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Why Is Adobe (ADBE) Down 11.6% Since Last Earnings Report?
ADBEAdobe(ADBE) ZACKS·2025-01-10 17:51

Earnings Performance - Adobe's Q3 2024 non-GAAP earnings were 4.65pershare,beatingestimatesby2.654.65 per share, beating estimates by 2.65% and showing a 13.7% YoY increase [2] - Total revenues reached 5.41 billion, surpassing estimates of 5.37billionandgrowing115.37 billion and growing 11% YoY on both reported and constant-currency bases [2] Revenue Drivers - Strong performances from Adobe Creative Cloud, Document Cloud, and Experience Cloud drove top-line growth [3] - Subscription revenues accounted for 95.8% of total revenues at 5.18 billion, up 11.6% YoY [5] - Product revenues declined 14.6% YoY to 82 million, while services & other revenues decreased 10.4% YoY to 146 million [5] Segment Performance - Digital Media segment revenues grew 11% YoY to 4billion,withCreativeCloudcontributing4 billion, with Creative Cloud contributing 3.19 billion (up 10% YoY) and Document Cloud generating 807million(up18807 million (up 18% YoY) [6][7][8] - Digital Experience segment revenues increased 10% YoY to 1.35 billion, with subscription revenues rising 12% YoY to 1.23billion[9]OperationalMetricsGrossmarginexpanded170bpsYoYto89.81.23 billion [9] Operational Metrics - Gross margin expanded 170 bps YoY to 89.8% [10] - Operating expenses increased 9.5% YoY to 2.86 billion, but as a percentage of total revenues, they contracted 50 bps to 52.9% [10] - Adjusted operating margin expanded 30 bps YoY to 46.5% [10] Financial Position - Cash and short-term investments stood at 7.5billionasofAug30,2024,downfrom7.5 billion as of Aug 30, 2024, down from 8.1 billion as of May 31, 2024 [11] - Trade receivables increased to 1.8billionfrom1.8 billion from 1.6 billion in the previous quarter [11] - Long-term debt remained stable at 4.128billion[11]Cashgeneratedfromoperationsincreasedto4.128 billion [11] - Cash generated from operations increased to 2.02 billion from 1.94billioninthepreviousquarter[11]FutureOutlookQ42024revenueguidanceisprojectedbetween1.94 billion in the previous quarter [11] Future Outlook - Q4 2024 revenue guidance is projected between 5.50 billion and 5.55billion[13]DigitalMediarevenuesareexpectedtobebetween5.55 billion [13] - Digital Media revenues are expected to be between 4.09 billion and 4.12billion,whileDigitalExperiencerevenuesareanticipatedtorangefrom4.12 billion, while Digital Experience revenues are anticipated to range from 1.36 billion to 1.38billion[13]NetnewARRintheDigitalMediasegmentisprojectedat1.38 billion [13] - Net new ARR in the Digital Media segment is projected at 550 million, and Digital Experience subscription revenues are expected to be between 1.23billionand1.23 billion and 1.25 billion [13] - Non-GAAP earnings per share are forecasted between 4.63and4.63 and 4.68 [14] Market Position and Growth - Adobe faces stiff competition in the AI software space from tech giants and well-funded startups like Stability AI and Midjourney [4] - The company's investments in generative AI capabilities and AI-powered offerings are expected to boost its prospects [3] - Estimates have been trending upward, with Adobe holding a Zacks Rank 3 (Hold) [15][18]