For Adobe Inc. (NASDAQ: ADBE), 2024 was a year of hits and misses, as it generated record revenues during the year while the stock suffered a sharp fall. The design software maker’s subscription revenue has grown consistently since adopting the SaaS business model, mainly through its Creative Cloud platform. Meanwhile, the company’s aggressive AI integration has increased user engagement and it enjoys strong customer loyalty.
Adobe’s stock has lost about 17% in the past twelve months when it experienced a series of ups and downs. A positive side of the price drop is that the stock has become more affordable. Given the company’s growing AI business and its continued dominance in creative software, ADBE appears to be an attractive investment.
When the tech firm reports its first-quarter 2025 results on March 12, after the closing bell, Wall Street will be looking for adjusted earnings of $4.97 per share on revenues of $5.66 billion. That compares to earnings of $4.48 per share and revenues of $5.18 billion reported in Q1 2024. For over three years, quarterly earnings have consistently beaten estimates. The Adobe leadership expects first-quarter revenue to be in the range of $5.63 billion to 5.68 billion, and adjusted earnings per share in the $4.95-5.00 range.
In the final three months of fiscal 2024, adjusted earnings increased 13% annually to $4.81 per share, exceeding Wall Street’s expectations. Net income, on a reported basis, was $1.68 billion or $3.79 per share in Q4, compared to $1.48 billion or $3.23 per share a year earlier. The positive bottom-line performance reflects an 11% growth in revenues to $5.61 billion, driven mainly by a double-digit increase in Digital Media revenue that accounts for more than 70% of the total. The top line beat estimates for the eighth consecutive quarter.
From Adobe’s Q4 2024 earnings call:
“Our strategy to unleash creativity for all, accelerate document productivity and power digital businesses represents a massive addressable market opportunity. Adobe continues to build on its strong foundation of transformative innovation, category and brand leadership, financial performance, and profitable growth. We’re delivering Adobe magic to an expanding set of global customers and executing on the massive market opportunity ahead. Adobe couldn’t be better positioned for 2025 and beyond.”
For fiscal 2025, Adobe expects total revenue to be between $23.30 billion and $23.55 billion. The forecast for full-year earnings per share is $20.20-20.50. Although the market is becoming increasingly competitive, the company looks on track to achieve its financial goals, thanks to stable revenue growth and healthy free cash flow. Notably, in the most recent quarter, gross margin was an impressive 89%. While there is no specific timeline for monetizing Adobe’s investments in its AI-enabled offerings, they are expected to be a significant catalyst to the business in the long term.
The performance of Adobe shares has not been very impressive ahead of the earnings, so far. On Thursday, the stock opened at $451.24 and traded lower in the early hours of the session.
The post Adobe (ADBE) looks poised for a solid start to FY25 amid AI momentum first appeared on AlphaStreet.
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