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Adobe shares slip 10% on soft sales forecast

Adobe shares fell up to 11% in extended trading on Thursday after the company reported solid fiscal first-quarter results but missed quarterly revenue guidance.  

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

Earnings per share: $4.48 adjusted, vs $4.38 projected.  

Revenue: $5.18 billion, compared to $5.14 billion predicted 

Adobe’s revenue increased 11% year on year in the quarter ending March 1, according to a statement. Net income fell to $620 million, or $1.36 per share, compared to $1.25 billion, or $2.71 per share, in the same quarter last year.  

During the quarter, Adobe abandoned its $20 billion acquisition of design software firm Figma after UK regulators raised antitrust concerns. The business paid Figma a $1 billion termination fee.  

Adobe has unveiled an early prototype of an artificial intelligence helper for its Reader and Acrobat applications

Meanwhile, in February, OpenAI introduced Sora, a video generator that can create a film based on a person’s written description. Adobe will collaborate with OpenAI on Sora, said David Wadhwani, head of Adobe’s digital media division, during the results call. 

“You’re going to see us obviously developing our own model,” he went on to say. “You will see others designing a model. All of this produces a tailwind, since the more people create video clips, the more they need to edit them.” 

Adobe expects adjusted earnings of $4.35 to $4.40 per share in the fiscal second quarter, with revenue ranging from $5.25 billion to $5.30 billion. The median of the range indicates 9% increase. Analysts surveyed by LSEG expected $4.38 earnings per share and $5.31 billion in revenue.  

Wadhwani believes that product advancements in the Adobe Express app, the Firefly Services AI solution, and the new Acrobat assistant will accelerate digital media annualized recurring revenue in the second half of the year.  

The corporation stated it would put aside $25 billion for share buybacks

Adobe shares have declined 4% this year, excluding after-hours trading, while the S&P 500 index has risen 8%.  

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