Last Thursday, Adobe Inc ADBE reported its third quarter results, surpassing Wall Street’s estimates for both the top and bottom line. However, Adobe’s stock got punished for a lighter-than-expected fourth quarter guidance that sparked fears of smaller rivals taking business from software companies like Adobe and Salesforce Inc CRM. 

Fiscal third quarter highlights

For the quarter ended on August 30th, Adobe reported revenue grew 11% to $5.41 billion, topping $5.37 billion that LSEG expected. The biggest line of business, Digital Media, that is home to Creative Cloud subscriptions that use generative artificial intelligence called Firefly, grew 11% YoY, bringing in sales of $3.98billion. Within the digital media segment, creative revenue grew 10% YoY to $3.19 billion while Document Cloud grew 18% YoY to $807 million.

The total subscription revenue amounted to $5.18 billion, rising 11% YoY. 

Digital Experience segment reported revenue rose 10% to $1.35 billion.

Net income rose to $1.68 billion with adjusted earnings amounting to $4.65, surpassing $4.53 that LSEG estimated. 

Adobe demonstrated the strenght from its cash-generation capabilities, $2.02 billion, bringing in cash of $2.02 billion from its operations. 

Adobe adjusted its outlook to a tough economy. 

Taking into account current macroeconomic conditions and expected seasonal strength, Adobe adjusted its outlook. For the fourth fiscal quarter, Adobe guided for revenue between $5.5 billion and $5.55 billion, which fell short of FactSet’s estimate of $5.6 billion.     Digital Media is projected to bring in $4.09 billion to $4.12 billion while Digital Experience segment is expected to report revenue between $1.36 billion and $1.38 billion. Adjusted profit is expected to range between $4.63 and $4.68 per share.

Adobe continues to empower its users with the technology of tomorrow.

Throughout the third quarter, Adobe outperformed across its key business segmens. More importantly, Adobe continues to integrarte AI across its portfolio. AI-powered enhancements, particularly Adobe Firefly, fueled the increased customer engagement and retention across Creative Cloud, Document Cloud, and Experience Cloud. However, the lighter than expected forecast sparked fears that AI gains will take longer to monetize, especially in the pressured buying environment.

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