Adobe Earnings - What You Need to Know

Can AI help the company beat expectations again with an 8% earnings move?

• Adobe will report quarterly earnings after the market closes on Wednesday.
• The company has exceeded earnings-per-share (EPS) and revenue estimates four quarters in a row.
• It’s expected to report EPS of $4.67 on $5.54 billion in revenue.
• Clarity around AI initiatives will be a focal point for this earnings report.

Adobe (ADBE) is set to round out the earnings season with a report on Wednesday after the stock market closes. The company has exceeded earnings estimates four quarters in a row but lacks clarity around AI monetization initiatives. That could be why it's not participating in the wide-spread tech rally we've seen to end 2024.

Adobe is expected to report an EPS of $4.67 on $5.54 billion in revenue. The stock opened at $589.51 this year, and quickly reached the annual high of $638.25 before falling to a low of $433.97 at the end of May. The stock price currently sits around $550 per share, down 6.6% on the year. This has not been a great year for ADBE stock, considering it feels like every other tech stock involved in AI is up this year.

Adobe stock opened at $589.51 this year, and quickly reached the annual high of $638.25 before falling to a low of $433.97 at the end of May. The stock price currently sits around $550 per share, down 6.6% on the year. This has not been a great year for ADBE stock, considering it feels like every other tech stock involved in AI is up this year.

You can see the gaps up and down in the stock’s chart, which were related to previous earnings announcements. Even though Adobe continues to post strong figures, exceeding EPS and revenue estimates each of the past four quarters, the stock price hasn't always responded the same way.

Dan Durn, executive vice president and CFO of Adobe, offered insight in the last earnings call: “In Q3, Adobe delivered cash flows of over $2 billion and exited the quarter with record RPO, demonstrating the power of combining growth with world-class profitability ... Given the massive markets we are catalyzing, I’m confident in our ability to drive growth and industry leadership."

The markets are likely looking for more clarity around how they will continue to scrape market share away from competitors in the AI space, as the stock is down this year and we're looking at a high implied volatility for the earnings announcement.

Implied volatility helps us build context around binary events, like earnings announcements, by looking at the pricing of the options markets. Near-term expirations that contain the announcement are the most "clean" look at the earnings call.

This week, ADBE stock has an implied move of +/- $45.99, which is just over 8% of the stock price of $550. This earnings announcement is on the higher end of the range compared to other stocks, which typically fall between 5%-10% of the notional value of the stock price.

Looking to March of 2025, we see ADBE stock has an expected move of +/- $84.37. That means this earnings announcement accounts for well over 50% of the expected move through the rest of the year and beyond. We may see fireworks on Wednesday with this sort of focus on the earnings call.

Bullish on ADBE stock for earnings

If you're bullish on ADBE for earnings, you're looking for an EPS and revenue beat, and clear guidance for future movement in the AI space. A lot of analysts are calling for a clear plan in this regard, and it seems the market is waiting for that considering the stock is down on the year.

Bearish on ADBE stock for earnings

If you're bearish on ADBE for earnings, you're looking for an EPS and/or revenue miss. Estimates have been exceeded four quarters in a row, but this quarter we're looking at estimates that are higher than last quarter. Pair that with the uncertainty baked around this earnings announcement with such a high implied stock price move, and you might assume that traders and investors have ADBE stock on a short leash.

Tune in to Options Trading Concepts Live on Wednesday ahead of the ADBE earnings announcement for in-depth options trading ideas!

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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