Adobe Inc (NASDAQ:ADBE) shares are set to open 9% lower on Friday as weak revenue guidance overshadowed a record fiscal third quarter.
The creative software provider expected Q4 revenue in the range of $5.5 billion to $5.55 billion, short of analyst forecast of $5.6 billion.
Its net new annual recurring revenue guidance (NN ARR) of $550 missed the consensus of $570 million.
Adjusted earnings per share (EPS) in the range of $4.63 to $4.68 are in line with estimates of $4.65.
Jefferies analysts attributed the Q4 revenue guidance miss to the timing of large deals and Cyber Monday, in addition to extra conservatism amid accelerating AI usage.
“We believe FQ4 NN ARR guide could be very conservative, based on: stronger pricing tailwind; ramping monetization of AI; and accelerating momentum heading into MAX conference,” they wrote in a note to clients.
They believe fiscal 2025 could be the year of AI monetization for Adobe.
“FY24 is already seeing some monetization, though early, as new users buy higher-priced plans, existing users upgrade, enterprises buy Firefly Services, and new products such as Acrobat AI Assistant get adopted,” they wrote.
“That said, gen AI usage limits have not been enforced so far, but we believe this could change in early FY25, especially for higher-value gen AI processes for video, audio, 3D, and animation.”
Analysts noted Adobe’s Q3 results were “broadly strong.”
For the third quarter, revenue of $5.41 billion was narrowly ahead of the consensus of $5.37 billion and marked an 11% increase from the year-ago quarter.
Adjusted EPS was $4.65, ahead of estimates of $4.54.
"Adobe's record Q3 performance is a testament to our relentless innovation and commitment to delivering value to our customers,” Adobe CEO Shantanu Narayen said in a statement.
“With groundbreaking advancements in AI across Creative Cloud, Document Cloud and Experience Cloud, we are empowering millions of users worldwide.”
Shares of Adobe traded down 9% at $533.65 before Friday’s opening bell.