Adobe Expects To 'Deliver In A Bigger Way': 6 Analysts Address Key Metrics, 'Positive AI Commentary'

Shares of Adobe Inc ADBEwere climbing in early trading on Friday, with the company reported upbeat quarterly results.

The results came amid an exciting earnings season. Here are six analyst takeaways.

• BMO Capital Markets analyst Keith Bachman maintained an Outperform rating, while raising the price target from $525 to $580.
• KeyBanc analyst Jackson Ader reiterated an Underweight rating, while lifting the price target from $445 to $450.
• Bank of America Securities analyst Brad Sills reaffirmed a Buy rating and price target of $640.
• Oppenheimer analyst Brian Schwartz maintained an Outperform rating and price target of $580.
• RBC Capital analyst Matthew Swanson reiterated an Outperform rating and price target of $600.
• JMP Securities analyst Patrick Walravens reaffirmed a Market Perform rating on the stock.

Check out other analyst stock ratings.

BMO Capital Markets: Adobe reported its NNARR (net new annual recurring revenue) around $45 million higher than the guidance of $440 million, Bachman said. The company raised its fiscal 2024 NNARR guidance from $1.9 billion to $1.95 billion.

The third-quarter guidance of $460 million implies a fourth-quarter NNARR of about $572 million, "which is about $20 million below our previous estimate," the analyst stated. "More broadly, we thought Adobe had a more upbeat tone on the economic environment and generative AI adoption than other areas of software.”

KeyBanc Capital Markets: Adobe delivered a "solid" quarter, with NNARR for Creative Cloud being "a bit of a relief," which is just what the company and the stock needed, Ader said. "There was upside to key metrics in the quarter, positive commentary on AI, and it raised the midpoint of guidance.”

Although Adobe's revenue beat was "skinny," this marked a "reversal of what we’ve typically seen this earnings season," with the guidance raise for the full year being slightly more than the beat, the analyst wrote. "While the rest of the sector has been downplaying the growth for the second half, Adobe is looking for that second half to deliver in a bigger way.”

BofA Securities: Adobe delivered a beat-and-raise quarter, with "solid traction across monetization efforts for Express, Firefly, and Document Cloud," Sills said. With expectations of sustaining this strength, management raised their fiscal 2024 Digital Media ARR outlook by $50 million, he added.

"We view Q2 results as a bullish signal that key growth initiatives are playing out in both Creative and Document Cloud," the analyst wrote. Companies upgrading to "generative document summary, composition and collaboration capabilities" drive the adoption of Adobe's AI Assistant, reflected in the acceleration of ARR growth to 26% year-on-year, from 25% in the previous quarter, he added.

Oppenheimer: Following the previous quarter's lackluster results, Adobe returned to strong upside, Schwartz said. He added, however, that bookings strength was driven by Document Cloud and not Creative Cloud, while management's NNARR target for Digital Media in fiscal 2024 implies no year-on-year growth in the back half of the year.

The narrative on Adobe has shifted "from fears of the macro and competitive headwinds with AI causing a slowing growth and AI monetization path to its bookings growth strengthening from pricing and product momentum, and generative AI in FY2025," the analyst wrote.

RBC Capital Markets: The highlight of the beat-an-raise quarter was Digital Media's NNAR of $487 million, "which reflects a 10.7% beat relative to guidance," Swanson said. "This was driven by broad-based strength which flowed through to higher FY/24 guidance.”

"While we didn’t get specific genAI contribution details, the qualitative commentary remains positive with growth in new users, migrations to higher-priced plans, and traction around flagship products," the analyst wrote.

JMP Securities: Adobe reported non-GAAP earnings of $4.48 per share, ahead of the consensus of $4.39 per share, with a 46.0% operating margin, Walravens said. He added, however, that the company's revenue growth decelerated to 10% year-on-year, from 11% in the prior quarter.

RPO of $17.86 billion beat consensus of $17.44 billion and marked 17% year-on-year growth, an acceleration from 16% last quarter, the analyst stated. "The company guided to a relatively weaker-than-expected F3Q24, but brought FY24 numbers up.”

ADBE Price Action: Shares of Adobe had risen by 14.62% to $525.79 at the time of publication on Friday.

Now Read: Adobe’s Optimistic Forecast For New AI Tech Infused Products Attract Investor Cheer

Image: Shutterstock