Adobe Q4 Earnings Beat Estimates, Shares Fall on Weak Outlook

Adobe ADBE reported fourth-quarter fiscal 2024 non-GAAP earnings of $4.81 per share, beating the Zacks Consensus Estimate by 3.22%. The figure improved 12.6% on a year-over-year basis.ADBE’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 2.59%.Find the latest EPS estimates and surprises on Zacks Earnings Calendar.Total revenues were $5.61 billion, which beat the consensus mark by 1.24% and increased 11.1% year over year, both on a reported and a constant-currency (cc) basis.ADBE shares were down more than 10% in pre-market trading on a disappointing outlook. Adobe’s revenue expectation for fiscal 2025 is less exciting despite strong revenue growth in the Digital Media and Digital Experience segments.Adobe Inc. Price, Consensus and EPS Surprise Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. QuoteADBE’s Top Line in DetailSubscription revenues were $5.37 billion (accounted for 95.7% of the total revenues), up 12.6% on a year-over-year basis. Product revenues totaled $81 million (1.4% of the total revenues), down 28.9% year over year. Services & other revenues were $160 million (2.9% of the total revenues), down 6.4% year over year.The Digital Media segment generated revenues of $4.15 billion, up 12% year over year, both on a reported and cc basis. The figure surpassed the Zacks Consensus Estimate by 0.92%. Digital Experience revenues of $1.40 billion were up 10% year over year both on a reported and cc basis. The figure beat the consensus mark 1.7%.Digital Media Top-Line DetailDigital Media segment comprises Creative Cloud and Document Cloud. Adobe saw strong adoption of Acrobat Pro single app in both Document Cloud and Creative Cloud offerings.Creative Cloud generated $3.3 billion in revenues, up 10% year over year on a reported basis and 11% on a cc basis. The figure beat the Zacks Consensus Estimate by 1.13%.Adobe expanded its Generative AI (GenAI) portfolio with the launch of Firefly Image Model 3, enhancements to vector models, richer design models and the all-new Firefly video model. Deep integration of these models into Adobe’s tools, like Lightroom, Photoshop, Premiere, InDesign and Express, has improved the experience for creative professionals globally. Firefly generations now have crossed 16 billion cumulative generations.Strong Adobe Express adoption by businesses (4,000 in the reported quarter) is noteworthy. Number of students using Adobe Express jumped 84% year over year. The increasing number of integrations into leading social, productivity and collaboration apps like ChatGPT, Alphabet GOOGL division Google, Slack, Wix, Box, Hubspot and Webflow significantly increased Adobe Express’ customer reach. Alphabet, American Express, Coca-Cola, Johnson & Johnson, LVMH, Procter & Gamble, T-Mobile and the U.S. Department of Defense were major additions to the Creative Cloud clientele in the reported quarter. Document Cloud revenues were $843 million, up 17% year over year, both on a reported and cc basis. The figure lagged the consensus mark by 0.01%.Adobe’s Document Cloud AI Assistant is now available in Acrobat across desktop, web and mobile and integrated into Chrome and Microsoft MSFT Teams and Edge extensions.Adobe saw AI Assistant conversations double sequentially. Monthly Active Users grew 25% year over year and surpassed 650 million paid and free users. Monthly Active users for Acrobat Web increased roughly 50% year over year.Abbott Laboratories, BWI GmbH, Defense Information Systems Agency, Kaiser Permanente, Novo Nordisk, Truist, U.S. Cellular and the U.S. Department of State were major additions to the Document Cloud clientele in the reported quarter. Digital Media’s annualized recurring revenues (“ARR”) were $17.33 billion exiting the fiscal fourth quarter, of which the net new ARR was $578 million. Creative and Document ARR was $13.85 billion and $3.48 billion, respectively.Digital Experience Top-Line DetailExperience Cloud subscription revenues were $1.27 billion, up 13% year over year on a reported basis and 12% at cc. Adobe is benefiting from the strong adoption of its customer experience management solution that spans content, data and customer journeys. Adobe Experience Platform AI Assistant is helping marketers automate tasks and generate new audiences and journeys. Adobe Experience Manager Generate Variations is offering dynamic and personalized content creation, enabling customers to deliver more engaging experiences on their websites.Adobe GenStudio, which integrates Express, Firefly, Workfront, Experience Manager, Customer Journey Analytics and Journey Optimizer, is riding on strong adoption in the content supply chain for enterprises. It saw strong demand for Adobe GenStudio for Performance Marketing since its general availability at MAX.Adobe’s expanded partnership with Amazon AMZN makes the Adobe Experience Platform available on Amazon Web Services. Partnerships with Google’s Campaign Manager 360, Meta Platforms, Microsoft Advertising, Snap and TikTok are key catalysts.Operating Details of ADBEAdobe reported fourth-quarter fiscal 2024 GAAP gross margin of 89%, which expanded 160 basis points (bps) on a year-over-year basis.Operating expenses were $3.03 billion, up 13.6% year over year. As a percentage of total revenues, the figure increased 120 bps year over year to 54.1%.The adjusted operating margin was 46.3%, which contracted 10 bps year over year.ADBE’s Balance Sheet & Cash Flow Remains StrongAs of Nov. 29, 2024, the cash and short-term investment balance was $7.89 billion, up from $7.5 billion as of Aug. 30, 2024. Long-term debt, as of Nov. 29, 2024, was $4.129 billion compared with $4.128 billion as of Aug. 30, 2024.Cash generated from operations was $2.92 billion in the reported quarter compared with $2.02 billion in the previous quarter. Adobe repurchased 4.6 million shares in the fiscal fourth quarter.ADBE’s Q1 & FY25 View DisappointsFor the first quarter of fiscal 2025, Adobe expects total revenues between $5.63 billion and $5.68 billion. The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $5.73 billion, currently higher than the management’s guidance range, indicating 10.49% growth from the figure reported in the year-ago quarter.Adobe expects Digital Media revenues between $4.17 billion and $4.20 billion. The Digital Experience segment’s revenues are expected between $1.38 billion and $1.40 billion. Experience Subscription revenues are expected in the $1.27-$1.29 billion range.Adobe expects fiscal first quarter non-GAAP earnings between $4.95 and $5. The consensus mark for earnings is currently pegged at $4.95 per share, indicating 10.49% growth from the figure reported in the year-ago quarter.For fiscal 2025, Adobe expects total revenues between $23.30 billion and $23.55 billion ($21.51 billion in fiscal 2024). Unfavorable forex and continued move to subscriptions from perpetual offerings are expected to negatively impact revenues by roughly $200 million.The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $23.77 billion, higher than management’s expectation.Adobe expects Digital Media revenues between $17.25 billion and $17.40 billion ($15.86 billion in fiscal 2024). Digital Media ending ARR book of business growth is pegged at 11% year over year.The Digital Experience segment’s revenues are expected between $5.8 billion and $5.9 billion ($5.37 billion in fiscal 2024). Experience Subscription revenues expected in the $5.375-$5.425 billion range ($4.86 billion in fiscal 2024).Adobe expects fiscal 2025 non-GAAP earnings between $20.20 and $20.50 ($18.42 per share in fiscal 2024). The consensus mark for fiscal 2025 earnings is currently pegged at $20.53 per share, higher than management’s guidance range.Zacks RankCurrently, Adobe carries a Zacks Rank #4 (Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Adobe Inc. (ADBE): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks