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Shantanu Narayen, CEO, Adobe

Mark Neuling | CNBC

Adobe shares rose 6% in extended trading on Thursday after the design software maker announced fiscal fourth-quarter earnings and guidance that exceeded analysts’ expectations.

Here’s how the company did:

  • Earnings: $3.60 per share, adjusted, vs. $3.50 per share as expected by analysts, according to Refinitiv.
  • Revenue: $4.53 billion, vs. $4.53 billion as expected by analysts, according to Refinitiv.

Total revenue grew 10% year over year in the quarter, which ended on Dec. 2, according to a statement. In the previous quarter revenue rose by 13%. Net income, at $1.18 billion, was down slightly from $1.23 billion in the year-ago quarter.

“We delivered record operating cash flows with a focus on profitability,” CEO Shantanu Narayen told analysts on a conference call. He said the company is remaining cautious and won’t be immune from a worsening economy.

With respect to guidance, Adobe called for $3.65 to $3.70 in adjusted earnings per share on $4.60 billion to $4.64 billion in revenue in the fiscal first quarter. Analysts polled by Refinitiv had expected $3.64 in adjusted earnings per share and $4.64 billion in revenue. The numbers don’t include impact from Figma. The company maintained its guidance for the full 2023 fiscal year.

Adobe’s Digital Media business, which includes Creative Cloud design software subscriptions, contributed $3.30 billion in revenue, not quite meeting the StreetAccount consensus of $3.31 billion. Creative revenue grew 8% in the quarter. The Digital Experience unit, which includes Adobe’s marketing software, delivered $1.15 billion in revenue, just over the $1.14 billion StreetAccount consensus.

The digital experience business succeeded in closing “numerous transformational deals that span our portfolio of solutions,” Anil Chakravarthy, president of the division, said on the call.

In the quarter Adobe said it would buy design software startup Figma for about $20 billion in the 40-year-old public company’s largest transaction to date.

“Overall, the regulatory process is proceeding as expected,” said David Wadhwani, president of the Digital Media business. The U.S. Justice Department and the United Kingdom’s Competition and Markets Authority is reviewing the deal, and Adobe still expects it to close in 2023, Wadhwani said.

One analyst asked how Figma is handling the current economic environment. But for now FIgma is still a private company, and Adobe isn’t able to discuss Figma’s latest performance, Narayen said.

When removing the effect of the after-hours move, Adobe shares have slid 42% this year, while the S&P 500 index has declined 18% over the same period.

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OpenAI gets new $1.5 billion investment from SoftBank, allowing employees to sell shares in a tender offer

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OpenAI gets new .5 billion investment from SoftBank, allowing employees to sell shares in a tender offer

Sam Altman, chief executive officer of OpenAI, during an event in Seoul, South Korea, on Friday, June 9, 2023.

SeongJoon Cho | Bloomberg | Getty Images

OpenAI is allowing employees to sell roughly $1.5 billion worth of shares in a new tender offer to SoftBank, CNBC has learned.

The new financing will allow the Japanese tech conglomerate to get an even larger slice of the AI startup, and it will allow current and former OpenAI employees to cash out their shares, two people familiar with the matter told CNBC.

Employees will have until Dec. 24 to decide if they want to participate in the new tender offer, which has not previously been reported, one of the people said. The deal was spurred by SoftBank billionaire founder and CEO Masayoshi Son, who was persistent in asking for a larger stake in the startup after putting $500 million into OpenAI’s last funding round, one of the people said.

The tender offer is not related to OpenAI’s potential plans to restructure the firm to a for-profit business, one of the people said.

OpenAI and SoftBank declined to comment.

The news underscores Son’s interest in the AI space and in backing the most valuable private players. SoftBank was an early investor in Arm, and Son said at a recent conference that he’s saving “tens of billions of dollars” to make the “next big move” in artificial intelligence. He had previously invested in Apple, Qualcomm and Alibaba.

SoftBank’s Vision Fund 2 recently invested in AI startups Glean, Perplexity and Poolside. SoftBank has about 470 portfolio companies and $160 billion in assets across its two vision funds.

The OpenAI investment matches SoftBank’s eagerness to deploy cash, with a capital-intensive business model, a person close to Son told CNBC.

Even without SoftBank’s deep pockets, OpenAI has had no trouble raising billions in cash. Its valuation has climbed to $157 billion in the two years since launching ChatGPT. OpenAI has raised roughly $13 billion from Microsoft, and it closed its latest $6.6 billion round in October, led by Thrive Capital and including participation from chipmaker Nvidia, SoftBank and others.

The company also received a $4 billion revolving line of credit, bringing its total liquidity to more than $10 billion. OpenAI expects about $5 billion in losses on $3.7 billion in revenue this year, CNBC confirmed in September with a person familiar with the situation.

OpenAI employees can cash out

The tender offer will be open to current and former employees who had been granted restricted stock units at least two years ago and have held the shares for at least that long, one of the people said. The unit price of $210 will align with the company’s most recent funding round.

Tender offers have become crucial for tech employees amid a dormant IPO market and skyrocketing company valuations. Private companies rely on such deals to keep employees happy and reduce the pressure to list on public markets. Since OpenAI has no initial public offering immediately on the horizon and a price tag that makes the company prohibitively expensive for would-be acquirers, secondary stock sales are the only way in the near future for shareholders to pocket a portion of their paper wealth.

Databricks is another private company raising money to allow employees to cash out and avoid public markets pressure, CNBC reported this week.

OpenAI took a more restrictive approach to tender offers in the past, with rules allowing the company to determine who gets to participate in stock sales, CNBC reported in June. Current and former OpenAI employees previously told CNBC that there was growing concern about access to liquidity after reports that the company had the power to claw back vested equity.

But the company reversed its policies toward secondary share sales this summer, and it now allows current and former employees to participate equally in annual tender offers.

The company expects to allow more of these secondary sales, and it will need to tap private markets again in the future based on demand from investors and the capital-intensive nature of the business, according to a person familiar with this week’s tender offer.

OpenAI has faced increasing competition from startups like Anthropic and tech giants like Google. The generative AI market is predicted to top $1 trillion in revenue within a decade, and business spending on generative AI surged 500% this year, according to recent data from Menlo Ventures.

Last month OpenAI launched a search feature within ChatGPT, its viral chatbot, that positions the high-powered AI startup to better compete with search engines like Google, Microsoft’s Bing and Perplexity.

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Workday stock slips on light quarterly forecast

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Workday stock slips on light quarterly forecast

Workday CEO Carl Eschenbach walks to a morning session at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, on July 14, 2023.

Kevin Dietsch | Getty Images

Workday shares slipped as much as 11% in extended trading Tuesday after the human resources and finance software maker issued a quarterly forecast that came in below Wall Street projections.

For the fiscal fourth quarter, Workday called for an adjusted operating margin of 25% on $2.03 billion in subscription revenue. Analysts polled by StreetAccount were looking for a 25.5% margin and $2.04 billion in subscription revenue.

Here’s how the company performed during the fiscal third quarter compared with the consensus among analysts surveyed by LSEG:

  • Earnings per share: $1.89 adjusted vs. $1.76 expected
  • Revenue: $2.16 billion vs. $2.13 billion expected

Workday’s total revenue grew about 16% year over year in the quarter ended Oct. 31, according to a statement. Subscription revenue totaled $1.96 billion, up around 16%, consistent with the $1.96 billion consensus among analysts surveyed by StreetAccount.

The company reported net income of $193 million or 72 cents per share, up $114 million or 43 cents per share in the same quarter a year ago. The adjusted operating margin for the quarter was 26.3%. StreetAccount had expected 25.4%.

In some parts of the world, Workday is still facing more deal scrutiny than usual, Workday’s finance chief, Zane Rowe, said on a conference call with analysts.

Now the company is looking to grow its business in the U.S. government, CEO Carl Eschenbach said. “We think there’s a huge opportunity there with probably more than 80% of HCM and ERP still on premises,” he said, referring to human capital management and enterprise resource planning.

Earlier this month, President-elect Donald Trump announced plans for an advisory panel called the “Department of Government Efficiency.”

“People are absolutely looking to drive more economies of scale and more efficiency,” Eschenbach said.

Workday said Rob Enslin, the former Google and SAP executive who stepped down as UiPath CEO in June, was joining as president and chief commercial officer. In October, Workday told employees that Doug Robinson, a co-president, will retire.

During the quarter, Workday acquired contract lifecycle management software startup Evisort. Workday also said artificial intelligence agents for spotting inefficiencies, filing expense reports and updating succession plans would become available in early access in 2025.

“We think they’re going to have a nice impact on bookings and revenue as we go into the new year,” Eschenbach said.

Rowe called for $8.8 billion in fiscal year 2026 subscription revenue, good for 14% growth.

As of Tuesday’s close, Workday shares were down 2% in 2024, while the S&P 500 index had gained 26%.

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Dell shares fall on light forecast despite growing AI sales

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Dell shares fall on light forecast despite growing AI sales

Dell Technologies forecast fourth-quarter revenue and earnings below Wall Street expectations Tuesday, despite bullish commentary from the company on AI sales growth. The PC maker reported quarterly earnings Tuesday that beat analyst expectations for earnings per share but came up light on overall revenue.

Shares fell 10% in after-hours trading.

Here’s how Dell did for the fiscal third quarter versus LSEG consensus estimates for the quarter ending Nov. 1:

  • Earnings per share: $2.15 adjusted versus $2.06 expected
  • Revenue: $24.4 billion versus $24.67 billion expected

Net income climbed 12% to $1.12 billion, or $1.58 per share, from about $1 billion, or $1.36 per share, in the year-ago period. Overall revenue increased about 10% from $22.25 billion a year ago.

Dell said it expected between $24 billion and $25 billion in revenue during the fourth quarter, less than LSEG expectations of $25.57 billion. It said it expected $2.50 in adjusted earnings per share, versus expectations of $2.65 per share.

Chief Operating Officer Jeff Clark told investors on the earnings call that growth from AI will change from quarter to quarter.

“This business will not be linear, especially as customers navigate an underlying silicon roadmap that is changing,” Clark said.

The company’s shares have risen 86% so far in 2024 as investors realize it’s one of the most important companies selling tools and systems for artificial intelligence developers.

Dell is a top vendor for computer clusters required to develop and deploy artificial intelligence, especially computers based around Nvidia chips. It competes against other server makers such as Super Micro Computer and Hewlett Packard Enterprise, as well as manufacturers in Asia.

Demand for Nvidia’s AI accelerators remains high from cloud providers, enterprises, and government institutions, who often buy systems installed with tens of thousands of AI chips. Dell sells the completed systems.

This year, Nvidia CEO Jensen Huang gave Dell and its founder, Michael Dell, a shout-out as the company to contact to place orders for its new Blackwell AI chips.

Dell executives said some of the demand from its customers was shifting to later quarters, waiting for Nvidia’s next-generation Blackwell chips, which are in production now but have yet to ship to end-users in large quantities.

“We saw in Q3 a pretty rapid shift of the orders moving towards our Blackwell design,” Clark said.

Dell said much of its AI system growth was already reflected in a $4.5 billion pipeline of future orders.

“We’re only in the very early innings of enterprises learning how to deploy AI,” Clark said.

Dell’s AI server sales are reported in the company’s Infrastructure Solutions Group, which includes AI servers, storage, networking components, and traditional servers. The group’s revenue rose 34%, mostly driven by AI sales, to $11.4 billion.

The strongest part of Dell’s ISG business was its servers and networking subsidiary, which includes AI systems. Revenue rose 58% to $7.4 billion. Dell shipped $2.9 billion in AI servers during the quarter, and the company said during the quarter that customers had booked $3.6 billion of future AI server orders.

The company said increased AI server orders boosted demand by “double digits” for its traditional servers, which are less power-hungry and based around CPU chips from Intel or AMD, and can free up room or power inside data centers for companies investing heavily in AI infrastructure.

The company’s computer storage systems grew less strongly than servers, rising 4% to $4 billion. The overall ISG unit is more profitable, thanks to sales of pricier AI systems.

Dell’s Client Solutions Group, which sells PCs and laptops to consumers and enterprises, declined 1% on an annual basis to $12.1 billion.

While commercial clients buying PCs for their workforces rose 3% on an annual basis to $10.1 billion, the company’s sales from PCs to consumers fell 18% on an annual basis to $2 billion.

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