- 1Q24 revenue/adj. PATMI was in line with expectations at 24%/25% of our FY24e forecasts. Adj. PATMI increased 17% YoY to US$2bn due to higher operating leverage.
- For 2Q24e, Adobe expects adj. EPS of US$4.38 (up 12% YoY) on revenue of US$5.3bn (up 9% YoY). Digital Media segment revenue will grow 11% YoY led by higher subscription sales for its Creative Cloud and Document Cloud apps.
- Maintain REDUCE recommendation with an unchanged DCF target price of US$465 (WACC 7.3%, g 4%). No change to our forecasts, except for a one-off US$1bn termination fee related to the Figma deal. Adobe faces headwinds from increased competition and tough comparisons due to pricing actions. In addition, Firefly AI tools are unlikely to boost revenues until the end of this year as Adobe is currently focusing on enhancing customer engagement instead of immediately monetising generative tokens.
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