Jamie Spencer
Adobe shares dropped 13% on Thursday as investors reacted to lingering concerns over growth and the company’s artificial intelligence monetization strategy.
Strong Earnings, Investor Concerns
The sell-off followed better-than-expected quarterly results, with Adobe reporting adjusted earnings of $5.08 per share on $5.71 billion in revenue. Analysts polled by LSEG had expected $4.97 per share and $5.66 billion in revenue.
For the current quarter, Adobe projected adjusted earnings between $4.95 and $5.00 per share on revenue of $5.77 billion to $5.82 billion, slightly below market expectations.
AI Strategy in Focus
Investors remain cautious about Adobe’s ability to compete in generative AI. The company reported $125 million in annualized recurring revenue from AI and expects that to double by the end of the fiscal year.
Bernstein analyst Mark Moerdler remains optimistic, stating, “To believe that Adobe is an AI winner, investors need to observe longer-term trends.” Morgan Stanley’s Keith Weiss called Adobe’s new AI revenue disclosures “a step in the right direction” but said investors need a clearer roadmap, which may come at the company’s investor meeting next week.
CEO Defends AI Innovations
Adobe CEO Shantanu Narayen addressed concerns in a CNBC interview, stating, “Not only are we infusing AI in our existing products and delivering value, but it’s clear that the innovation we’ve delivered is creating new revenue streams.”
Revenue and Growth Outlook
Adobe’s total revenue rose 10% year over year in the quarter ending Feb. 28. Net income increased to $1.81 billion, or $4.14 per share, up from $620 million, or $1.36 per share, a year earlier.
For fiscal 2025, Adobe expects adjusted earnings per share between $20.20 and $20.50, with revenue between $23.3 billion and $23.55 billion, implying around 9% growth.
