Adobe Earnings: Shares Are Attractive as Strong Quarter Overshadowed by Light Revenue Guidance

We are maintaining our fair estimate at $635 per share after wide-moat Adobe reported good third-quarter results, while providing guidance that was light on the top line. We think the 9% after-hours selloff is overdone as we see solid trends from last quarter continuing this quarter. We see no glaring weak spots in its results. Management hinted that some deals may have been pulled forward, which would help explain the top-line strength this quarter combined with slight downward guidance for the fourth quarter. We are encouraged by recent product introductions throughout the portfolio and think Firefly leaves Adobe well positioned in artificial intelligence. We think recent price increases, recent important product launches, and rapid generative AI adoption should help drive growth at least through 2025. Changes to our model were short-term fine-tuning, while our longer-term estimates are unchanged and we continue to see shares as undervalued.