What You Need to Know Before Adobe’s Earnings Report

Key conclusions

Adobe is scheduled to report fiscal third-quarter financial results after the close of trading on Thursday.
Analysts are predicting Adobe will see revenue and profit growth compared with the same period last year, thanks in part to growth fueled by demand for artificial intelligence.
The company may also provide updates on AI integration and monetization efforts.

Adobe ( ADBE ) is set to report fiscal third-quarter earnings after the close on Thursday, and investors will likely be watching to see if the company can capitalize on the potential of artificial intelligence (AI).

Analysts expect the software company to post third-quarter revenue of $5.37 billion, up 10% year over year, according to estimates compiled by Visible Alpha. Net income is forecast to rise 12% to $1.57 billion, or $3.51 per share.

	Analysts’ estimates for Q3 2024	Q2 2024	Q3 2023
Income	$5.37 billion	$5.31 billion	$4.89 billion
Diluted earnings per share	$3.51	$3.49	$3.05
Net income	$1.57 billion	$1.57 billion	$1.4 billion

Key Metric: Digital Media Revenue

Adobe’s Digital Media business, which includes Creative Cloud subscriptions, reported new annual recurring revenue (ARR) of $487 million in the second quarter, up from $470 million a year earlier. The gains helped Adobe report better-than-expected results, sending shares up more than 14% the day after the results were released.

Analysts are forecasting a slight decline in net new Digital Media ARR in the third quarter to $462 million, according to Visible Alpha. Oppenheimer analysts suggested investors could still see a “re-acceleration” in the metric in the second half of the year.

Business in Focus: AI Integration

Investors will also likely be watching for updates on Adobe’s AI monetization offerings, as the company previously noted that many Creative Cloud subscribers were upgrading their plans to get access to Firefly, its generative AI model. In addition to Firefly, the company has brought generative AI to Document Cloud, as well as Adobe Express for business.

The company could also showcase new AI services at Adobe MAX in October. Oppenheimer analysts said they expect a possible reveal of “generative video, editing, and audio dubbing solutions approaching beta.”

Adobe shares have risen nearly 23% since the company reported better-than-expected second-quarter results, even though they have lost about 5% this year.