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For the third quarter of fiscal 2024, ADBE projects total revenues between $5.33 billion and $5.38 billion. The Zacks Consensus Estimate for revenues is pegged at $5.37 billion, suggesting growth of 9.7% from the year-ago quarter’s reported figure.
Management expects non-GAAP earnings per share between $4.50 and $4.55. The consensus mark for earnings is pegged at $4.53 per share, indicating a 10.8% rise from the year-ago period’s actual. Earnings estimates have been unchanged over the past 30 days.
Image Source: Zacks Investment Research
Adobe has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 2.05%. Its earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 2.69%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Adobe this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Here’s How ADBE’s Segments are Poised Ahead of Q3 Results
Adobe has been benefiting from its strong generative AI capabilities. Its expanding AI-powered product portfolio is likely to have been the key catalyst in driving its top-line growth in the fiscal third quarter. The solid momentum of the company’s family of creative, generative AI models, Firefly, is likely to have driven growth across its Digital Media and Digital Experience segments.
The Digital Media segment, comprising Creative Cloud and Document Cloud, is expected to have gained from the strong adoption of Firefly tools in Photoshop, Generative Fill and Generative Expand. The solid adoption of PDFs, coupled with strength in Frame.io, Adobe Stock, Acrobat ecosystem and Adobe Express Web, is anticipated to have been other positives.
Adobe expects Digital Media revenues between $3.95 billion and $3.98 billion. The Zacks Consensus Estimate for the same is pegged at $3.968 billion, indicating year-over-year growth of 10.4%.
ADBE expects the Digital Experience segment’s revenues between $1.325 billion and $1.345 billion. The consensus mark for the same is pegged at $1.336 billion, indicating year-over-year growth of 8.7%.
The Digital Experience segment, comprising Adobe Experience Cloud, is likely to have benefited from the solid demand for the Adobe Experience Platform.
ADBE’s Strong Generative AI Portfolio to Consider
Adobe’s unveiling of the Firefly Image 2 Model, Firefly Vector Model and Firefly Design Model to mark a significant advancement in its creative generative AI model family, enhancing creative control, image quality and illustrator capabilities, is likely to have boosted the adoption rate of ADBE’s creative tools.
The company added features to Acrobat AI Assistant to allow customers to ask questions, get insights and create content from information across groups of PDFs and other document types. It also introduced enhanced meeting transcript capabilities in AI Assistant. Adobe offers AEP AI Assistant, which is capable of answering technical questions, automating tasks, simulating outcomes and generating audiences seamlessly.
These are expected to have continued benefiting Adobe’s segmental performace.
Growing momentum in Generative Remove in Adobe Lightroom, which is a powerful Firefly-backed tool that helps remove unwanted objects from any photo in a single click in a non-destructive manner, is anticipated to have been a plus.
The introduction of Adobe Express for Enterprise, which is powered by Firefly Image Model 3, is likely to have driven the company’s momentum among various enterprises.
Strategic Partnerships Bode Well
ADBE’s partnerships with Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) are expected to have contributed well to the quarterly performance.
The integration of Acrobat PDF technology into Microsoft Edge and Alphabet’s Google Chrome is a major plus. Adobe is experiencing rising free-to-paid conversions on the back of its Acrobat extensions for Microsoft Edge and Google Chrome.
ADBE’s recent partnership with Microsoft to provide marketing insights and workflows from Adobe Experience Cloud applications and Microsoft Dynamics 365 to Microsoft Copilot in order to assist marketers in creative brief development, content creation and content approval management is noteworthy.
Macro Headwinds & Competition Do Not Bode Well
A challenging macroeconomic environment, with high oil prices and elevated interest rates, is expected to have been concerning for ADBE in the fiscal third quarter. Fears of a looming U.S. recession are also weighing on the tech stocks.
The ongoing Russia-Ukraine war is expected to have continued impacting the company’s business negatively.
Adobe faces stiff competition from the likes of Meta Platforms (META - Free Report) and Alphabet’s Google in the digital content space due to their growing generative AI efforts. This is likely to have acted as a headwind.
Price Performance
Adobe’s shares have lost 4.5% on a year-to-date basis against the industry, the Zacks Computer & Technology sector and the S&P 500 index’s rallies of 7.1%, 13.6% and 14.5%, respectively.
ADBE has also underperformed its peers META and GOOGL, which gained 42.6% and 6.5% year to date, respectively.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Attractive Valuation
ADBE’s attractive valuation should beckon investors seeking value. The stock is currently trading at a discount with a forward 12-month Price/Earnings multiple of 28.51X, lower than the industry’s average of 30.62X.
Image Source: Zacks Investment Research
Investment Thesis
Although the intensifying generative AI battle and the negative impacts of geo-political tensions are negatives, Adobe’s expanding generative AI-powered product portfolio and strength in Firefly are positives.
A strong partner base, expanding clientele, solid momentum in the PDF category, compelling product lines, continued innovation and a growing footprint in emerging markets should continue to drive its top-line growth.
Conclusion
Given the fundamental strength, upswing in segmental revenue estimates and attractive valuation, growth-seeking investors should consider the ADBE stock for their portfolios ahead of its third-quarter fiscal 2024 earnings results.
Image: Shutterstock
Adobe Set to Post Q3 Earnings: To Buy or Not to Buy the Stock?
Adobe (ADBE - Free Report) is scheduled to report its third-quarter fiscal 2024 results on Sept. 12.
For the third quarter of fiscal 2024, ADBE projects total revenues between $5.33 billion and $5.38 billion. The Zacks Consensus Estimate for revenues is pegged at $5.37 billion, suggesting growth of 9.7% from the year-ago quarter’s reported figure.
Management expects non-GAAP earnings per share between $4.50 and $4.55. The consensus mark for earnings is pegged at $4.53 per share, indicating a 10.8% rise from the year-ago period’s actual. Earnings estimates have been unchanged over the past 30 days.
Image Source: Zacks Investment Research
Adobe has an impressive earnings surprise history. In the last reported quarter, the company delivered an earnings surprise of 2.05%. Its earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 2.69%.
Image Source: Zacks Investment Research
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Adobe this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
ADBE has an Earnings ESP of 0.00% and a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here’s How ADBE’s Segments are Poised Ahead of Q3 Results
Adobe has been benefiting from its strong generative AI capabilities. Its expanding AI-powered product portfolio is likely to have been the key catalyst in driving its top-line growth in the fiscal third quarter. The solid momentum of the company’s family of creative, generative AI models, Firefly, is likely to have driven growth across its Digital Media and Digital Experience segments.
The Digital Media segment, comprising Creative Cloud and Document Cloud, is expected to have gained from the strong adoption of Firefly tools in Photoshop, Generative Fill and Generative Expand. The solid adoption of PDFs, coupled with strength in Frame.io, Adobe Stock, Acrobat ecosystem and Adobe Express Web, is anticipated to have been other positives.
Adobe expects Digital Media revenues between $3.95 billion and $3.98 billion. The Zacks Consensus Estimate for the same is pegged at $3.968 billion, indicating year-over-year growth of 10.4%.
ADBE expects the Digital Experience segment’s revenues between $1.325 billion and $1.345 billion. The consensus mark for the same is pegged at $1.336 billion, indicating year-over-year growth of 8.7%.
The Digital Experience segment, comprising Adobe Experience Cloud, is likely to have benefited from the solid demand for the Adobe Experience Platform.
ADBE’s Strong Generative AI Portfolio to Consider
Adobe’s unveiling of the Firefly Image 2 Model, Firefly Vector Model and Firefly Design Model to mark a significant advancement in its creative generative AI model family, enhancing creative control, image quality and illustrator capabilities, is likely to have boosted the adoption rate of ADBE’s creative tools.
The company added features to Acrobat AI Assistant to allow customers to ask questions, get insights and create content from information across groups of PDFs and other document types. It also introduced enhanced meeting transcript capabilities in AI Assistant.
Adobe offers AEP AI Assistant, which is capable of answering technical questions, automating tasks, simulating outcomes and generating audiences seamlessly.
These are expected to have continued benefiting Adobe’s segmental performace.
Growing momentum in Generative Remove in Adobe Lightroom, which is a powerful Firefly-backed tool that helps remove unwanted objects from any photo in a single click in a non-destructive manner, is anticipated to have been a plus.
The introduction of Adobe Express for Enterprise, which is powered by Firefly Image Model 3, is likely to have driven the company’s momentum among various enterprises.
Strategic Partnerships Bode Well
ADBE’s partnerships with Microsoft (MSFT - Free Report) and Alphabet (GOOGL - Free Report) are expected to have contributed well to the quarterly performance.
The integration of Acrobat PDF technology into Microsoft Edge and Alphabet’s Google Chrome is a major plus. Adobe is experiencing rising free-to-paid conversions on the back of its Acrobat extensions for Microsoft Edge and Google Chrome.
ADBE’s recent partnership with Microsoft to provide marketing insights and workflows from Adobe Experience Cloud applications and Microsoft Dynamics 365 to Microsoft Copilot in order to assist marketers in creative brief development, content creation and content approval management is noteworthy.
Macro Headwinds & Competition Do Not Bode Well
A challenging macroeconomic environment, with high oil prices and elevated interest rates, is expected to have been concerning for ADBE in the fiscal third quarter. Fears of a looming U.S. recession are also weighing on the tech stocks.
The ongoing Russia-Ukraine war is expected to have continued impacting the company’s business negatively.
Adobe faces stiff competition from the likes of Meta Platforms (META - Free Report) and Alphabet’s Google in the digital content space due to their growing generative AI efforts. This is likely to have acted as a headwind.
Price Performance
Adobe’s shares have lost 4.5% on a year-to-date basis against the industry, the Zacks Computer & Technology sector and the S&P 500 index’s rallies of 7.1%, 13.6% and 14.5%, respectively.
ADBE has also underperformed its peers META and GOOGL, which gained 42.6% and 6.5% year to date, respectively.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Attractive Valuation
ADBE’s attractive valuation should beckon investors seeking value. The stock is currently trading at a discount with a forward 12-month Price/Earnings multiple of 28.51X, lower than the industry’s average of 30.62X.
Image Source: Zacks Investment Research
Investment Thesis
Although the intensifying generative AI battle and the negative impacts of geo-political tensions are negatives, Adobe’s expanding generative AI-powered product portfolio and strength in Firefly are positives.
A strong partner base, expanding clientele, solid momentum in the PDF category, compelling product lines, continued innovation and a growing footprint in emerging markets should continue to drive its top-line growth.
Conclusion
Given the fundamental strength, upswing in segmental revenue estimates and attractive valuation, growth-seeking investors should consider the ADBE stock for their portfolios ahead of its third-quarter fiscal 2024 earnings results.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.