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: Adobe had a bang-up 2023, but a tepid 2024 revenue forecast is dinging the stock

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the close up of the five rows coins ,and the coins jar that fell, with the back ground is a dark blue graph.

Adobe Inc.’s plunge into artificial intelligence has mostly paid big dividends this year, but a soft sales outlook punctured the company’s stock Wednesday.

Compounding matters, Adobe aid it was being probed by the Federal Trade Commission about its subscription practices.

Shares of the desktop-publishing pioneer
ADBE,
-1.48%

 sunk about 5% in extended trading Wednesday after the company reported robust quarterly results that topped analyst estimates for revenue and earnings but issued quarterly and annual sales projections that disappointed Wall Street.

Adobe’s stock has blown up nearly 80% since its May introduction of AI tools during its annual developers conference. On Wednesday, Adobe shares declined 1.5% to $624.26 during the regular trading session.

Adobe’s all-time closing high was nearly $700, reached in November 2021.

Adobe reported fiscal fourth-quarter net earnings of $1.49 billion, or $3.23 a share, compared with net earnings of $1.18 billion, or $2.53 a share, in the same quarter a year earlier. Adjusted earnings were $4.27 a share.

Revenue climbed to a record $5.05 billion from $4.53 billion in the year-ago quarter.

“Adobe drove record revenue of $19.41 billion in [fiscal 2023] and 17 percent year-over-year EPS growth, with strong momentum across Creative Cloud, Document Cloud and Experience Cloud,” Adobe Chief Executive Shantanu Narayen said in a statement announcing the results.

Analysts surveyed by FactSet had expected, on average, net earnings of $4.13 a share on revenue of about $5 billion.

The company pointed to strong early adoption of its suite of AI-powered content creation tools. “We’re very optimistic,” Narayen said. 

But Adobe’s sales outlook, while strong, wasn’t to the elevated levels expected by the street. The company forecast first-quarter sales of between $5.1 billion and $5.15 billion. Analysts are expecting about $5.16 billion.

For fiscal 2024, Adobe is forecasting $21.33 billion to $21.5 billion in revenue, far short of the consensus $21.73 billion predicted by analysts.

Adobe said the guidance reflects “current expectations for the macroeconomic and foreign exchange environments.”

During a conference call with analysts late Wednesday, Narayen acknowledged conservative guidance for 2024, as it has in previous fiscal years. “It’s our highest Q1 guidance ever,” he hastily added.

Shares of Adobe have popped 85.5% in 2023. The broader S&P 500 index
SPX,
by comparison, is up 22.6% this year.

Leading into Wednesday’s results, analysts were uniformly expecting a breakout quarter for Adobe after executives predicted a “really strong” performance during the company’s analyst day in October.

“Focus should turn to initial [fiscal 2024] guidance, which we expect to start off conservative yet optimistic about the pickup from creative tailwinds, AI adoption, and recent price increases,” Jefferies analyst Brent Thill said in a note last week.

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