Adobe had a bang-up 2023, but a tepid 2024 revenue forecast is dinging the stock

By Jon Swartz

Adobe Inc.'s plunge into artificial intelligence has mostly paid big dividends this year, but a soft forecast wreaked havoc on the company's stock Wednesday.

Shares of the desktop-publishing pioneer (ADBE) were sinking 7% in extended trading Wednesday after the company reported quarterly results that topped analyst estimates for revenue and earnings.

Adobe's stock has blown up nearly 80% since its May introduction of AI tools during its annual developers conference. On Wednesday, Adobe shares declined 1.5% to $624.26 during the regular trading session.

Adobe's all-time closing high was nearly $700, reached in November 2021.

Adobe reported fiscal fourth-quarter net earnings of $1.49 billion, or $3.23 a share, compared with net earnings of $1.18 billion, or $2.53 a share, in the same quarter a year earlier. Adjusted earnings were $4.27 a share.

Revenue climbed to $5.05 billion from $4.53 billion in the year-ago quarter.

"Adobe drove record revenue of $19.41 billion in [fiscal 2023] and 17 percent year-over-year EPS growth, with strong momentum across Creative Cloud, Document Cloud and Experience Cloud," Adobe Chief Executive Shantanu Narayen said in a statement announcing the results.

Analysts surveyed by FactSet had expected, on average, net earnings of $4.13 a share on revenue of about $5 billion.

But a tepid sales outlook gouged Adobe shares. The company forecast first-quarter sales of between $5.1 billion and $5.15 billion. Analysts are expecting about $5.16 billion.

For fiscal 2024, Adobe is forecasting $21.33 billion to $21.5 billion in revenue, far short of the consensus $21.73 billion predicted by analysts.

Shares of Adobe have popped 85.5% in 2023. The broader S&P 500 index SPX, by comparison, is up 22.6% this year.

Leading into Wednesday's results, analysts were uniformly expecting a breakout quarter for Adobe after executives predicted a "really strong" performance during the company's analyst day in October.

"Focus should turn to initial [fiscal 2024] guidance, which we expect to start off conservative yet optimistic about the pickup from creative tailwinds, AI adoption, and recent price increases," Jefferies analyst Brent Thill said in a note last week.

-Jon Swartz

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12-13-23 1624ET

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