Adobe Stock Drops 10% due to a Weak Sales Prediction

In extended trading on Thursday, Adobe’s stock fell as much as 11% after the company released impressive fiscal first-quarter earnings, but missed quarterly revenue guidance by a small margin.
This is how the business performed in comparison to analyst estimates gathered by LSEG, formerly Refinitiv:
• Adjusted earnings per share were $4.48 compared to $4.38 projected.
• Revenue: $5.18 billion versus the anticipated $5.14 billion
According to a release, Adobe’s revenue increased 11% year over year in the quarter that concluded on March 1. In comparison to the same quarter last year, when net income was $1.25 billion, or $2.71 per share, it dropped to $620 million, or $1.36 per share.

During the quarter, U.K. regulators raised concerns about competition, leading Adobe to renounce its $20 billion acquisition of design software startup Figma. Figma received a $1 billion termination compensation from the corporation.
Adobe revealed the release of a beta version of an AI helper for its Acrobat and Reader software.
In the meantime, Sora—which can create a movie from a person’s written description—was unveiled by OpenAI in February. During the results call, David Wadhwani, president of Adobe’s digital media division, said that the company will collaborate with OpenAI on Sora.

“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.”

With $5.25 billion to $5.30 billion in revenue, Adobe anticipates fiscal second-quarter earnings of $4.35 to $4.40 per share on an adjusted basis. The range’s center suggests a growth rate of 9%. $5.31 billion in revenue and $4.38 in earnings per share were the expectations of analysts surveyed by LSEG.
The new Acrobat assistant, the Firefly Services AI solution, and product improvements in the Adobe Express app should accelerate digital media annualized recurring revenue in the second half of the year, according to Wadhwani.
The business declared that it would set aside $25 billion for buybacks of shares.

When accounting for the change after hours, Adobe’s stock has decreased by 4% this year compared to an 8% increase in the S&P 500 index.