Adobe Inc.’s foray into artificial intelligence (AI) has proven to be highly fruitful this year. However, a disappointing forecast had a negative impact on the company’s stock on Wednesday.
In the latest quarter, Adobe exceeded analyst expectations for both revenue and earnings. Despite this achievement, shares of the desktop-publishing pioneer, ADBE, sank by 7% during extended trading. This decline was in sharp contrast to the company’s remarkable growth, with the stock surging by almost 80% since the introduction of AI tools at its annual developers conference in May.
During the regular trading session, Adobe shares experienced a more moderate decline of 1.5%, settling at $624.26. Although slightly below its peak, which was achieved in November 2021 at nearly $700, the stock remains strong.
The company reported impressive fiscal fourth-quarter net earnings of $1.49 billion, or $3.23 per share. This is a noticeable increase from $1.18 billion, or $2.53 per share, in the same quarter the previous year. Adjusted earnings per share stood at $4.27.
Furthermore, Adobe’s revenue climbed to $5.05 billion, up from $4.53 billion in the year-ago quarter.
The company’s investment in AI has undoubtedly played a significant role in its continued success and expansion across various business sectors.
Adobe Misses Q4 Revenue Expectations
Adobe fell short of revenue expectations in the fourth quarter of 2023, causing a decline in the company’s stock. While analysts predicted average net earnings of $4.13 per share on approximately $5 billion in revenue, Adobe’s sales outlook for the first quarter of 2024 was not as robust as anticipated. The company forecasts sales between $5.1 billion and $5.15 billion, slightly below the analysts’ expected $5.16 billion.
Disappointing Fiscal 2024 Forecast
Furthermore, Adobe’s projected revenue for fiscal 2024 is far below what analysts had predicted. The company expects to generate between $21.33 billion and $21.5 billion in revenue, falling short of the consensus prediction of $21.73 billion.
Stock Performance
In 2023, Adobe’s stock experienced a significant increase of 85.5%. In comparison, the S&P 500 index (SPX) only rose 22.6% during the same period.
Analysts’ Expectations
Ahead of the fourth-quarter results, analysts had high hopes for Adobe’s performance based on the company’s optimistic predictions during their analyst day in October. Analyst Brent Thill from Jefferies noted that the focus would now shift towards fiscal 2024 guidance, which he expects to be conservative initially but optimistic regarding the impact of creative tailwinds, AI adoption, and recent price increases.