Adobe Shares Plunge 13% on Disappointing Revenue Guidance

On Thursday, shares of Adobe saw a significant decline of 13%, marking their largest drop since March. This plunge followed the company's announcement of disappointing revenue guidance.

In the earnings report for the fourth quarter, Adobe projected sales for the fiscal first quarter to be between $5.63 billion and $5.68 billion. Analysts had anticipated revenue figures closer to $5.73 billion, according to data from LSEG.

Following the news, TD Cowen analysts downgraded Adobe's stock rating from "buy" to "hold." In contrast, Wells Fargo maintained a "buy" rating despite labeling the year 2024 as a "frustrating" period for the company. As a result of this recent downturn, Adobe's stock price has dropped 20% since the beginning of the year, while the Nasdaq index has increased by 33%, reaching the 20,000 mark for the first time.

Although Adobe's revenue forecast fell short of expectations, the company reported strong fourth-quarter results. Their adjusted earnings per share were $4.81, surpassing the average estimate of $4.66 by analysts. Additionally, the fourth-quarter revenue increased by 11% to $5.61 billion, which also exceeded the expected figure of $5.54 billion.

Adobe's strategy to capitalize on generative artificial intelligence plays a crucial role in its growth. The company has been focusing on monetizing this technology through standalone products like Firefly image generation and expansions within its Creative Cloud suite.

Analysts at Deutsche Bank maintained their "buy" rating but reduced their target price for Adobe from $650 to $600. They remarked that the earnings results and guidance will require confidence in the company's future performance. Nevertheless, they acknowledged that there is tangible evidence indicating that Adobe is among a select few software companies effectively monetizing generative AI.

Adobe, stocks, revenue