Creative software giant Adobe delivered what most stock analysts described as a "solid" quarterly report, but investors wanted more.
On the stock market today, Adobe stock sank 5.3% to close at 391.68.
Late Thursday, the digital media and marketing software maker posted a modest beat-and-raise report for its fiscal second quarter ended May 30.
Adobe earned an adjusted $5.06 a share, up 13% year over year, on sales of $5.87 billion, up 11%, in fiscal Q2. Wall Street had expected Adobe to earn $4.97 a share on sales of $5.8 billion.
For the current quarter, Adobe expects to earn an adjusted $5.18 a share, up 11%, on sales of $5.9 billion, up 9%, based on the midpoint of its outlook. Analysts had been modeling earnings of $5.11 a share on sales of $5.88 billion.
Multiple equity analysts described Adobe's fiscal Q2 report as "solid."
"Adobe reported solid second-quarter results that outperformed consensus across all key metrics," William Blair analyst Jake Roberge said in a client note Friday. He reiterated his outperform rating on Adobe stock and said the company is seeing nice uptake for its generative AI offerings.
Adobe Stock Targets Adjusted
Four Wall Street firms raised their price targets on Adobe stock after the report, while four other firms cut their price targets.
Jefferies analyst Brent Thill said Adobe is making progress with AI adoption but likely "not enough to appease bears." He rates Adobe stock as buy with a price target of 590.
CFRA Research analyst Angelo Zino reiterated his buy rating on Adobe stock but cut his price target to 500 from 575.
In a client note, he cited "increasing concerns surrounding competitive pressures and a longer time horizon to reach notable AI monetization."
Adobe is facing heightened competition in creative software from Canva and generative AI startups.
"Still, at near historical-low valuations and given its highly recurring business model and attractive margins, we think shares offer an enticing risk/reward opportunity, but investors may need to be patient due to limited catalysts," Zino said.
Adobe Driving Creative AI, CFO Says
In an interview with Investor's Business Daily, Adobe Chief Financial Officer Dan Durn said he was pleased with the quarter.
"The company reported record revenue and great profitability," Durn said. "Underlying that is just continued momentum of the business."
He added, "Adobe is leading the creative AI revolution with innovations like Firefly, Acrobat AI Assistant and GenStudio. They are amplifying creativity and productivity."
The company's strong second-quarter results gave it confidence to increase its sales and earnings targets for the full fiscal year, Durn said.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
