Shares of Adobe Inc
The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.
- RBC Capital Markets analyst Matthew Swanson maintained an Outperform rating and price target of $610.
- Goldman Sachs analyst Kash Rangan reiterated a Buy rating and price target of $640.
- KeyBanc Capital Markets analyst Jackson Ader reaffirmed an Underweight rating and price target of $450.
- Oppenheimer analyst Brian Schwartz maintained an Outperform rating and price target of $625.
- Piper Sandler analyst Brent Bracelin reiterated an Overweight rating and price target of $635.
- JMP Securities analyst Patrick Walravens reaffirmed an Market Outperform rating on the stock.
- Bank of America Securities analyst Brad Sills maintained a Buy rating and price target of $640.
The company exited the fiscal third quarter with RPO (remaining performance obligation) of $18.14 billion. This represents 15% year-on-year growth, which is "a sign of broader enterprise adoption," Swanson stated. Management lowered guidance for the fiscal fourth quarter. This could prove conservative, "given recent innovation and execution" and an "additional potential catalyst from Adobe Max," he further wrote, calling the stock weakness "an overreaction."
Goldman Sachs: Adobe reported DM NNARR of $504 million, versus consensus of $462 million, driven by revenue growth of 11% and operating profit margin of 47% coming in higher than estimates of 10% and 46%, respectively, Rangan said. The stock was punished for management's weaker-than-expected DM NNARR guidance of $550 million for the fiscal fourth quarter, which missed consensus of $571 million, he added.
"While investors are likely concerned about guidance's effect on upcoming DM FY25 guidance and hesitant about where we are in the maturity of the business, we believe this reaction is overblown," the analyst wrote. Adobe's core business remains strong and is likely to be boosted by ramping AI adoption, he further stated.
KeyBanc Capital Markets: Adobe's third-quarter beat made the fourth quarter even more dependent on "a strong seasonal end to the year, which, in our opinion, is no guarantee in the current budget environment," Ader said. The fourth-quarter outlook across the board is below prior implied guidance and consensus, he stated.
"The list of explanations includes increased go-to-market costs to market increased pace of product launches, FX being more of a headwind than was factored into the Company's methodology at the start of the year, a calendar anomaly that causes Cyber Monday to fall into next fiscal year and large document cloud deals that were signed earlier than anticipated," the analyst wrote. He added, however, that Adobe may need to sacrifice margins to maintain its revenue growth.
Oppenheimer: Adobe reported total revenues of $5.41 billion, representing 11% year-on-year growth and beating consensus of $5.37 billion, Schwartz said. Pro forma earnings grew by 14% year-on-year to $4.65 per share, higher than the market estimate of $4.53 per share, he added.
Management guidance to BM NNARR of around $550 million for the fourth quarter, which missed the consensus by $25 million, the analyst stated. He noted, however, that the full-year DM NNARR has been raised by $23 million to around $1.97 billion and came in above the consensus of $1.95 billion.
Piper Sandler: DM ARR may have been a useful metric during the SaaS transition, but is not in the AI era, Bracelin said. He added that the annual and new DM ARR variance "is just 3.8% for four years at $1.91B-$1.98B."
Adobe's new DM ARR beat consensus by $44 million in the third quarter, but the company lowered the fourth quarter projection by only $21 million, the analyst stated. "Nothing in Q3 results or the Q4 outlook changes our thesis that ADBE is in the early innings of a new innovation cycle," he further wrote.
JMP Securities: The company guided to its fiscal fourth-quarter non-GAAP earnings of $4.63-$4.68 per share, versus consensus of $4.67, Walravens said. Total revenue of $5.50-$5.55 billion, versus consensus of $5.61 billion, representing around 9% year-on-year growth at the midpoint, he added.
"On the cautious side, the F4Q guidance was a bit light, AI monetization remains early, and competition is increasing, particularly from Canva and Figma," the analyst wrote. Adobe has a good strategy of "developing commercially safe AI frontier models and embedding them into its applications."
BofA Securities: Adobe's DM NNARR of $504 million "nicely exceeded our $471 million estimate," Sills said in a note. The company's third-quarter results were boosted by about $20 million worth of deals in the Document Cloud being pulled forward from the fourth quarter, he stated.
"The Q4 outlook for NNDMARR of $550 million is below our $571 million from the movement into Q3," the analyst wrote. He added, however, that the net result is an increase of $32 million in the fiscal 2026 outlook to $1.915 billion.
ADBE Price Action: Shares of Adobe had declined by 9.12% to $533.08 at the time of publication on Friday.
