Adobe Inc. stock plummeted around 10% in after-hours trading. This steep decline followed its weak sales outlook for the current quarter. The forecast fueled concerns over emerging AI startups posing competitive threats.
According to Adobe’s statement, revenue will range between $5.25-$5.3 billion. However, analysts projected $5.31 billion on average. Additionally, Adobe forecasted profits up to $4.40 per share, excluding items. Analysts’ consensus estimate stood at $4.38.
Adobe, the longtime creative software leader, faced mounting anxieties. Investors feared generative AI startups could erode Adobe’s market share. To counter this, Adobe integrated its proprietary Firefly AI model into flagship products like Photoshop and Illustrator.
However, OpenAI’s recent Sora video generation model reignited competition fears. This prompted Adobe’s stock slide despite its AI initiatives.
CEO Shantanu Narayen acknowledged higher expectations for guidance. Yet, he remained optimistic about Adobe’s AI progress.
AI Isn’t Boosting Adobe’s Financials Yet
Notably, Adobe projected $440 million in new recurring creative revenue. This fell short of analysts’ $459 million forecast. Stifel analyst Parker Lane attributed this shortfall to investors awaiting AI features’ financial impact.
“Investors hear great AI adoption stories but await reflection in financials,” Lane stated.
After surging 77% in 2023, Adobe’s stock dipped 4.4% year-to-date. Analysts cited fears over generative AI startups and established rivals like Canva.
In Q1, Adobe’s sales grew 11% to $5.18 billion. Profit was $4.48 per share, excluding items. This exceeded revenue and earnings estimates.
Significantly, Adobe confirmed monetizing new AI features actively. It plans accelerated efforts in the second half.
Moreover, Adobe’s digital media unit posted 12% revenue growth to $3.82 billion. Its marketing/analytics division rose 10% to $1.29 billion.
Narayen dismissed claims that AI could replace human creativity entirely. “The next ‘Oppenheimer’ won’t happen via text prompts for decades,” he asserted.
However, he acknowledged AI’s potential to drive Adobe’s editing tools’ demand.
Conclusively, Adobe unveiled a new $25 billion share buyback program. This supersedes the previous $15 billion plan expiring in 2024.
Despite the forecast concerns, Adobe positions itself strategically. It leverages AI to drive innovation and sustain creative software dominance proactively.
