Adobe shares fall 3% after disappointing revenue outlook
Adobe projects lower-than-expected sales despite AI push
Adobe Inc. gave a cautious revenue forecast for the current quarter, sending its shares down about 3% in extended trading Wednesday.
Despite efforts to monetize its generative artificial intelligence (AI) features, the company projected sales for the period ending in May to be between $5.77 billion and $5.82 billion, reports Bloomberg.
Analysts had anticipated revenue of $5.8 billion. Adobe also forecasted profit of $4.95 to $5 per share, below the expected $5. The company’s AI model, Firefly, which is integrated into creative applications like Photoshop and Premiere, has been a focal point for the company’s growth strategy.
While Adobe is pushing to monetize its AI capabilities—announcing charges for AI-generated content and price hikes for some of its products—the broader market is concerned about competition from emerging AI-native competitors.
Financial Performance and Market Sentiment
While Adobe’s fiscal first-quarter revenue increased by 10% to $5.71 billion, surpassing Wall Street’s estimate of $5.66 billion, the company’s overall outlook remained tepid. The company’s remaining performance obligations—a measure of future sales—stood at $19.7 billion, slightly below the analyst estimate of $19.8 billion.
Adobe’s digital media unit, which includes its creative software, posted an 11% rise in sales to $4.23 billion, but the outlook for the upcoming quarter raised doubts. Adobe’s stock has dropped 24% over the past year, with investor sentiment shifting as concerns around competition in the AI space grow. Matthew Swanson, an analyst at RBC Capital Markets, noted that these concerns have weighed on Adobe’s stock performance.
Next week, Adobe is set to host an investor event where the company is expected to provide more clarity on its long-term financial outlook and additional details on its AI strategy. CEO Shantanu Narayen expressed confidence in Adobe’s ability to capitalize on the "creative economy" driven by AI but acknowledged the competitive challenges ahead.
Reminder, Australia’s banking sector faced a sharp downturn this week, wiping out $26 billion in market value as concerns over profitability mounted.
