ADBE stock: Adobe hits Q2 target on demand for cloud software
Digital media and marketing software company Adobe ( ADBE ) easily beat Wall Street estimates for the fiscal second quarter. It also vowed to lead the “new era of generative AI” with its expertise in creative software and digital content workflows. ADBE shares rose on the news.
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The San Jose, Calif.-based company said late Thursday that it earned an adjusted $3.91 a share on sales of $4.82 billion in the quarter ended June 2. Analysts polled by FactSet had expected Adobe to earn $3.79 a share on sales of $4.77 billion. On a year-over-year basis, Adobe revenue rose 17% while sales rose 10%.
But Adobe offered mixed guidance for the next two quarters.
For the current quarter, Adobe forecast adjusted earnings of $3.98 per share on sales of $4.85 billion. It is based on the midpoint of the guide. Wall Street reported earnings of $3.89 per share on sales of $4.86 billion for the third quarter.
Its full-year guidance suggested fourth-quarter financial adjusted earnings of $4.01 per share on sales of $4.98 billion. Analysts had been looking for earnings of $4.05 per share on sales of $5 billion.
The ADBE stock is a recent breakout
In morning trading on the stock market today, the ADBE share rose 3% to 505.73. During the regular session on Thursday, ADBE stock rose 2.4% to close at 490.91.
On June 9, ADBE stock broke out of a cup base at a buy point of 451.15, according to IBD MarketSmith charts. The move came after Adobe announced new enterprise applications for its Firefly generative artificial intelligence software.
“Adobe achieved record revenue in Q2, demonstrating strong demand across Creative Cloud, Document Cloud and Experience Cloud,” CEO Shantanu Narayen said in a press release.
He added, “Adobe’s breakthrough innovation positions us to lead the new era of generative AI given our rich datasets, foundational models and ubiquitous product interfaces.”
Adobe Likely Key AI Beneficiary
Adobe has three cloud computing businesses. The largest, Creative Cloud, includes software for creative professionals such as Photoshop and Illustrator. Document Cloud includes Acrobat and e-signature offerings. Experience Cloud provides marketing software and services.
“This is a seminal moment in Adobe’s history, given the technologies we’re bringing to life,” including Firefly generative AI, CFO Dan Durn told Investors Business Daily. “Generative AI is a very strong thematic trend playing out in the market right now, and Adobe is a clear leader.”
At least 22 Wall Street firms raised their price targets on ADBE shares after the company’s earnings report.
Goldman Sachs analyst Kash Rangan said Adobe’s Q2 financial report confirmed his view that Adobe is a “key generative AI adopter.” Rangan rates the ADBE share as a buy with a price target of 550.
“The comprehensive data-driven platform and product-led growth should enable Adobe to seize this opportunity,” Rangan said in a note to clients.
Adobe is on the IBD Tech Leaders list. ADBE stock has an IBD Composite Rating of 98 out of 99, according to IBD Stock Checkup.
Adobe ranks first out of six stocks in IBD’s Computer Software-Desktop industry group.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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