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Why Adobe Stock Crashed Today

By Joe Tenebruso – Dec 16, 2021 at 12:19PM

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A tepid growth forecast disturbed investors.

What happened

Shares of Adobe (ADBE -0.48%) fell 10% on Thursday following the release of the tech giant's fiscal 2021 fourth-quarter earnings results.  

So what

Adobe's revenue jumped 20% year over year to $4.1 billion. The software company enjoyed broad-based growth. Revenue in its creative, digital media, digital experience, and document cloud divisions increased 19%, 21%, 23%, and 29%, respectively.

Adobe has emerged as a key beneficiary of the digital transformation megatrend during the COVID-19 pandemic. "Technology innovation, the proliferation of new devices and platforms, and the increased desire and ability for anyone to create and deliver great digital experiences have all accelerated the move to a truly digital world," Adobe Chief Marketing Officer Ann Lewnes said during a conference call with analysts. 

The revenue gains helped Adobe's gross profit rise by 20% to $3.6 billion. Its adjusted operating income and earnings per share, in turn, grew 21% and 14%, respectively, to $1.5 billion and $3.20.

A person is pointing to a stock chart that rises sharply and then falls.

Image source: Getty Images.

Now what

Investors, however, appeared to focus more on Adobe's muted sales and profit guidance. Management expects total revenue to grow by roughly 13% to $17.9 billion, while adjusted earnings increase by 10%, to $13.70 per share. That was below Wall Street's projections, which had called for revenue of $18.2 billion and adjusted per-share profits of $14.26. 

Despite the shortfall, Adobe's leadership said the software leader has a massive market opportunity still ahead, which CFO Dan Durn pegged at a whopping $205 billion.

"Adobe's vision, category leadership, ground-breaking technology, and large and loyal customer base position us well for fiscal 2022 and beyond," CEO Shantanu Narayen said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Adobe Inc. The Motley Fool has a disclosure policy.

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