Digital media and marketing software firm Adobe beat Wall Street's targets for its fiscal third quarter. But its outlook for the current period called for earnings only modestly higher than views on in-line sales. ADBE stock fell Friday on the news.
The San Jose, Calif.-based company late Thursday said it earned an adjusted $4.09 a share on sales of $4.89 billion in the quarter ended Sept. 1. Analysts polled by FactSet had expected Adobe earnings of $3.98 a share on sales of $4.87 billion. On a year-over-year basis, Adobe earnings rose 20% while sales advanced 10%.
For the current quarter, Adobe forecast adjusted earnings of $4.13 a share on sales of $5 billion. That's based on the midpoint of its guidance. Wall Street had been modeling earnings of $4.06 a share on sales of $5 billion for the fiscal fourth quarter. In the year-earlier period, Adobe earned an adjusted $3.60 a share on sales of $4.53 billion.
"Adobe delivered world-class margins and earnings in Q3, while making significant investments in our technology platforms," Chief Financial Officer Dan Durn said in a news release.
He added, "Our innovation engine, global reach and strong operational rigor position us to capture the massive opportunities ahead."
ADBE Stock Falls After Report
On the stock market today, ADBE stock slid 4.2% to close at 528.89. During the regular session Thursday, ADBE stock dipped 0.3% to close at 552.16.
Lately, Adobe has been adding generative artificial intelligence capabilities to its creative software.
On Wednesday, Adobe announced the commercial availability of its Firefly generative AI tool. Firefly is now natively integrated into Creative Cloud apps like Photoshop and Illustrator. Firefly also is in Adobe Express and Adobe Experience Cloud.
Adobe increased its Creative Cloud pricing plans by 6% to 10% to account for the new generative AI features. It will implement the new prices starting Nov. 1.
"We are unleashing a new era of AI-enhanced creativity around the world with innovations across our product portfolio," Chief Executive Shantanu Narayen said in a written statement.
Adobe Stock Is A Tech Leader
In an interview with Investor's Business Daily, Durn said AI will boost Adobe's top and bottom lines gradually. The company is rolling out Firefly in limited geographies and enterprise customers won't see price increases until their contracts are up for renewal.
"This is going to play out over time," Durn said. "But the secular tailwind behind the company as we bring this to life is going to be fantastic."
Also, Adobe only just started offering generative AI for photos and images. It plans to add generative AI to video, animation, design and other media across its product portfolio, Durn said.
Generative AI can create content — including written articles, images, videos and music — from simple descriptive phrases. Artificial intelligence systems analyze and digest vast amounts of data to create these new works.
Adobe ranks first out of six stocks in IBD's Computer Software-Desktop industry group, according to IBD Stock Checkup. ADBE stock has best-possible IBD Composite Rating of 99.
Further, ADBE stock is on the IBD Tech Leaders list.
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