Even The Mighty Adobe Isn't That Optimistic About 2024

Although Adobe Inc ADBE topped expectations with its fiscal fourth quarter results on Wednesday, its fiscal 2024 fiscal guidance was below estimates. The software maker’s shares, that rose 85% since the beginning of 2023, dropped more than 6% upon the report due to its lighter-than-expected forecast that accounted for an unfavorable impact of its ongoing negotations with regulators, the Federal Trade Commission, regarding its disclosure and subscription practices.

Quarterly Results Topped Estimates

For the quarter ended on December 1st, Adobe reported revenue grew 12% YoY to $5.05 billion, topping FactSet’s estimate of $5.03 billion. Document Cloud revenue led growth-wise, as it grew 16% YoY to $721 million. Digital Media experienced revenue growth of 13% YoY of $3.72 billion, followed by 12% YoY growth reported by the creative revenue segment, with Digital Experience bringing in $1.27 billion which translates to a growth rate of 10% YoY.

Net income rose 26% to $1.48 billion, or $3.23 per share. Adjusted earnings per share amounted to $4.27, also topping FactSet’s estimate of $4.14.

Strong Fiscal Year Results

For the fiscal 2023, Adobe achieved record revenue of $19.41 billion, earning a profit of $5.43 billion, or $11.82 per share. Adobe’s operations generated an operating cashflow of $7.30 billion.

A Weaker Than Expected Guidance

For the undergoing February quarter, Adobe guided for earnings per share in the range between $4.35 and $4.40, on a revenue in the range between $5.1 billion and $5.15 billion.

As for the full fiscal year, Adobe guided for earnings per share in the range between $17.60 and $18 per share on the back of revenue between $21.3 billion and $21.5 billion.

Going ahead, Adobe remains focused on closing its Figma acquisition it announced in September last year. During the quarter, Adobe made available Firefly generative artificial intelligence features to its Photoshop and Illustrator users. Adobe is going all in into AI, but so is everyone else in the tech world. Meta Platforms META. Earlier in September, Meta introduced a series of new AI experiences across its apps. Meta announced that soon its users will be able to edit their images or even co-create them with their Instagram friends thanks to new AI editing tools. Meta will also be releasing its AI studio for both its users and developers to build their own AIs. Offering its version of Photoshop-like features, Meta is going for its piece of the creative workflow pie.

However, if Adobe continues to differentiate its value proposition in the AI era as successfully as it did until now, this evolving technology will undoubtedly further cement its status as an indispensable power tool for creatives. However, regulatory issues concerning its subscription models could have a significant material impact on its financials.

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