Adobe’s shares experienced a decline of over 4% in extended trading on Wednesday, following the release of its second-quarter revenue forecast. While the company’s projections met Wall Street expectations, investors are closely monitoring Adobe’s strategy for monetizing its artificial intelligence (AI) offerings amid increasing competition.
The company anticipates revenue between $5.77 billion and $5.82 billion for the second quarter, aligning with analyst consensus according to LSEG data. Adobe maintained its initial revenue forecast for the year. CEO, acknowledged the significance of AI to the company’s future, stating they are “well positioned to capitalize on the acceleration of the creative economy driven by AI.”
Investment analysts are watching closely to see when Adobe can significantly increase the financial returns from its generative AI products as it invests heavily in differentiating itself from competitors. Integrating sharper AI editing tools into its wide array of software, especially products like Photoshop, that are used by professionals across many industries, is a key strategy.
“I think guidance is rough and I think people are questioning, is the AI monetization quick enough?” said Parker Snook, senior research analyst at M Science.
Annual recurring revenue (ARR) from Adobe’s AI and add-on offerings was $125 million at the end of the quarter. Adobe expects to double this figure in the next three quarters and anticipates significant growth by the end of fiscal year 2025, according to CFO Dan Durn in an interview with Reuters.
DA Davidson analyst Gil Luria commented, “While investors are still concerned about the transition to AI, as Adobe continues to deliver new products we expect those concerns to be replaced by excitement over those products.”
The company’s reported revenue for the first quarter was $5.71 billion, exceeding the $5.66 billion estimate. Digital media revenue for the same period reached $4.23 billion, surpassing the $4.19 billion estimate. On an adjusted basis, earnings per share were $5.08, compared to estimates of $4.97 per share.
