Adobe Earnings Preview–Are Ominous Markets Increasing Uncertainty?

Last quarter, the company beat EPS and revenue estimates, but stock price still fell

• Adobe will report quarterly earnings after the stock market closes tomorrow, Wed., March 12.
• An 8% stock price range is implied from the options market this week.
• Adobe exceeded earnings expectations last quarter, but the stock price fell over $100 in a week.
• The company is expected to announce earnings-per-share of $4.97 on $5.66 billion in revenue.
  

Executives at Adobe (ADBE) are off to Las Vegas next week for the Adobe Summit and its focus on generative AI. But before that, the software company will report quarterly earnings, and it’s looking to bounce back from a massive stock price sell-off. Even though the company has exceeded earnings-per-share (EPS) and revenue estimates, the market pulled out of investing in Adobe to a pretty alarming degree.

At any rate, Adobe will report quarterly earnings on tomorrow, after the stock market closes. The software company is expected to announce earnings per share (EPS) of $4.97 on $5.66 billion in revenue. Both estimates are higher than last quarter, when Adobe exceeded both. ADBE stock sits around $435 per share, about $10 lower than at the beginning of the 2025 trading year.

If you just look at the price chart from 2025 to today, the stock is one of the only tech giants that hasn't been a victim of the broad market sell-off. It's hard to decipher whether this is good for Adobe stockholders, or whether traders and investors are waiting for the summit and earnings results.

It's always curious to see a company like Adobe beat earnings estimates handily and then have the stock price fall. It's a reminder that while earnings results can align with stock price movement, sometimes it's exactly the opposite.

In the last earnings call, Adobe executives offered words of positivity, with CEO Shantanu Narayen saying that “Adobe delivered record FY24 revenue, demonstrating strong demand and the mission-critical role Creative Cloud, Document Cloud and Experience Cloud play in fueling the AI economy ... Our highly differentiated technology platforms, rapid pace of innovation, diversified go-to-market and the integration of our clouds position us for a great year ahead.”

Dan Durn, chief financial officer, added this: “Adobe drove FY24 records of $21.51 billion in revenue, $8.06 billion in cash flows from operations and $19.96 billion in RPO ... Adobe’s strategy, AI innovation and massive cross-cloud opportunity position us well for 2025 and beyond.”

While uncertainty is everywhere in the market, with huge swings each day the past few weeks, we always need to come back to the options market for context around this earnings announcement.

Based on current implied volatility in the weekly options cycle for Adobe, we're looking at an 8% stock price range of +/- $36.27 against the notional value of a $435 stock price. This is on the higher end of most tech stocks because most have a range of 5%-10% ahead of earnings calls.

Looking to the May 2025 options cycle, we can see an expected stock price move of +/- $56.99. That tells us the market is putting a ton of weight on this earnings announcement because this week makes up well over 50% of the expected range for the next 66 days. There is even heightened implied volatility for next week's Adobe Summit, which is interesting as well.

Bullish on ADBE stock for earnings

If you're bullish on ADBE stock for earnings, you want to see continued strength under the hood. There’s a feeling that an EPS and revenue beat is required in the current market, where we're seeing tech stocks fall 5%-10% each day. You'll want to hear a much better outlook for 2025 than during the last earnings call, which could be why the stock fell so dramatically. Either way, ADBE bulls will need to see drastic improvements in current success and forecasts if we're to see the stock price higher.

Bearish on ADBE stock for earnings

If you're bearish on ADBE stock for earnings, the sell-everything market environment certainly doesn't hurt your case. I would consider Adobe a "fringe" tech stock, in the sense that many more people who don't focus on the market too much would prefer to invest in one of the Magnificent Seven stocks at a discount than dabble with ADBE stock. With that said, the stock just sold off $100 after beating earnings estimates. If it fails to beat estimates this time, it could mean trouble for the stock price.

Tune in to Options Trading Concepts Live tomorrow at 11 a.m. CDT for an in-depth look at options strategies for Adobe earnings after the close.

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  

For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro. 

Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.