Adobe stock falls as revenue outlook comes up short and $20 billion Figma deal announced

Adobe Inc. shares were falling more than 7% in Thursday’s premarket trading after the software company fell short with its revenue outlook for the current quarter and announced plans for a $20 billion merger deal.

Adobe
ADBE,
+0.85%

plans to acquire Figma, a maker of collaborative design tools, it announced Thursday morning in conjunction with its latest earnings numbers, which the company had originally planned to deliver after the closing bell.

The maker of Photoshop, Illustrator, and other creative software tools posted a mixed financial report Thursday. Adobe’s profit exceeded the consensus view, but the company fell short with its revenue outlook for the current period.

For Adobe’s just-reported fiscal third quarter, the company posted net income of $1.16 million, or $2.42 a share, compared with $1.21 million, or $2.52 a share, in the year-earlier quarter.

On an adjusted basis, Adobe reported $3.40 in earnings per share, up from $3.11 in the year-before period, while analysts tracked by FactSet were modeling $3.35.

Adobe’s revenue rose to $4.43 billion from $3.94 billion. The FactSet consensus was for $4.44 billion.

For the fiscal fourth quarter, Adobe expects revenue of $4.52 billion, while analysts tracked by FactSet had been modeling $4.60 billion. Adobe executives said in the release that the outlook reflects macroeconomic conditions, foreign-exchange pressures, and the usual “year-end seasonal strength in demand for our offerings.”

They anticipate adjusted earnings per share of $3.50 for the fiscal fourth quarter, while the FactSet consensus was for $3.47.

Mizuho analyst Gregg Moskowitz had written prior to the report that he “wouldn’t be surprised by a guide down for F4Q” given his recent conversations with industry players. He downgraded Adobe’s stock in a Monday note to clients.

Adobe expects that the newly announced deal for San Francisco-based privately held Figma will help it “reimagine the future of creativity and productivity, accelerate creativity on the web, advance product design and inspire global communities of creators, designers and developers,” executives said in a Thursday press release. They see “a massive, fast-growing market opportunity” for the combined entity.

The company plans for the deal to consist of roughly half cash and half stock, per the release. Adobe executives anticipate that the transaction will close in 2023.

Adobe’s stock has slipped 1.4% over the past three months through Wednesday, while the S&P 500 index
SPX,
+0.34%

has gained 4.1%.

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