Digital media and marketing software firm Adobe late Thursday beat expectations for its fiscal third quarter and guided slightly above views for the current period. Adobe stock rose in extended trading.
The San Jose, Calif.-based company earned an adjusted $5.31 a share on sales of $5.99 billion in the quarter ended Aug. 29. Analysts polled by FactSet expected fiscal Q3 earnings of $5.18 a share on sales of $5.92 billion. On a year-over-year basis, Adobe earnings increased 14% while sales rose 11%.
For the current quarter, its fiscal Q4, Adobe expects to earn an adjusted $5.38 a share on sales of $6.1 billion. That's based on the midpoint of its guidance. Wall Street had been modeling earnings of $5.34 a share on sales of $6.08 billion. In the same quarter last year, Adobe earned an adjusted $4.81 a share on sales of $5.61 billion.
"Adobe is the leader in the AI creative applications category with AI-influenced ARR (annualized recurring revenue) surpassing $5 billion and AI-first ARR already exceeding our $250 million year-end target," Chief Executive Shantanu Narayen said in a news release. "Given our customer strategy, AI product innovation and strong go-to-market execution, we're pleased to once again raise our FY25 total revenue and EPS targets."
Adobe exited the quarter with $20.44 billion in remaining performance obligations (RPO).
In after-hours trading on the stock market today, Adobe stock advanced 4% to 364.60. During the regular session Thursday, Adobe stock rose a fraction to close at 350.55.
'Incredibly Frustrating Stock'
Year to date through Thursday's close, Adobe stock is down 21%.
"ADBE has been an incredibly frustrating stock for most of the last 12 months," Mizuho Securities analyst Gregg Moskowitz said in a client note Monday. At the time, he lowered his price target to 460 from 530 but kept his outperform rating.
One reason Adobe has been a laggard is investor concern that artificial intelligence applications could erode its business.
Late Thursday, Adobe pushed back on that argument. In a news release, the company said nearly 90% of Adobe's top 50 enterprise accounts have adopted one or more of Adobe's AI-first innovations. Those innovations include Acrobat AI Assistant, Firefly Services, and GenStudio for Performance Marketing.
Further, more than 40% of Adobe's top 50 enterprise accounts doubled their annualized recurring revenue spend with Adobe since the start of fiscal 2023.
Adobe Stock Has Weak Composite Rating
On Wednesday, Adobe announced the general availability of a suite of AI agents. The agents help businesses orchestrate customer experiences online, across websites, mobile apps and more.
Adobe stock has a weak IBD Composite Rating of 52 out of 99, according to IBD Stock Checkup. The Composite Rating scores a stock's key growth metrics against all other stocks regardless of industry group.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
