Adobe's latest earnings leave Wall Street wanting more

By William Gavin and Emily Bary

'In this environment, you can't just meet' expectations, an analyst says

Adobe posted results on Thursday for its August quarter.

Adobe touted artificial-intelligence momentum in the most recent quarter, but that wasn't enough to excite investors.

The design-software company has been trying to convince Wall Street that it's well-suited to compete in the AI era. Adobe (ADBE) has various AI offerings of its own, but it also faces competition from rivals offering free or cheap creative tools.

Adobe on Thursday reported overall August-quarter revenue of $6.76 billion, up 13% from a year before. That's only slightly above the $6.69 billion that analysts tracked by FactSet had been expecting. The company also posted adjusted earnings per share of $6.13, a few cents above the $6.08 a share that analysts were modeling.

Rebecca Wettemann, principal analyst at technology research firm Valoir, characterized the performance as essentially meeting investors' expectations.

"In this environment, you can't just meet," she said in emailed comments. Rather, companies "have to beat and drive the narrative."

The report comes as Adobe is in the midst of a leadership shakeup. CEO Shantanu Narayen is due to step down at the start of December, and the company recently named Anil Chakravarthy, the leader of its Customer Experience Orchestration business, to be his successor. The company also is in search of a permanent chief financial officer.

"A mediocre quarter right before the CEO handoff is the worst possible timing," Wettemann wrote. "Chakravarthy walks into the job Dec. 1 carrying investor doubt instead of a running start, with the CFO seat still unfilled."

The company said Thursday that it's seeing AI momentum in the form of what it calls "AI-first" annual recurring revenue, which was up 150% from a year before. Adobe also disclosed that it has more than 1 billion monthly active users across its general creativity and productivity offerings.

For the November quarter, Adobe models $6.8 billion to $6.85 billion in total revenue, along with $6.30 to $6.35 in adjusted earnings per share. That compares with the $6.841 billion and $6.31, respectively, that analysts tracked by FactSet were modeling.

Adobe shares slipped 2.4% in after-hours action on Thursday.

-William Gavin -Emily Bary

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09-10-26 2017ET