Adobe is expected to report a rise in fiscal third-quarter earnings and revenue, but ongoing uncertainty around the effects of artificial intelligence and a management transition could still continue to pressure the stock.
Adobe is scheduled to report financial results after the stock market closes on Thursday. Analysts surveyed by FactSet expect the creative software company to report adjusted earnings of $6.08 per share on revenue of $6.69 billion. That would be higher than the earnings of $5.31 per share on revenue of $5.99 billion in the same period last year.
Adobe has consistently reported better-than-expected earnings over the last few quarters, but that hasn't boosted investor sentiment. In fact, Adobe stock has fallen after 15 of the past 20 earnings reports, according to Dow Jones Market Data.
Some shareholders are worried about Adobe's future in an AI driven world. AI models are constantly evolving, and with that comes increased competition for creative software.
Adobe is pushing back on this by releasing its own AI powered updates. The company also said when last reporting earnings in June that AI-first annual recurring revenue "triples year over year and exceeds $500 million." Still, the stock is down 27% this year.
"ADBE's AI initiatives generally prioritize adoption over monetization in the medium term, which is likely to limit revenue capture, but as ADBE drives broader proliferation & usage of its AI, it should drive strong yields in the longer term," TD Cowen analyst Derrick Wood wrote on Tuesday. He rates Adobe as a Hold with a $245 price target.
Adobe also announced last week that Anil Chakravarthy will take over as CEO in December after sharing in March that Shantanu Narayen would be stepping down after 18 years. Chakravarthy is currently president of Adobe's Customer Experience Orchestration business and worldwide field operations.
The stock fell 6.7% on Sept. 4 after the announcement was made.
"Given the lengthy search, we think investors had begun expecting an external candidate," Piper Sandler analyst Billy Fitzsimmons wrote on Sept. 3.
Wall Street will be listening closely to the company's earnings call to see if Chakravarthy joins and shares any information about his plans for the future.