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ADBE tumbles 12% despite beating expectations and announcing $25 billion share repurchase plan

AInvestThursday, Mar 14, 2024 4:58 pm ET
1min read

Adobe Inc. (ADBE) released its earnings report for the first quarter (Feb) of fiscal year 2024, surpassing analysts' expectations. The company outpaced expectations and announced a massive $25 billion share repurchase program. The news was not enough to placate shareholders as the stock tumbled 12% in after hours, setting up a test of the $500-psyche level for support.

The price action highlights the elevated bar companies need to pass when they are considered inside the "AI realm".

ADBE reported adjusted earnings per share (EPS) of $4.48, $0.10 better than the consensus of $4.38. The company also reported a 11% year-over-year (y/y) revenue growth to $5.18 billion, slightly exceeding Street expectations. 

In the first quarter, the company's Digital Media segment revenue grew by 12% y /y or 13% in constant currency, reaching $3.82 billion. Creative revenue saw an 11% y/y growth or 12% in constant currency, amounting to $3.07 billion. Document Cloud revenue experienced an 18% y/y growth as reported and in constant currency, standing at $750 million. 

Net new Digital Media Annualized Recurring Revenue (ARR) was $432 million, exiting the quarter with a Digital Media ARR of $15.76 billion. Creative ARR grew to $12.78 billion, and Document Cloud ARR grew to $2.98 billion. 

The Digital Experience segment revenue grew by 10% y/y to $1.29 billion, with subscription revenue reaching $1.16 billion, representing a 12% y/y growth.

Adobe issued guidance for the second quarter (May), expecting an EPS of $4.35-4.40, compared to the $4.38 consensus. The company also forecasted Q2 revenues of $5.25-5.30 billion, compared to the $5.3 billion consensus.

In addition, the company approved a new stock repurchase authorization, granting the authority to repurchase up to $25 billion in common stock through March 14, 2028. 

Despite these positive financial results and outlook, Adobe's shares decreased by 5.7% following the earnings report release. In summary, Adobe's first quarter earnings report reveals strong financial performance and growth across its Digital Media and Digital Experience segments. The company's revenue growth and adjusted EPS exceeded analysts' expectations, and it issued optimistic guidance for the second quarter.  


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