TLDR
- Adobe stock jumped 3% after hours following Q3 revenue of $5.99 billion that exceeded Wall Street forecasts
- Company raised full-year guidance with EPS targets of $20.80-$20.85 and revenue of $23.65-$23.70 billion
- AI-driven annual recurring revenue hit $5 billion milestone, up from $3.5 billion previously
- Q3 adjusted EPS reached $5.31, beating analyst estimates of $5.18
- Stock remains down 21% year-to-date despite strong quarterly performance
Adobe stock climbed 3.07% to $361.32 in after-hours trading Thursday after the creative software company delivered third-quarter results that beat Wall Street expectations across key metrics.
The company reported adjusted earnings per share of $5.31, surpassing consensus estimates of $5.18. Revenue came in at $5.99 billion, topping the $5.91 billion analysts had projected according to LSEG data.
Third-quarter revenue represented an 11% year-over-year increase from $5.41 billion in the same period last year. Net income rose to $1.77 billion, or $4.18 per share, compared to $1.68 billion, or $3.76 per share, in the prior year quarter.
The strong results provided a welcome boost for Adobe shares, which have declined 21% year-to-date even as the broader Nasdaq gained 14%. Thursday’s after-hours rally suggests renewed investor confidence in the company’s growth strategy.
Raised Guidance Drives Optimism
Adobe issued fourth-quarter guidance that exceeded analyst expectations on both revenue and earnings fronts. The company projects Q4 adjusted EPS between $5.35 and $5.40, above Wall Street’s $5.34 estimate.
Fourth-quarter revenue guidance was set at $6.08-$6.13 billion, compared to consensus forecasts of $6.08 billion. The company also raised its full-year targets, now expecting revenue of $23.65-$23.70 billion and adjusted EPS of $20.80-$20.85.
These updated projections compare favorably to average analyst estimates of $23.57 billion in revenue and $20.58 in EPS for the full year. Adobe’s Digital Media division, which serves as the primary revenue driver, is expected to generate $4.53-$4.56 billion in Q4 revenue.
AI Strategy Shows Results
A key highlight of Adobe’s quarterly report was the continued growth of its artificial intelligence initiatives. The company’s AI-influenced annual recurring revenue surpassed $5 billion, up from $3.5 billion at the end of fiscal 2024.
CEO Shantanu Narayen emphasized Adobe’s leadership position in AI creative applications during the earnings call. “Adobe is the leader in the AI creative applications category with AI-influenced ARR surpassing $5 billion and AI-first ARR already exceeding our $250 million year-end target,” he stated.
The company reported that 99% of Fortune 100 companies have now used AI features in Adobe products. More than 40% of Adobe’s top 50 enterprise clients have doubled their annual recurring revenue spending since fiscal 2023 began.
Despite facing competition from companies like OpenAI and Canva in the AI-powered creative software space, Adobe’s latest results demonstrate successful monetization of its AI investments. The company’s focus on protecting customer intellectual property has emerged as a key differentiator in enterprise sales.
Retail sentiment toward Adobe stock remained “extremely bullish” on Stocktwits following the earnings announcement, with message volume reaching “extremely high” levels as traders discussed the quarterly beat and raised guidance.
Adobe closed regular trading at $350.55, up 0.11% on the day, before surging in extended hours on the earnings news.
