Adobe Q1 Earnings Preview: Analysts See Strong Growth Trends, Spotlight On 'Generative AI-Enabled Suite'

Computer software company Adobe Inc ADBE reports first-quarter financial results Thursday, March 14 after market close.

Here's a look at the earnings estimates from analysts, their insights, and key items to watch.

Earnings Estimates: Analysts expect Adobe to report first quarter revenue of $5.14 billion, according to data from Benzinga Pro.

The company reported revenue of $4.66 billion in last year's first quarter and reported revenue of $5.05 billion in the most recently reported fourth quarter.

Adobe has beaten analyst estimates for revenue in four of the last five quarters and nine of the last 10 quarters.

Analysts expect the company to report earnings per share of $4.38 for the first quarter, compared to $3.80 reported in the year prior period. The company has beaten earnings per share estimates from analysts in eight straight quarters.

Guidance from Adobe for the first quarter is for revenue to be between $5.1 billion and $5.15 billion and earnings per share to be between $4.35 and $4.40.

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What Analysts Are Saying: Piper Sandler analyst Brent Bracelin sees the risk-reward for Adobe stock turning favorable in the next artificial intelligence innovation cycle.

The analyst has an Overweight rating and $705 price target.

"We recommend growth investors revisit ADBE ahead of the earnings report on 3/14, given results could be better than feared based on favorable 3P data trends," Bracelin said.

The analyst said a large base of 500+ million using the freemium version of Acrobat Reader could lead to increased monetization for Adobe with its AI Assistant offering.

"We see top-of-funnel website activity as one of the health indicators for new customer activity."

Positive data points from due diligence are highlighted by JMP Securities analyst Patrick Walravens in a new investor note.

The analyst, who has a Market Perform rating and no price target, said investors are likely focused on the artificial intelligence tools being offered by Adobe.

"On the positive side, Adobe continues to execute very well under CEO Shantanu Narayen, adding significant value to enterprises, professionals, and hobbyists alike through a generative AI-enabled suite or products in Digital Media and Experience," Walravens said.

Here's a look at other analyst ratings on Adobe stock.

BMO Capital: Outperform rating, lowers price target from $690 to $660

Exane BNP Paribas: Downgrades from Neutral to Underperform, $499 price target

Barclays: Upgrades from Equal-Weight to Overweight, raises price target from $680 to $700

Key Items to Watch: One of the key items highlighted by analysts is Adobe's decision to abandon its merger with Figma. Analysts want to hear more about the decision and how regulatory hurdles played into the decision.

Artificial intelligence will be the key topic on the mind of investors and analysts with mixed feelings towards Adobe. Some see AI hurting Adobe's existing products. The reveal of Sora text-to-video generator from OpenAI sent shares of Adobe lower.

Others see the growth of artificial intelligence as a win for Adobe as it is integrating more AI tools into its products.

Adobe will host its Adobe Summit event from March 26 to March 28, providing another catalyst for investors and analysts two weeks after quarterly earnings are reported.

Adobe is guiding for full year revenue to be in a range of $21.30 billion to $21.50 billion and earnings per share to be in arrange of $17.60 to $18.

If the company beats first quarter estimates, investors will be closely watching to see if full year guidance is raised.

ADBE Price Action: Adobe shares trade at $580.21 versus a 52-week trading range of $323.29 to $638.25. Shares of Adobe are up 79% over the last year, but remain down on a year-to-date trading basis in 2024.

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