Adobe stock drops on Q4 earnings miss and weak guidance; revenues beat

Shares of Adobe Systems (ADBE) slipped Thursday after the software solutions provider reported weaker than expected earnings for the fourth quarter, despite a marked increase in revenues. Investor sentiment was also dampened by the company’s unimpressive guidance for the first quarter and fiscal 2019.

Adjusted earnings jumped 45% year-on-year to $1.83 per share but missed the consensus estimate of Wall Street analysts. Reported profit was $678.2 million or $1.37 per share, sharply higher than $501.5 million or $1.00 per share recorded in the fourth quarter of 2017.

Revenues of the San Jose, California-based firm climbed 23% to $2.46 billion in the fourth quarter, beating estimates. The company closed the acquisition of Marketo during the quarter, which contributed significantly to the overall performance. The topline growth was broad-based, with both the key business segments – Digital Media and Digital Experience – and all the geographical segments registering double-digit growth.

The topline growth was broad-based, with the key business segments and all the geographical segments registering double-digit growth

“In 2018 we made significant investments across our product portfolio, entered new markets, and made strategic acquisitions which we believe will fuel continued top and bottom-line performance,” said CEO Shantanu Narayen.

During the October quarter, the management repurchased around 1.6 million shares, returning $397 million of cash to stockholders.

Adobe to buy Marketo, defying Salesforce dominance

For the first quarter of 2019, Adobe expects adjusted and unadjusted earnings of $1.60 per share and $1.14 per share, respectively, on revenues of $2.54 billion. It is looking for revenues of $11.15 billion and adjusted earnings of $7.75 per share in fiscal 2019. Full-year unadjusted earnings are estimated to be $5.54 per share. Meanwhile, the outlook fell short of analysts’ forecast.

Adobe’s stock, which was one of the top gainers in the recent tech rally, hit an all-time high in October. The shares closed Thursday’s regular trading session higher but dropped in the after-hours following the earnings report.

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