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Adobe’s Strong Earnings Couldn’t Boost the Stock. Here’s Why.

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‘s fiscal third-quarter earnings and sales beat expectations, but the results weren’t enough to send shares higher.

For the quarter ended Sept. 3,


(ticker: ADBE) reported revenue of $3.94 billion Tuesday, up 22% year over year. It was a quarterly sales record for the creative-software company, topping Wall Street’s consensus estimate of $3.89 billion, according to FactSet. Non-GAAP earnings of $3.11 a share also beat consensus estimates at $3.01 a share.

But Adobe shares have risen more than 40% in the past six months following a string of better-than-expected quarters. Better-than-consensus results may have already been priced in the stock. The stock was down 3.7% to $622.26 in premarket trading Wednesday.

“Adobe had another outstanding quarter as Creative Cloud, Document Cloud and Experience Cloud continue to transform storytelling, learning and conducting business in a digital-first world,” CEO Shantanu Narayen said in the earnings release.

CFO John Murphy, who in March announced plans to retire later in 2021, told Barron’s that the work-from-home environment has helped accelerate a shift from paper to digital documents that’s continuing.

Murphy was especially pleased with Digital Experience segment sales, which jumped 26% to $985 million. “That was just phenomenal performance and outpaced what we guided,” he said.

Digital Media segment revenue was up 23% year over year to $2.87 billion. That includes Creative segment revenue of $2.37 billion, up 21% compared with the year-ago quarter, and Document Cloud revenue of $493 million, up 31% year over year.

For the fiscal fourth quarter, the company’s targets include revenue of $4.07 billion and non-GAAP earnings of $3.18 per share. Both figures were ahead of Wall Street’s consensus estimate before the release, according to FactSet.

“We’re a unique company in that, given our size, we’re able to continue to deliver the level of growth that we can, but also deliver it profitably,” Murphy said. “We have some of the best margins in the industry—if not the best margins in the industry—and that gives us a lot of flexibility in how we drive growth, both organically and inorganically.”

Write to Connor Smith at [email protected]

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