Adobe’s shares experienced a significant surge of 15% on Friday, marking the biggest gain since March 2020. This surge came after the software maker reported earnings and revenue that exceeded analysts’ estimates. CEO Shantanu Narayen attributed Adobe’s record revenue to its strong growth across Creative Cloud, Document Cloud, and Experience Cloud. Additionally, he highlighted the company’s advancements in artificial intelligence, stating that their approach to AI and innovative product delivery are attracting a wider range of customers and providing more value to existing users.
In terms of specifics, Adobe reported adjusted earnings per share of $4.48, surpassing the LSEG consensus estimate of $4.39 per share. The company’s revenue also saw a 10% increase from the previous year, reaching $5.31 billion, which was higher than analysts’ expectations of $5.29 billion. Particularly impressive was the new annualized recurring revenue for the Digital Media business, including Creative Cloud subscriptions, which came in at $487 million, beating the StreetAccount consensus of $437.4 million.
Adobe’s positive earnings report stands in contrast to the experiences of many other software companies in the industry. While Salesforce recently suffered a significant drop in shares due to weaker-than-expected revenue and disappointing guidance, Adobe’s results paint a different picture. Moreover, Oracle saw a rally in shares after announcing cloud deals with Google and OpenAI, despite falling short of Wall Street’s expectations in their fourth-quarter results. The addition of CrowdStrike to the S&P 500 also sparked a jump in the company’s shares.
JMP analysts, who have a hold rating on Adobe, expressed optimism in their note following the earnings report. They acknowledged the challenging economic environment and increased competition in the design software industry but highlighted Adobe’s integration of AI functionality across its product portfolio as a positive sign. Similarly, analysts from Piper Sandler raised their revenue estimates for fiscal years 2024 and 2025, citing encouraging customer reactions to recent innovations and the expected impact of AI-powered solutions on user acquisition and average revenue per user.
Despite the significant rally in Adobe’s shares on Friday, the stock remains down 12% for the year, closing at $525.31. However, the company’s strong performance in the latest earnings report and positive outlook from analysts indicate that Adobe may be well-positioned to continue its growth and innovation in the coming years.