Shares of creative software provider Adobe (ADBE) sank in after-hours trading after the company reported earnings for its fourth quarter of Fiscal Year 2024 that was followed by soft guidance. Adjusted earnings per share came in at $4.81, which beat analysts’ consensus estimate of $4.67 per share.
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Sales increased by 11.1% year-over-year, with revenue hitting $5.61 billion. This also beat analysts’ expectations of $5.54 billion. The bulk of the revenue, and the main growth driver, came from Adobe’s Digital Media segment, which grew 12% year-over-year to $4.15 billion.
Meanwhile, buybacks also helped push the EPS figure past estimates. During the third quarter, 4.6 million shares were repurchased by the company, therefore slightly increasing the share of the profits to the remaining investors. Adobe regularly repurchases its shares each quarter, which totaled 17.5 million units for the fiscal year.
2025 Outlook
Looking forward, management has provided the following guidance for 2025:
- Q1 Revenue of between $5.63 billion and $5.68 billion versus analysts’ estimates of $5.72 billion
- Q1 Adjusted EPS in the range of $4.95 to $5.00 compared to analysts’ estimates of $4.94
- FY25 Revenue of between $23.3 billion to $23.55 billion versus analysts’ estimates of $23.8 billion
- FY25 Adjusted EPS in the range of $20.20 to $20.50 compared to analysts’ estimates of $20.53
As we can see, the company’s outlook is worse than expected, as revenue was a total miss, and the yearly EPS range was below estimates. This is what led to the after-hours move in the stock price.
Is Adobe a Buy, Hold, or Sell?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on ADBE stock based on 21 Buys, three Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 3% year-to-date decline, the average ADBE price target of $624.17 per share implies 8.14% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
