ADBE Stock: Adobe Falls On Mixed Report, Acquisition

Digital media and marketing software firm Adobe (ADBE) on Thursday topped Wall Street’s earnings target for its fiscal third quarter but sales were a tad below views. It also announced a deal to acquire Figma, a web-first collaborative design platform, for about $20 billion. ADBE stock fell by double digits on the news.


The San Jose, Calif.-based company earned an adjusted $3.40 a share on sales of $4.43 billion in the quarter ended Sept. 2. Analysts polled by FactSet expected Adobe earnings of $3.35 a share on sales of $4.44 billion. On a year-over-year basis, Adobe earnings rose 9% while sales increased 13%.

For the current quarter, Adobe forecast adjusted earnings of $3.50 a share on sales of $4.52 billion. Analysts were looking for earnings of $3.47 a share on sales of $4.6 billion in the fiscal fourth quarter. In the year-earlier period, Adobe earned $3.20 a share on sales of $4.11 billion.

Also, Adobe said it is buying Figma, which makes a design platform for teams who build products together. Adobe expects the cash-and-stock deal to close in 2023, pending regulatory approvals and other closing conditions.

ADBE Stock Drops

In morning trading on the stock market today, ADBE stock tumbled 14.3% to 318.50.

“Fueled by our groundbreaking technology, track record of creating and leading categories and consistent execution, Adobe delivered another record quarter,” Chief Executive Shantanu Narayen said in a news release. “With the announcement of our intent to acquire Figma, we believe we have a unique opportunity to usher in a new era of collaborative creativity.”

Figma expects to add about $200 million in annualized recurring revenue this year, exiting 2022 with over $400 million in total ARR. Figma has positive operating cash flows and gross margins of about 90%, according to a news release.

Adobe Stock Downgraded

Earlier this week, two Wall Street firms downgraded ADBE stock ahead of the company’s earnings report. Mizuho Securities lowered its rating on Adobe to neutral from buy on Monday. And BMO Capital Markets downgraded Adobe to market perform, or neutral, from outperform, or buy.

Mizuho noted a difficult sales climate for Adobe. BMO cited survey results and sales channel feedback that showed weakness in Adobe’s Creative Cloud business.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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2022-09-15 06:58:00

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