Adobe shares slipped down as much as 11% on not too strong sales forecast. Adobe shares went down in extended trading on Thursday after the design software maker issued strong fiscal first-quarter results but came up slightly short on quarterly revenue results. Adobe reported Thursday softer-than-expected guidance on a key revenue metric for the current quarter, adding to concerns that rising competition is stifling growth.
The results come ahead of the company’s investor day on March 26, when the company is expected to unveil new products that could alleviate investor fears of rising competition from OpenAI’s text-to-video generator, Sora.
Adobe quarter results
Here’s how the company did, compared with estimates from analysts polled by LSEG, formerly known as Refinitiv:
Abode earnings per share: $4.48 adjusted vs. $4.38 expected
Abode revenue: $5.18 billion vs. $5.14 billion expected
Adobe’s revenue growth was 11% year over year in the quarter, which ended March 1, according to a statement. Net income decreased to $620 million, or $1.36 per share, from $1.25 billion, or $2.71 per share, in the same quarter a year ago.
Adobe Figma acquisition
During the quarter, Adobe abandoned its $20 billion acquisition of design software startup Figma after U.K. regulators found competitive concerns. As the termination fee Abode had to pay Figma $1 billion.
Adobe AI assistant
Adobe announced an early version of an artificial intelligence (AI) assistant for its Reader and Acrobat apps.
Meanwhile, in February, OpenAI announced Sora, which can generate a video based on a person’s written description. Adobe will work with OpenAI around Sora, David Wadhwani, president of Adobe’s digital media business, said on the earnings call.
“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.”
Adobe forecast
Abode is putting all effort to stay competitive in the market by leveraging cutting-edge technology.
Adobe sees fiscal second-quarter earnings of $4.35 to $4.40 per share on an adjusted basis, with $5.25 billion to $5.30 billion in revenue. The middle of the range implies 9% growth. Analysts polled by LSEG had been looking for $4.38 in earnings per share and $5.31 billion in revenue.
Product enhancements in the Adobe Express app, the Firefly Services AI offering and the new Acrobat assistant should lead to acceleration in digital media annualized recurring revenue in the second half of the year, Wadhwani said.
The company said it was setting aside $25 billion for share buybacks.
Leaving out the after-hours movement, Adobe shares were down 4% so far this year, while the S&P 500 index has gained 8% during the same period.
