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Adobe cuts full-year guidance, stock slides

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Yahoo Finance Live anchors discuss second-quarter earnings for Adobe.

Video Transcript

BRIAN SOZZI: Shares of Adobe are under pressure this morning after reporting mixed earnings and a worse than expected outlook. And Brad, a couple of things to pick apart here with Adobe. And as I mentioned, it's also the top trending ticker on the Yahoo Finance platform this morning. They lowered their guidance for this fiscal-- for its current fiscal year by $250 million. And they're pinning the blame on FX headwinds, just like Microsoft we've been talking about all week, another big cap tech company warning about the revenue and profit hit from various foreign exchange moves. Also a $75 million hit from the Ukraine War.

I have to knock Adobe's executive team here. You know, I listened to that earnings call. And there was really no acknowledgment of what is happening in the world. And right now, for me, I'm giving high marks to executive teams that are hopping on these calls and various investor presentations out there on Wall Street-- this is-- they're all happening over the next few weeks still-- that are keeping it real.

You know, I understand DocuSign's CEO, Dan Springer. He came on with us last week-- challenging quarter. He told it like it was. You hopped on this Adobe call, and it sounds like a bunch of executives that are setting their investors up for failure when they report three months from now. You would think GDP was growing 6% or 7% and consumer spending was going through the roof. And interest rates are still at rock bottom levels.

BRAD SMITH: Yeah, and there is that realism in the forecast versus the actuality of what they're trying to redirect towards. And if there's anything, they're trying to ensure that. And all of these companies, when they're continuing to invest in some of these core categories like digital media and net new digital media, like, that all sounds great.

But at the end of the day, when we boil down to how they're going to continue, even in this environment, to see internationally, as we were just talking about a moment ago, Europe possibly already being in a recession, how does that dampen what your outlook looks like and where you're actually going to see some of that continued run rate from this point forward if businesses and end consumers, which is what this company dabbles in both sides of that, B2B and B2C, if they're getting hit on both of those ends?

BRIAN SOZZI: Yeah, right on. And, you know, I can't help but to think, if they would have read the room right, use this type of environment to just keep it real with your investors. We all see what's going on in this world-- various inflationary pressures, consumers pulling back, and businesses also pulling back on how much they do spend. I understand digital opportunities are amazing. And you want to position yourself the future of cloud services. But you know what? Businesses are, in fact, pulling back.

And then I look at the valuation of Adobe. It's not priced for a recession. It's still trading at almost 30 times forward earnings, according to data on Yahoo Finance, plus a PEG ratio of almost 2 times. And again, this comes as slowing growth has start to set in at this company.

BRAD SMITH: There will be companies over the course of this next earnings season that will be extremely real with us, and there will be those that are almost overly real to the point where it seems like they might be sandbagging, even, in order to just beat on some depressed kind of outlooks as well.