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What’s happening: Shares of Adobe fell on Friday, after the company reported its fiscal third-quarter results.
What happened: The marker of the Creative Cloud suite of products reported better-than-expected earnings for the latest quarter.
However, Adobe issued weak guidance for the current quarter, which exerted pressure on the stock.
How were the results: The San Jose, California-based company reported low double-digit growth in sales for the quarter ended August 30.
Why it matters: High interest rates and challenging macroeconomic conditions in the US have forced companies to lower their costs, impacting Adobe’s overall results. The company also faces stiff competition from firms like Stability AI and Midjourney.
Adobe’s Digital Media segment’s revenues climbed 11% year-over-year to $4 billion, while Document Cloud revenues surged 18% to $807 million. Creative revenues rose 10% year-over-year to $3.19 billion.
Adobe’s operating expenses rose to $2.86 billion in the third quarter, from $2.61 billion in the year-ago period. The company exited the quarter with RPOs (remaining performance obligations) of $18.14 billion, representing 15% year-on-year growth and signalling broader enterprise adoption.
“With groundbreaking advancements in AI across Creative Cloud, Document Cloud and Experience Cloud, we are empowering millions of users worldwide,” CEO Shantanu Narayen said.
Management guided to fourth-quarter revenues of $5.5 billion to $5.55 billion, missing market estimates of $5.61 billion. The company also projected earnings of $4.63 to $4.68 per share, compared to market expectations of $4.67 per share.
How shares responded: Adobe’s shares fell 8.5% to close at $536.87 on Friday, following the release of quarterly results. The stock has gained around 9% over the past six months.
What to watch: Investors will continue monitoring Adobe’s progress in launching AI tools, with the company all set to announce a generative AI-powered tool called Adobe Firefly Video Model this year.
Context: The EUR/USD forex pair edged higher this morning, as investors assessed the ECB’s rate decision.
Details: The European Central Bank cut its benchmark interest rate by 25 basis points (bps) on Thursday, announcing a second rate cut this year. This brought the ECB’s key rate down to 3.5%. Policymakers did not provide any insight into their plans for another rate cut.
Data released on Friday showed industrial production in the Eurozone contracting by 0.3% in July, in-line with market estimates and compared to a flat reading in June. On an annual basis, the region’s industrial output fell by 2.2% in July, versus a 4.1% decline in the previous month.
Weakness in the greenback provided support to the EUR/USD pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.1% to 100.99 this morning. The US dollar recorded losses for the third session in a row on increasing speculations of the Federal Reserve lowering interest rates more aggressively.
The EUR/USD pair gained 0.1% to reach 1.1087 this morning, while the EUR/GBP pair lost 0.05% to 0.8436. The STOXX Europe 600 Index had added 0.76% to close at 515.95 on Friday.
What to watch: Investors await the release of economic data on balance of trade, labour costs and wage growth in the Eurozone today. The Eurozone had recorded a trade surplus of €22.3 billion in June and is expected to report a surplus of €14.9 billion in July. Analysts expect the labour cost index to rise by 4.3% year-over-year in the second quarter, following a 5.1% gain in the previous quarter, while wages are projected to increase 3.2% in the second quarter, compared to a previous reading of 5.3%.
Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.72%, 0.54% and 0.47%, respectively.
White House National Security Adviser Jake Sullivan said Joe Biden is on a new aid package for Ukraine. The news sent the safe-haven US dollar index slightly lower in forex trading this morning.
New Zealand’s BusinessNZ Performance of Services Index rose to 45.5 in August, versus 45.2 in the previous month. However, services activity remaining in the contraction zone exerted pressure on the NZD/USD forex pair.
India’s total passenger vehicle sales fell 1.6% year-over-year to 308,779 in August, which sent the INR/USD pair lower in forex trading this morning.
China’s retail sales grew by 2.1% year-over-year in August, decelerating from 2.7% growth in the previous month. However, the CNY/USD forex pair remained almost flat this morning.
Saudi Arabia’s annual inflation rate rose to 1.6% in August, from 1.5% in July. However, the SAR/USD pair rose slightly in forex trading this morning.
Italy’s inflation rate and balance of trade, Canada’s manufacturing sales and new motor vehicle sales, US NY Empire State Manufacturing Index, Turkey’s total motor vehicles production, total vehicle sales and central government budget balance, as well as India’s balance of trade.
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