Adobe (ADBE) -) shares moved lower Friday after the cloud software group narrowly topped revenue forecasts for its third quarter earnings and indicated it may take longer to benefit from gains in generative AI pricing.
Adobe said revenue for the three months ending in July rose 10% from last year to $4.89 billion, narrowly topping Street forecasts and powering an adjusted bottom line of $4.09 per share which handily beat analysts' estimates of $3.98 per share.
Revenues from the group's Digital Media segment were up 11% from last year at $3.59 billion, while Digital Experience revenues were up 10% at $1.23 billion. Net new annualized recurring revenue from Digital media was $464 million, down from the $470 million recorded over the previous quarter.
Looking into the final months of its fiscal year, Adobe said it sees adjusted earnings in the region of $4.10 to $4.15 per share, topping Street forecasts, thanks in part to the impact of AI-related technologies embedded in its creative cloud products. Fourth quarter revenues were pegged between $4.975 billion and $5.025 billion.
“We are unleashing a new era of AI-enhanced creativity around the world with innovations across our product portfolio,” said CEO. “We see this truly as a seminal moment for how we're going to grow the business, but it's going to take a few years to play out, and we're really excited about sort of what this means for bringing new customers into the franchise.”
Adobe share were marked 3.8% lower in early Friday trading to change hands at $532.20 each.
"We like how Adobe has embraced generative AI, training foundation models like Firefly on rich data sets like Adobe Stock and just this week commercially releasing generative AI capabilities that are natively integrated into Adobe Creative Cloud applications such as Photoshop and Illustrator and Adobe Express," said JMP Securities analyst Patrick Walravens, who carries a 'market perform' rating on Adobe stock
Potential issues we continue to monitor include increased scrutiny of enterprise spending and the scrutiny of the pending $20 billion Figma acquisition by global competition authorities."
Adobe has proposed to buy the privately-held cloud design startup Figma, but the deal is being probed by the European Commission over competition concerns.
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