fiscal year that came in below Wall Street’s expectations, the Wall Street Journal reports.
The stock dropped by nearly 10% in premarket trading, bringing the share price to just under $495.
Despite the market reaction, Adobe’s financial results for its fiscal fourth quarter showed solid growth:
- Net Profit: Adobe reported a profit of $1.68 billion for the three months ending Nov. 29, an increase from $1.48 billion a year earlier.
- Adjusted Earnings: Earnings per share (EPS), excluding certain items, were $4.81, beating analysts’ consensus estimate of $4.67, according to FactSet.
- Revenue: Total revenue for the quarter rose 11% to $5.61 billion, also surpassing market forecasts.
Chief Executive Shantanu Narayen highlighted strong demand for Adobe’s suite of products, emphasizing the company’s role in driving growth within the expanding AI-driven economy.
While Adobe’s Q4 results were positive, its forward guidance disappointed investors. For the current quarter, Adobe projected adjusted earnings of $4.95 to $5.00 per share, which is in line with analysts’ forecasts. However, the company’s revenue guidance for the quarter, up to $5.68 billion, was slightly below market expectations.
The full-year outlook caused the greatest concern among investors:
- Full-Year Revenue: Adobe expects revenue of up to $23.55 billion, which is below analysts’ estimates of $23.78 billion.
- Full-Year EPS: The company forecast full-year adjusted earnings per share between $20.20 and $20.50, also short of analysts’ consensus of $20.52.
The weaker-than-expected revenue outlook was seen as a signal that demand for Adobe’s products may be facing headwinds, particularly at a time when investors are closely watching the performance of companies tied to artificial intelligence.
Adobe’s share price decline reflects investor disappointment in the company’s future growth potential, even as its past quarter delivered stronger-than-expected results. The 10% drop in premarket trading indicates that market participants had anticipated a more bullish outlook from the company, especially given its growing presence in AI-related tools and creative software.
While Adobe’s fourth-quarter results showed strong revenue growth and higher earnings than expected, the company’s forecast for the coming fiscal year failed to meet analysts’ projections. Investors appear to be focusing on the revenue shortfall rather than Adobe’s past performance.
