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Adobe Issues Weak Revenue Outlook, Maintains Full-Year ARR Growth Guidance

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Adobe Issues Weak Revenue Outlook, Maintains Full-Year ARR Growth Guidance

Adobe (ADBE) shares fell early Friday after the software maker provided a fiscal fourth-quarter revenue outlook below Wall Street's estimates at the midpoint and maintained its full-year annualized recurring revenue, or ARR, growth guidance, while the company reported better-than-expected results for the third quarter.

Revenue is anticipated to come in between $6.8 billion and $6.85 billion for the ongoing quarter, the company said late Thursday. The guidance's midpoint of about $6.83 billion is just below the current consensus on FactSet of $6.84 billion. The stock was down 3.4% in the most recent premarket activity.

Adjusted earnings are pegged at $6.30 to $6.35 per share for the fourth quarter, while the Street is looking for $6.31.

For fiscal 2026, Adobe now expects adjusted EPS to be in a range of $24.45 to $24.50 on revenue of $26.58 billion to $26.63 billion, up from its previous forecasts of $24.35 to $24.45 and $26.5 billion to $26.6 billion, respectively. The average analyst estimate is for non-GAAP EPS of $24.43 and sales of $26.55 billion.

The company continues to project ARR growth of about 10.2% for the ongoing fiscal year. That represents a slowdown from the previous fiscal year's gain of 11.5%. The metric advanced 11.2% year over year to $27.5 billion in the third quarter, interim Chief Financial Officer Steve Day said during an earnings call, according to a FactSet transcript.

Day, who was appointed interim CFO in June, told analysts on the call that the software maker continues to expect ARR to be higher in the fourth quarter versus the previous quarter and anticipates "good contributions" from each of its segments towards the full-year guidance.

In a client note emailed Tuesday, Morgan Stanley said it expected Adobe to reiterate its full-year ARR growth target on its third-quarter results. "We continue to believe that a clear line of sight to stabilizing (and ultimately an inflection) in ARR growth will be needed to drive fundamental investor engagement on the shares," the brokerage said at the time.

For the quarter ended Aug. 28, Adobe's adjusted EPS climbed to $6.13 from $5.31 the year before, topping the FactSet-polled consensus of $6.09. Revenue rose 13% to $6.76 billion, ahead of the Street's view of nearly $6.7 billion.

"Adobe delivered record (third-quarter) results, reflecting the strength of our (artificial intelligence) innovation, expanding customer reach and leadership across creativity, productivity and customer experience," outgoing Chief Executive Shantanu Narayen said in the earnings release. Narayen is set to be succeeded by Anil Chakravarthy, currently president of Adobe's customer experience orchestration business and worldwide field operations, on Dec. 1.

By customer group, business professionals and consumers subscription revenue increased 16% to $1.91 billion, while creative and marketing professionals subscription revenue rose 13% to $4.65 billion.

On Thursday, cloud computing company Oracle (ORCL) reported fiscal first-quarter results above market estimates as cloud infrastructure sales more than doubled year over year.

Last month, customer relationship management platform Salesforce (CRM) lifted its full-year revenue outlook after delivering a fiscal second-quarter beat, while Microsoft (MSFT) announced fiscal fourth-quarter results in July that topped expectations.

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