Adobe shares dip after 15 of 20 earnings; AI under scrutiny

Adobe reports fiscal third-quarter results after U.S. markets close Thursday. Analysts expect about $6.69 billion in revenue and $6.08 in adjusted EPS. The stock closed at $254.86 on Wednesday and is down about 27% year to date.

Shares have fallen after 15 of the last 20 earnings reports. Adobe guided Q3 revenue of $6.67 billion to $6.72 billion and non-GAAP earnings of $6.05 to $6.10 a share. The company has beaten both revenue and earnings in nine of the past 10 quarters, while shares have risen after only two of the last 12 reports.

Adobe reported AI-first annual recurring revenue exceeded $500 million at the end of the second quarter, more than triple the level a year earlier. Total ending annual recurring revenue reached $27.1 billion, and Firefly ARR approached $300 million after roughly 50% sequential growth. The company has added AI features across Firefly, Premiere, After Effects and Acrobat and expanded freemium access to some AI tools.

Goldman Sachs analyst Gabriela Borges noted that incumbents must reduce technical debt, continue innovating and find ways to monetize AI tools. She said Adobe is still determining where it stands in that process.

RBC Capital’s Matthew Swanson raised his price target on Adobe to $315 from $285 and kept an Outperform rating. He wrote that an in-line quarter would be acceptable but ‘a path to ARR re-acceleration remains the key to company-specific multiple expansion.’

Anil Chakravarthy will become chief executive on December 1, and Shantanu Narayen will move to executive chair. Investors will review the earnings, management commentary and guidance for signals on AI monetization and the company’s recurring-revenue trajectory.