Adobe ( ADBE ) Q1 2024 Earnings Report

Adobe shares tumbled as much as 11% in extended trading Thursday after the design software maker posted strong fiscal first-quarter results but fell slightly short of quarterly revenue guidance.

Here’s how the company fared compared to estimates from analysts polled by LSEG, formerly Refinitiv:

• Earnings per share: $4.48 adjusted vs. $4.38 expected
• Income: $5.18 billion vs. $5.14 billion expected

Adobe’s revenue rose 11% year over year in the quarter ended March 1, according to a statement. Net income fell to $620 million, or $1.36 per share, from $1.25 billion, or $2.71 per share, in the same quarter a year ago.

In the quarter, Adobe abandoned its $20 billion acquisition of design software startup Figma after British regulators found competition concerns. The company paid Figma a $1 billion termination fee.

Adobe announced an early version of an AI assistant for its Reader and Acrobat apps.

Meanwhile, in February OpenAI announced Sora, which can generate video based on a person’s written description. Adobe will work with OpenAI around Sora, David Wadhwani, president of Adobe’s digital media business, said on the earnings call.

“You’ll see us obviously developing our own model,” he said. “You’ll see others develop a model. All of this creates a tailwind because the more people generate videos, the more they have to edit that content.”

Adobe sees fiscal second-quarter earnings of $4.35 to $4.40 per share on an adjusted basis, on revenue of $5.25 billion to $5.30 billion. The middle of the range suggests 9% growth. Analysts polled by LSEG had expected $4.38 in earnings per share and $5.31 billion in revenue.

Product enhancements in the Adobe Express application, the Firefly Services AI offering and the new Acrobat assistant should lead to an acceleration of annual recurring revenue in digital media in the second half of the year, Wadhwani said.

The company said it set aside $25 billion for share buybacks.

Excluding after-hours trading, Adobe shares are down 4% so far this year, while the S&P 500 is up 8% over the same period.