Adobe Systems Incorporated (NASDAQ:ADBE) shares are on fire, running up 64% so far in 2023 as it rides the artificial intelligence (AI) wave, and investors will be watching third-quarter earnings closely to see whether they can keep the flame burning.
The San Jose, California digital art and marketing software company releases its 3Q report after the closing bell on Thursday and Wall Street analysts expect it to deliver a 17% increase in adjusted earnings per share (EPS) to $3.98 off the back of a 10% rise in revenue to a record $4.82 billion.
Adobe itself has guided for revenue of $4.83 billion to $4.87 billion and adjusted EPS of $3.95 to $4.
Among its array of software offerings, Adobe’s Firefly platform, a generative AI system that integrates with its Creative Cloud apps, has caught the market's attention.
The company announced Wednesday that Firefly is now also available for commercial use across its Adobe Adobe Express, and Adobe Experience Cloud applications. Firefly's generative AI features were previously only available for experimentation and personal use.
Following its beta launch earlier this year, the platform generated more than 70 million images.
In a recent client note, analysts at Bank of America upgraded Abobe to 'Buy', saying the company was ahead of the curve with AI.
"Many software firms are likely to benefit from AI as new offerings are launched in the coming years," the analysts wrote in an August 17 note.
"We believe that AI offerings (such as generative AI-powered content creation tool Firefly) are likely to begin driving meaningful revenue/FCF upside as soon as FY24."
Investors will also be looking for more details of last year's merger agreement to acquire Figma, a leading web-first collaborative design platform, for approximately $20 billion in cash and stock.
The deal is still reported to be under investigation by the UK's competition regulator.
Contact the author at stephen.gunnion@proactiveinvestors.com