Earnings Preview: What to expect when Adobe (ADBE) reports Q4 results

Adobe Inc. (NASDAQ: ADBE) has delivered strong operating margins and profit in recent quarters while making significant investments in its technology platform. That, combined with continued innovation, positions the company to tap into new opportunities, especially in the field of artificial intelligence. The company is rolling out several AI products for enterprise customers.

Adobe’s stock has made steady gains since hitting a three-year low around twelve months ago, and the value more than doubled during that period. It seems there is more room for growth, and the stock might set a new record in the near future. Given the company’s aggressive AI push, sales and margin growth should accelerate in the coming months, thanks to the successful cloud-based subscription model. ADBE has the potential to create good shareholder value, which makes the stock an ideal option for long-term investors though it trades at a higher valuation.

Q4 Earnings Due 

On average, market watchers expect adjusted earnings to be $4.14 per share in the November quarter, the results for which will be published on December 13, at 4.05 p.m. ET. A year earlier, the tech firm had reported earnings of $3.60 per share. It is estimated that Q4 revenues increased 11.2% annually to $5.03 billion. Adobe’s management is looking for revenues in the range of $4.975 billion to $5.025 billion and earnings per share between $4.10 and $4.15. The company’s guidance for unadjusted earnings per share is $3.10-3.15 for Q4.

The company has been constantly expanding its AI ecosystem. Firefly, a new family of creative generative AI models launched earlier this year, has opened a new window to the world of design, enabling clients to create AI-generated art in a variety of styles and customize their design models.

From Adobe’s Q3 2023 earnings call:

“We are bringing generative AI to life across our portfolio of apps and services to deliver magic and productivity gains. Our rich datasets enable us to create foundation models in categories where we have deep domain expertise. In the six months since launch, Firefly has captivated people around the world who have generated over 2 billion images. We’re excited about the potential to reimagine the content supply chain for all businesses through the integration of our clouds, enabling the delivery of personalized and engaging customer experiences.”

In Growth Mode

Over the past six years, Adobe’s quarterly profit either beat or matched estimates consistently. In the three months ended August 2023, earnings, excluding special items, increased 20% year-over-year to $4.09 per share. The bottom-line growth was driven by strong performance by the Digital Media and Digital Experience segments, which together account for around 98% of total revenues. Business expanded across all geographical regions during the quarter, driving up total revenues by 10% to $4.89 billion.  

Meanwhile, the company’s planned acquisition of Figma, Inc., which designs and develops browser-based photo editing software, remains in limbo due to regulatory hurdles. Through the $20-billion deal, Adobe looks to expand its portfolio and broaden its client base.

Shares of Adobe opened Wednesday’s session slightly above $600, after closing the previous session lower. It has gained 81% since the beginning of the year.