Cloud Stocks: Adobe Calls Off Figma Acquisition

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Adobe (Nasdaq: ADBE) recently reported its quarterly results that continued to outpace market expectations. However, a lesser optimistic outlook for the coming year sent the stock falling 6% in the after-hours trading session.

Adobe’s Financials
Adobe’s fourth-quarter revenues grew 12% to $5.05 billion, ahead of the market’s estimates of $5.03 billion. Adjusted EPS of $4.27 also beat analyst estimates of $4.14.By segment, revenues from the Digital Media segment grew 13% to $3.72 billion with Creative revenue up 12% to $3 billion and Document Cloud up 16% to $721 million. Revenues from the Digital Experience segment grew 10% to $1.27 billion with Digital Experience subscription revenues growing 12% to $1.12 billion.Digital Media Annualized Recurring Revenue (ARR) grew to $15.17 billion. Net new Digital Media ARR came in at $569 million. Creative ARR grew to $12.37 billion, and Document Cloud ARR grew to $2.81 billion.But Adobe’s outlook for the current year was a bit light. It expects to end the year with revenues of $21.3-$21.5 billion and non-GAAP EPS of $17.60-$18.00. The market was looking for revenues of $21.73 billion and an EPS of $18.00. The weaker outlook was in response to the current softness in the market as companies continue to remain cautious in their spending.

Adobe’s Figma Acquisition
The market has been abuzz with Adobe’s announcement to call off the $20 billion Figma acquisition. Adobe had announced plans to acquire Figma last year to improve its design tools and $20 billion Figma acquisition. Adobe was looking to create a seamless connection between its tools and Figma and to build it out as the native platform to integrate the design tools. At the time of the announcement, there was some concern on the price tag attached to the deal, but Adobe had justified the price based on the $16.5 billion addressable market for the opportunity.The deal was facing significant regulatory hurdles both in the UK and EU regions. The regulators were concerned that the acquisition was going to have significant impact on the product design, image editing, and illustration markets by significantly reducing competition in the space. Adobe was not able to satisfactorily prove to the authorities otherwise. While Adobe and Figma both do not agree with the regulatory finding, they have decided to call the deal off. Adobe will pay Figma a $1 billion termination fee.During the quarter, Adobe continued to release its AI-based products and announced that the Firefly generative AI features were now available in the Photoshop and Illustrator programs for Creative Cloud subscribers. The enterprise version of the Firefly web app that helps developers create images based on a few words also became available during the quarter.Meanwhile, Adobe’s stock is trading at $599.13 with a market capitalization of $270.3 billion. It touched a 52-week high of $633.89 in November and a 52-week low of $318.60 in February.More By This Author:Cloud Stocks: Okta Leverages AI For Security
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