[Music] welcome to drill down earnings we have quarterly results from Adobe the stock market is reacting like it's crazy I'm going to tell you what's going on this is the business story behind One stock in a move I'm Chief Market strategist Corey Johnson with a look at the business story behind this stock on the Move uh Q3 earnings from Adobe the stock is selling off and after hours trading why I kind of do mean why I I think I've got the you know it was a beat Wall Street likes a beat or a Miss but I think I know why the stocks off let's look at the actual numbers what we learned here um the company had a pretty decent quarter 11% growth on a year-over-year basis uh reporting uh about5 a. half billion dollars in revenues which is really strong but they got it to only about5 half billion dollar next quarter which is to say that they said next quarter you can expect their their growth to only be about 9% that decline in the growth rate when the growth rate have been kind of hanging in 11% when wall Street's been waiting for this big growth driven by AI story to come true well the growth has been okay but it hasn't accelerated after all the spending on AI and I think maybe the Market's upset now spending on AI hasn't really crushed them I mean they still reported 37% operating margin it's really strong um for this for this softwar driven business uh now and what is the business well it's the last quarter half of it was digital media creative business was 40% and their document Cloud which is actually growing really nicely at 10% of their business but they also report uh every quarter um you know all their segments they break down every how every segment is doing of course and every one of those segments is growing at double digits um uh the document cloud has much smaller businesses I mentioned but you know 14% growth there that's not too bad but 11 and 10% growth those other big businesses they've got really solid so you wonder what's going on that they're guiding towards 9% growth next quarter is is there some kind of economic slowdown is there a product problem that certainly isn't an AI fueled fantastic new leg of growth when you look at their orders however you go through their balance sheet you look at their accounts receivables you add in their new orders that are not in their accounts receivables a number that they report called um remaining performance obligations or rpos that's about 335 per of revenues that number has been generally increasing and was increasing again really nicely this quarter so you wonder if they're sandbagging this I don't know but the Billings were really strong the revenue growth that they reported was strong their guidance a a little bit weaker while the stock market hated that so immediately after the numbers came out the stock sold off conference call a lot of questions about what was going on with the stock and it continued to sell off a negative 9% number so down 9% and half hour was trading that erases all of the gains for the entire year which were only 8% so really bad result or bad reaction to these earnings a lot of questions as I said on the conference call shantan unan as the CEO of adobe and he was asked what's going on you know the numbers were okay the guidance was a little bit worse uh did you really have a strong third quarter was it uh kind of soft somewhere in the middle what are we expecting in terms of momentum well here's what he had to say on the conference call I think we had a strong Q3 and you know we continue to see the momentum in the business and you know it's our typical uh you know considered targets that we do and you know I focus on execution so uh we're not seeing anything as it relates to you know a change in the business Dynamics I also mentioned that the last few weeks of Q3 as you know the summer seasonality ends uh we saw the traditional strength that we expect to see on our web traffic so maybe it was just the mystery okay so web traffic was good you're expecting a big um uh user conference in the fall you the numbers I don't know uh maybe you're just they just making a number a little bit lower so they can beat that number in the future I don't know but the market sure hated these numbers today but the one number that really explains what's going on here I'm going to share that with you right after this the drill down is brought to you by fud cherum group where analysts researchers advisers content creators and marketing experts help Business Leaders anticipate and understand shifts in their Industries and build strategies to leverage disruptive innovation with deep analysis futurum group's extensive industry experience delivers reliable research and data thought leadership and actionable advice to help you with your strategy and go to market efforts futurum group so Adobe just reporting Q3 earnings fiscal Q3 earnings the stock market hates these numbers why let's take a look a little bit deeper here's your essential summary so about $5.5 billion in revenues up 11% a year-over-year basis the same kind of growth we've seen for this company for the last couple of years but they're warning it'll only be 9% next quarter the market didn't like that but the one number that tells us a whole lot sequential growth in revenues was 2% sequential growth in Billings or rpos was 6% so that says to me things aren't terrible down there in San Jose at Adobe all right thanks for checking out drillon earnings I'm Corey Johnson and you can check out all of our earnings reports right here on YouTube you can also go to x Cory TV or uh you can check me out on uh uh where else Tik Tok Instagram at drillon pod leave us some comments tell us what you think tell us what you'd like to see from the drill down earnings I'm here to deliver h