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Adobe’s stock took a hit in after-hours trading on Thursday, despite the company reporting better-than-expected Q3 results.
The creative software giant saw its stock drop by 10% in after-hours trading on Thursday following the release of its fourth-quarter fiscal report. Despite beating Wall Street expectations for its third-quarter results, the company’s soft revenue guidance for the upcoming quarter could be a source of concern for investors.
The San Jose-based firm reported impressive third-quarter figures, with revenue reaching $5.41 billion, surpassing the expected $5.37 billion mark.
However, According to CNBC, Adobe’s forecast for the fourth quarter fell short of analyst expectations, projecting earnings per share between $4.63 and $4.68 on revenue of $5.5 billion to $5.55 billion as against predicted earnings of $4.67 per share on $5.61 billion in sales.
Adobe’s Digital Media segment, which includes its Creative Cloud subscriptions featuring the AI-powered Firefly tool, demonstrated strong performance with an 11% year-over-year growth, generating $4 billion in sales.
Despite these positive results, investors remain wary of the potential impact of generative AI on Adobe’s business model. The rise of generative AI text-to-image tools like Midjourney and DALL-E 3, as well as the rising adoption of Adobe’s foremost competitor Canva has sparked concerns about Adobe’s market position.
In response, the company has aggressively rolled out its own AI tools, including the Acrobat AI assistant, which was launched last April and Firefly suite, a generative AI video tool that it Premiered on September 11.
