Adobe stock climbs on a more profitable quarter than predicted

Adobe shares rose 6% in extended trading on Thursday after the design software maker make knew fiscal fourth-quarter earnings and guidance that exceeded analysts’ expectations.

Here’s how the company did:

• Earnings: $3.60 per share, reconciled, vs. $3.50 per share as expected by analysts, according to Refinitiv.
• Revenue: $4.53 billion, vs. $4.53 billion as expected by analysts, corresponding to Refinitiv.

Total revenue grew 10% year over year in the quarter, which ended on Dec. 2, contract to a statement. In the previous quarter revenue rose by 13%. Net income, at $1.18 billion, was down slightly from $1.23 billion in the year-ago division.

“We delivered record operating cash flows with a focus on profitability,” CEO Shantanu Narayen told analysts on a symposium call. He said the company is remaining cautious and won’t be immune from a worsening economy.

With respect to guidance, Adobe requirement readied for $3.65 to $3.70 in adjusted earnings per share on $4.60 billion to $4.64 billion in revenue in the fiscal first favour. Analysts polled by Refinitiv had expected $3.64 in adjusted earnings per share and $4.64 billion in revenue. The numbers don’t incorporate impact from Figma. The company maintained its guidance for the full 2023 fiscal year.

Adobe’s Digital Centre business, which includes Creative Cloud design software subscriptions, contributed $3.30 billion in revenue, not entirely meeting the StreetAccount consensus of $3.31 billion. Creative revenue grew 8% in the quarter. The Digital Experience portion, which includes Adobe’s marketing software, delivered $1.15 billion in revenue, just over the $1.14 billion StreetAccount consensus.

The digital undergo business succeeded in closing “numerous transformational deals that span our portfolio of solutions,” Anil Chakravarthy, president of the margin, said on the call.

In the quarter Adobe said it would buy design software startup Figma for about $20 billion in the 40-year-old collective company’s largest transaction to date.

“Overall, the regulatory process is proceeding as expected,” said David Wadhwani, president of the Digital Media commerce. The U.S. Justice Department and the United Kingdom’s Competition and Markets Authority is reviewing the deal, and Adobe still expects it to suspend in 2023, Wadhwani said.

One analyst asked how Figma is handling the current economic environment. But for now FIgma is still a hermitical company, and Adobe isn’t able to discuss Figma’s latest performance, Narayen said.

When removing the effect of the after-hours motivate, Adobe shares have slid 42% this year, while the S&P 500 index has declined 18% through the same period.

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