Adobe
posted earnings that were a smidgen better than both guidance and Street estimates, as it continues to make a full-court press to add generative artificial intelligence capabilities across its broad suite of content creation and marketing tools.
Adobe shares were down 2% in late trading after the announcement. The stock is up 64% for the year to date.
Adobe CFO Dan Durn asserted in an interview with Barron’s that it was “a blowout quarter, from top to bottom.” He pointed out that revenue beat the midpoint of guidance by $40 million, while operating margin of 46.3% beat the 45.1% implicit in the company’s guidance.
And he noted Adobe did that while absorbing the considerable generative AI computing costs related to the launch of its Firefly suite of AI tools, including a popular text-to-image feature. Since the launch earlier this year, Adobe customers have produced two billion images using the Adobe AI tools at no cost to the users.
For the fiscal third quarter ended Sept. 1, Adobe reported revenue of $4.89 billion, up 10% from a year ago, or 13% adjusted for currency, slightly ahead of the company’s guidance range of $4.83 billion to $4.87 billion, and the Street consensus forecast at $4.87 billion. On an adjusted basis, the company earned $4.09 a share, topping its target of $3.95 to $4 a share, and Street consensus at $3.98. Under generally accepted accounting principles, the company earned $3.05 a share.
The company said its Digital Media segment revenue was $3.59 billion, up 11%. Digital Experience revenue was $1.23 billion, up 10%.
“We are unleashing a new era of AI-enhanced creativity around the world with innovations across our product portfolio,” Adobe CEO Shantanu Narayen said in a statement accompanying the earnings announcement. “The recent launches of Firefly, Express, Creative Cloud and GenStudio make Adobe magic available to millions of users.”
Adobe’s results come just one day after a flurry of announcements from the company that included additions to its AI software lineup, as well as updates on its strategy for monetizing its work in the field. The company has launched an enterprise version of Firefly as well as a plan to meter the use of AI features, giving customers the option to pay more for additional AI capacity. Adobe also announced plans to increase prices by 8% to 10% for various creative cloud plans as of Nov. 1, to reflect the costs associated with generative AI content creation.
For the November quarter, Adobe sees revenue of between $4.975 billion and $5.025 billion, with adjusted profits of $4.10 to $4.15 a share; Street consensus estimates had called for $5 billion in revenue and profits of $4.06 a share. The company sees digital media revenue in the quarter of between $3.67 billon and $3.7 billion, with Digital Experience revenue ranging from $1.11 billion to $1.13 billion.
Durn noted the price increases will provide a modest uplift to results in the fourth quarter, but with a more substantive boost in the coming fiscal year and beyond. He added that most individual users are under one-year contracts, while enterprise customers are generally covered by three-year agreements. The price increases, he says, “will filter into the market over time.”
Write to Eric J. Savitz at [email protected]
Read the full article here
