Adobe shares plunge premarket after weaker guidance fourth-quarter guidance

Investing.com -- Adobe (NASDAQ:ADBE )'s fourth-quarter revenue guidance missed analysts' expectations, sending shares in the Photoshop-owner sharply lower in premarket US trading.

The California-based group said it anticipates that sales during the period will come in at $5.50 billion to $5.55 billion, below LSEG forecasts of $5.61 billion, Reuters reported.

Quarterly profit, meanwhile, is seen at $4.63 to $4.68 per share, compared to estimates of $4.67 per share.

Digital media net new annualized recurring revenue is expected to come in at about $550 million in the current quarter, below consensus estimates of $571 million, according to analysts at Jefferies.

Responding to questions around its guidance in a post-earnings call, Adobe executives argued that its aggregate second-half performance is "playing out as we expected," although they noted that the third quarter in particular was "stronger" than anticipated.

"I think a lot of that can be explained by a few deals that would have historically just closed in Q4, closing earlier than expected in Q3, and that changed the dynamic in terms of the linearity that you would typically see between Q3 and Q4," said David Wadhwani, President of Adobe's digital media business.

The outlook comes as Adobe is introducing artificial intelligence-powered enhancements to its editing software in a bid to lift demand. But spending has remained subdued as customers, wary of an uncertain economic environment and elevated interest rates, look to rein in costs.

For the third quarter, the group announced earnings per share of $4.65 on revenue of $5.41 billion. Analysts polled by Investing.com anticipated earnings per share of $4.53 on revenue of $5.37 billion. New digital media annualized recurring revenue was $504 million.

"AI-linked stocks require momentum, including not only upside in the quarter, but also on the guide, and on this front, the company fell short," analysts at Vital Knowledge said in a note to clients.

The analysts added the disappointing fourth-quarter guidance is "leading some to worry" about the outlook for Adobe's 2025 fiscal year.

Yasin Ebrahim contributed to this report.

Source: Investing.com