Adobe Shares Plummet 14% After Disappointing Revenue Guidance
Adobe shares fell 14% on Thursday, their steepest drop since September 2022, after the software vendor issued disappointing revenue guidance. The company’s sales in the fiscal first quarter are expected to be between $5.63 billion and $5.68 billion, falling short of the average analyst estimate of $5.73 billion.
Despite the disappointing guidance, Adobe’s fourth-quarter results exceeded expectations. Adjusted earnings per share came in at $4.81, topping the average analyst estimate of $4.66. Revenue in the fourth quarter increased 11% to $5.61 billion, beating the average estimate of $5.54 billion.
Analysts at TD Cowen downgraded the stock to hold from buy, while Wells Fargo kept its buy rating, calling the company’s performance “frustrating” in 2024. The stock is now down 20% for the year, badly trailing the Nasdaq, which is up 33%.
Adobe’s growth strategy has focused on monetizing generative artificial intelligence, particularly in stand-alone offerings such as Firefly image generation and additional offerings across the Creative Cloud. Analysts at Deutsche Bank maintained their buy rating but lowered their target price from $650 to $600, citing the need for faith in the company’s full-year performance next year. Despite the challenges, the analysts noted that Adobe is one of the few application software companies successfully monetizing generative AI today.