Adobe Shares Decline due to Projections

On Thursday, extended trading saw shares of Adobe shed as much as 5%, after the full-guidance put forward by the design software maker that did not live up to the expectations of analysts.

Forecasts vs Expectations

The company reduced its guidance for this year. It said that revenue would be about $17.65 billion and this would lead to adjusted earnings per share of around $13.50. Meanwhile, analysts had been expecting that the revenue would be around $17.85 billion, while the earnings per share would be around $13.66.

The previous guidance that Adobe had shared was back in December, when it had forecasted a revenue of around $17.90 billion and its earnings per share had been around $13.70. According to the company, summer seasonality, the Russia and Ukraine war and a foreign-exchange headwind worth $175 million was responsible for the decline.

Companies like Salesforce and Microsoft had also issued their own adjusted projections, which they claimed had declined because of the currency impact. This year has seen the US dollar strengthen against the Japanese yen, the euro and other currencies, as interest rates have been hiked by the Federal Reserve to quell inflation.

The finance chief at Adobe, Dan Durn said that the uncertain economic environment was the problem, but the management was pleased with their success in acquiring talent in a competitive labor market.

Results for the Quarter  

There was a 14% growth in Adobe’s revenue in the quarter that came to a close on June 3rd. The net income of the company for the second quarter saw an increase of 6%, which brought it to a value of $1.18 billion. There was also a 15% increase in revenue of the Digital Media segment of the company. This includes the Document Cloud and Creative Cloud products, which had a revenue of about $3.20 billion, even though it had been estimated at $3.16 billion.

Adobe’s Digital Experience segment, which comprises of the Experience Cloud used by businesses for commerce and marketing also recorded a revenue of $1.10 billion. This was a 17% increase than the expected $1.08 billion. The company ended the quarter with deferred revenue of about $4.88 billion, which was a fall from the $5.02 billion recorded in the previous one. This was also below the expectations of $5 billion. The short-term investments and cash and cash equivalents of Adobe were about $5 billion.

What the Management Says

Shantanu Narayen, the chief executive of Adobe, stated that it was not necessary for the company to add anything to its portfolio. But, the CEO said that the company would now keep an eye out for acquisition targets because they could now expect reasonable prices now. He said that it was likely that some of the single product small companies would not be able to pull through in the current market conditions and this could work in favor for a large company like Adobe.

Excluding the after-hours movement, there has been a 36% decline in Adobe’s valuation since the beginning of the year.

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