Adobe (ADBE) shares slumped lower in pre-market trading after the world's third-largest cloud software group forecast weaker-than-expected near-term revenues thanks in part to headwinds linked to the strength of the U.S. dollar and the global economic uncertainty.
Adobe posted record revenues of $4.39 billion for the three months ending on June 3, the group's fiscal second quarter, with an adjusted non-GAAP bottom line of $3.35 per share, both of which topped Street forecasts. In terms of individual segment, Digital Experience revenues, which include its marketing solutions products, were up 17% from last year while Digital Media, which houses Adobe's two cloud divisions, rose 15%.
Looking into the current quarter, however, Adobe said it sees revenues of around $4.43 billion, with a tally of $17.65 billion for the full year, each of which fell shy of forecasts from Refinitiv, as strong dollar headwinds, Russia's war on Ukraine and the broader macro-economic pullback weighed on forecasts.
"Enterprise CEOs right now all recognize it's an uncertain time. And that's the conversation that we have. But despite that uncertain macroeconomic environment, the thing that all of them recognize is that Digital is a priority," CEO Shantanu Narayen told investors on a conference call late Thursday.
"I mean, everybody would have knowledge that it's an uncertain macroeconomic environment," he added. "But we believe that we will continue to win by delivering great innovative products that at the end of the day delight and ever increasing for our set of customers."
Adobe shares were marked 2.65% lower in early Friday trading to change hands at $355.73 each, a move that would extend the stock's year-to-date decline to around 36%.
Earlier this week, Adobe's larger rival, Oracle (ORCL) posted stronger-than-expected fourth quarter earnings and said robust demand would help offset strong-dollar headwinds as it kicks off its new fiscal year.
Currency headwinds, however, accelerated sharply over the quarter as the U.S. dollar moved towards a 20-year high against a basket of its global peers. With the dollar index holding at similar levels on foreign currency markets, those pressures are likely to continue into the current quarter.
Still, Oracle said it sees revenues rising by as much as 18%, thanks in part to its recently-closed $28.3 billion purchase of Kansas City, Missouri-based Cerner CERN, the second-largest designer of software used by doctors and hospitals to mange and store medical records.
"While Adobe continues to offer leading products in the Creative, Document, and Experience Clouds that target a $205 billion total addressable market, there are a number of areas where investors are likely to have lingering questions this quarter," said JMP Securities analyst Patrick Walravens, who carries a market perform rating on the stock, citing macro-economic challenges and recent price hikes.
Walravens also asked it the group's creative cloud express will "enable Adobe to blunt the competitive challenge from Canva, the privately-held, template-driven design and publishing tool for the masses that now exceeds $1 billion in annualized revenue"
