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Adobe Inc (Nasdaq: ADBE) is rallying in extended hours on Thursday after reporting market-beating financial results for its second quarter.

Adobe stock rallies on upbeat guidance

Investors are rewarding the stock also because the management issued encouraging guidance for the future. $ADBE now forecasts its revenue to fall between $5.33 billion and $5.38 billion on up to $4.55 a share of adjusted earnings in Q3.

Analysts, in comparison, were at $5.4 billion and $4.48 per share. Dan Durn – the chief financial officer of Adobe Inc said in a press release today:

Our market-leading products, strong execution and world-class financial discipline position us well for the second half of 2024 and beyond.

The Nasdaq-listed firm ended its recent quarter with $17.86 billion of remaining performance obligations – up 17% versus last year. Adobe stock is still down some 20% versus its year-to-date high.

Notable figures in Adobe Q2 earnings release

• Earned $1.57 billion versus the year-ago $1.29 billion
• Per-share earnings also declined from $2.83 to $3.50
• Adjusted EPS printed at $4.48 as per the earnings report
• Revenue jumped 10% year-over-year to a record $5.31 billion
• Consensus was $4.39 a share on $5.29 billion in revenue

Adobe noted a 9.0% and 11% annualised growth in its digital experience and digital media segments revenues, respectively, in the second quarter. According to CEO Shantanu Narayen:

Our highly differentiated approach to AI and innovative product delivery are attracting an expanding universe of customers and providing more value to existing users.

ADBE shares lack upside from here

Adobe Inc. repurchased about 4.6 million of its shares in the second quarter that concluded with $1.94 billion of cash flow from operations.

Last month, HSBC analyst Stephen Bersey reiterated his “hold” rating on ADBE shares His $511 price target is roughly in line with where the stock is trading at writing. Bersey hardly sees any upside in Adobe as AI could actually be a negative for it.

Adobe has enjoyed a high competitive moat over and we think that AI has significantly eroded many of these competitive barriers and see competitive pressures building over time. AI has the ability to automatically perform many of the capabilities that users achieve manually while using Adobe.

Note that Adobe stock does not currently pay a dividend either.

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