Shares of Adobe dropped by more than 12% on Thursday, putting the Photoshop maker’s stock on pace for its worst loss in nearly nine months after lowering its revenue forecast for the current fiscal year, despite reporting record revenue and earnings that beat out Wall Street’s expectations.
The Photoshop maker’s stock has underperformed this year as it forecasts slower revenue growth, even ... [+]
Adobe’s shares traded below $480 as of around 10:40 a.m. EST, the lowest level for the stock since Nov. 5 and the largest fall since a 13.6% drop on March 15.
The company on Wednesday reported fourth-quarter revenue of $5.61 billion—a quarterly record for Adobe, CEO Shantanu Narayen said—and adjusted earnings of $4.81 a share, both marks which exceeded analyst projections of $5.54 billion and $4.67 per share, respectively, according to FactSet.
Adobe’s performance was driven by a “strong” demand for the company’s cloud services, a surge that benefited from the growing AI market, according to Narayen.
Despite surpassing revenue and earnings estimates, Adobe said it expects fiscal year 2025 revenue to fall between $23.3 billion and $23.5 billion and current quarter revenue between $5.63 billion and $5.68 billion, both of which fell just below an analyst consensus of $23.8 billion and $5.72 billion, respectively.
Adobe shares have decreased by nearly 17% this year, performing well below the tech-heavy Nasdaq, which has risen by more than 35%.
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$29.8 billion. That’s how much was erased from Adobe’s market capitalization as shares decreased in value, decreasing from $242 billion on Wednesday to $212.2 billion.
Adobe outperformed Wall Street’s projections through all four of its quarters in 2024, though the company’s stock has suffered as Adobe has estimated slower revenue growth. It’s not immediately clear why Adobe has lower guidance than what Wall Street expects, however. David Wadhwani, Adobe’s president of digital media, told investors the company has taken a “holistic” approach to its estimates for the current fiscal year and suggested customer growth would be a “little different” compared to 2024 as Adobe introduces new products. Adobe announced the release of text-to-video generative AI tools earlier this year, which analysts from the investment firm William Blair signaled in September as positivity for the company’s “long-term trajectory.” Jake Roberge, an analyst at William Blair, said Adobe had “[capitalized]