American software company Adobe Inc. saw a significant drop in its stock price during after-hours trading due to disappointing annual sales forecasts. This news has raised concerns in the market about Adobe potentially losing market share in the increasingly competitive field of artificial intelligence. According to Adobe's statement, the company's annual revenue is expected to reach $23.4 billion by November 2025, while analysts had an average expectation of $23.8 billion.
Adobe is well-known for its creative software and has been integrating generative artificial intelligence (AI) features into its products in recent years. For example, the company has embedded its proprietary AI model Firefly into applications like Photoshop. Additionally, Adobe launched an AI tool for video creation at its annual user conference, gradually rolling it out to the public and integrating it into the editing application Premiere.
Adobe also plans to introduce a "new high-priced Firefly product," which includes video models, as stated by David Wadhwani, who oversees the company's creative business, during a conference call following the earnings release. A key metric that has attracted attention—annual recurring revenue from digital media—is expected to grow by 11% during the fiscal year, in line with market expectations. Chief Financial Officer Dan Durn mentioned during the call that the guidance considered the strategy of "continuously launching new tiered subscription products and additional services."
However, Adobe's outlook appears somewhat conservative due to the "uncertainty regarding the pace of AI adoption," said Bloomberg Intelligence analyst Anurag Rana. Adobe's stock price dropped nearly 9% in after-hours trading, closing at $549.93. The stock has declined 7.8% this year, underperforming its software industry peers and the overall market. Investors are concerned that AI creative tools launched by companies like OpenAI and Runway AI may take away Adobe's market share.
Although both company executives and customers have praised Adobe's new AI tools, Morgan Stanley analyst Keith Weiss noted during the conference call that "investors do not seem to feel this excitement." In the fourth fiscal quarter, Adobe reported an 11% increase in sales, reaching $5.61 billion. Profit (excluding certain items) was $4.81 per share, surpassing analysts' expectations of $4.67 per share, and revenue slightly exceeded the expected $554 million. The company's annual recurring revenue from digital media at the end of the quarter was $17.3 billion, slightly exceeding analysts' average expectations.
Key Points:
📝 Adobe expects annual revenue of $23.4 billion by 2025, below the analysts' expectation of $23.8 billion.
💻 The company has added generative AI features to its products, but investor reaction to the new AI tools has been lukewarm.
📉 The stock price fell nearly 9% in after-hours trading, with investors concerned about increasing AI competition.
