Adobe's AI Monetization Struggles Lead to Stock Plunge Despite Record Revenue

Down 22%, Here's How Adobe Could Follow in Salesforce's Footsteps to Become a Strong Buy in 2025 | The Motley Fool

With just a few weeks left in the year, the tech sector is shaping up to, once again, beat the S&P 500 (^GSPC -0.39%) largely thanks to gains from Nvidia and Broadcom in the semiconductor industry. The software industry also makes up a large share of the tech sector but has enjoyed mixed results on the year. For example, Salesforce (CRM -1.75%) is beating the S&P 500's year-to-date gain, but Microsoft and Adobe (ADBE -1.36%) are lagging behind. Adobe, in particular, is down over 22% year to date at the time of this writing -- heavily underperforming the sector. Here's what Salesforce is doing right, why Adobe is out of favor, and whether either growth stock is worth buying now. Not long ago, Salesforce was in the same boat as Adobe. Both companies were missing out on the broader tech sector rally as investors questioned if spending big bucks on artificial intelligence (AI) would pay off. However, as you can see in the chart, Salesforce has exploded higher in recent months, while Adobe is getting dangerously close to its 52-week low. Salesforce has become a standout in the enterprise software space because it has a compelling AI opportunity that will immediately contribute to top- and bottom-line growth. The opportunity is what Salesforce calls AI agents, which rely on machine learning and natural language processing to answer questions, solve problems, and make decisions. Agentforce is the platform where organizations can customize and build multiple AI agents. On Salesforce's third-quarter fiscal 2025 earnings call, the company mentioned the word "agent" a whopping 136 times. Typically, when a company over-emphasizes a new product or service, it can be a bit of a red flag that management is overpromising. However, given the rally in the stock price, investors seem to think Agentforce could be the real deal. Agentforce is arguably Salesforce's most significant innovation in years and offers a clear path to contributing high-margin revenue to Salesforce right away. Launched in October, the service is usage-based and costs $2 per conversation. As my colleague Geoffrey Seiler points out, that's a $2 billion opportunity based on Salesforce CEO Marc Benioff's goal of having 1 billion AI agents by the end of fiscal 2026 (which would correspond to early calendar year 2026). For context, Salesforce is guiding for around $38 billion in revenue in fiscal 2025. If Agentforce is successful, it could accelerate growth and differentiate the company's enterprise software suite, which includes Salesforce, Slack, Tableau, and more. However, for now, Salesforce is only guiding for 8% to 9% revenue growth in fiscal 2025 compared to fiscal 2024. In sum, Salesforce may not be growing rapidly, but it has the AI-driven growth narrative in spades, which makes the stock intriguing for long-term investors. Adobe just reported fiscal fourth-quarter and full-year fiscal 2024 results, growing revenue by 10.8% year over year in the period ended Nov. 29. The company is guiding for accelerated revenue growth of 14.2% in fiscal 2025 and non-GAAP (adjusted) earnings-per-share growth of 10.5%. And yet, Adobe sold off by over 13% the session after reporting earnings. Despite their similar near-term growth rates, investors are cheering Salesforce and have turned negative on Adobe. There is now widespread conviction that Salesforce's AI-fueled growth is the real deal, whereas there are doubts that Adobe can effectively monetize AI. Adobe has developed many AI-fueled product upgrades and just notched another record year of high-margin growth. However, it has yet to deliver the show-stopping announcement that Salesforce gave with Agentforce. The recent surge in Salesforce stock showcases investor excitement for AI-driven enterprise software solutions, while the disappointment in Adobe indicates a lack of patience for companies that don't have a clear roadmap for monetizing AI. As an individual investor, you don't have to get overly caught up in the short-term price action. Instead, it is better to filter out the noise and determine if a company has a runway for future growth and if the valuation makes sense. Salesforce has had a big run-up, but there's undeniable potential with Agentforce that could still make the stock a good buy now. However, some investors may prefer to wait and see if Salesforce can deliver on its lofty targets before jumping in now. Meanwhile, the sell-off in Adobe seems a little overblown. The midpoint of Adobe's non-GAAP fiscal 2025 earnings guidance is $20.35 per share, giving the company a forward price-to-earnings ratio of just 22.5. That's dirt cheap for a high-margin industry-leading cash cow that is poised for solid growth in the year to come.

Down Over 13% in a Single Day, Is This Megacap Growth Stock Worth Buying in December? | The Motley Fool

Many tech stocks had epic runs in 2023 and have sustained the momentum this year. But not Adobe (ADBE -0.89%). The software-as-a-service (SaaS) giant is down 22% year to date at the time of this writing and tumbled 13.7% on Thursday in response to its fourth-quarter fiscal 2024 results and fiscal year 2025 guidance. Here's what's driving the sustained sell-off in the growth stock and if it is worth buying in December. Adobe was a SaaS pioneer, launching its subscription service in 2012. Today, it still generates nearly all of its revenue from subscriptions. Users can pay for a bundled offering of its suite of apps, known as Creative Cloud, or they can turn to a la carte options. Adobe's business model is straightforward and highly effective. It upgrades core products and develops new products to retain existing users and attract new ones. By providing more value and empowering its users to get more out of a subscription, Adobe can justify price increases over time. Adobe dominates the digital media industry with tools for videos, images, documents, and more at different levels of sophistication, including professionals, students, and mainstream users. Its foothold in the industry and established product lineup gives it pricing power. Adobe is an ultra-high-margin business that generates a ton of cash flow. Its gross margin tends to be around 85% to 90%. In comparison, its operating margin hovers around 45% to 50% -- because its main expenses are research and development (R&D), sales, marketing, and administrative -- not maintaining existing products. In sum, Adobe is a phenomenal business, but there are concerns that Adobe may not be as dominant in the future. The last couple of years have been arguably the greatest surge in innovation Adobe has experienced since launching Creative Cloud 12 years ago. Artificial intelligence (AI) is leading to significant product improvements at Adobe, including text-to-image and video generation, GenStudio for Performance Marketing (AI-powered content for delivering cross-channel content and running market campaigns), improvements in Adobe Document Cloud (including AI-driven search and summary functions with PDFs), easy content creation using Adobe Express for mainstream users, and more. The problem isn't a lack of new ideas; it's that Adobe's innovation has so far failed to translate into meaningful revenue growth. In first quarter fiscal 2024, which ended March 1, 2024, Adobe reported $5.182 billion in revenue, representing 11.3% growth compared to the same quarter in fiscal 2023. Adobe is guiding for just 9.1% in revenue growth at the midpoint of its first quarter of fiscal 2025 (which is the upcoming quarter). For full-year fiscal 2025, Adobe is guiding for $23.3 billion to $23.55 billion in revenue, a non-GAAP (adjusted) operating margin of 46%, $15.80 to $16.10 in GAAP earnings per share (EPS), and $20.20 to $20.50 in non-GAAP EPS. If it hits the midpoints of these targets, Adobe would grow revenue by 14.2% and non-GAAP EPS by 10.5%. For context, Adobe grew revenue by 11% and non-GAAP EPS by 15% in fiscal 2024 versus fiscal 2023. So the growth rate remains roughly the same. It would be understandable if Adobe's margins came down as it ramps up spending on R&D. But the continued lack of revenue growth shows that Adobe's innovation has yet to be a game changer for the performance of its business, which is concerning considering Adobe is essentially entering year three of its AI journey. Wall Street's frustration with Adobe's inability to monetize AI is reflected in the stock price. Adobe soared 77.3% in 2023 as investors cheered AI's potential to accelerate growth. But that gain was amplified because Adobe had a terrible year in 2022. Zoom out, and the stock price is only up 55.1% over the last five years, lagging the S&P 500's 91% gain and drastically underperforming the tech sector's monster 168.7% run. Adobe remains in the experimentation phase rather than the monetization phase of its AI growth. On the first-quarter fiscal 2024 call from March, Adobe CEO Shantanu Narayen explained the company was focused more on developing new tools to see what sticks with users rather than maximizing near-term profits. Arguably one of the most important parts of Adobe's latest earnings call was when President of Digital Media David Wadhwani drilled into the specifics of Adobe's growth algorithm, which is a balance of gaining new users, new products, delivering value, and justifying higher pricing. Wadhwani explained that Adobe isn't focused on price increases right now, but rather, attracting new users and measuring engagement with its AI tools. Later in the call, an analyst pressed management on why it wasn't as willing to raise prices given the amount of value creation. Wadhwani reiterated that the game plan is to bring in more web and mobile users rather than squeeze profits out of users: And we believe that proliferation ... maintains as one of the top priorities because we know that if people start using our products today, we have the opportunity to continue to deliver value for a long time to come. And so, that balance is what we try to do. And it's a management judgment call that we think we're getting it right. To buy Adobe stock now, I think it's important to agree with management's approach to AI and pricing, which is focused on the long term. Adobe has made a splash with AI product developments but has yet to prove that AI will be a major contributor to its sales growth. But this is still a highly profitable company that continues to grow sales and earnings steadily. Adobe has become a better value as its stock price has languished and its earnings have increased. Adobe has just a 23.3 forward price-to-earnings (P/E) ratio based on the midpoint of its fiscal 2025 non-GAAP earnings guidance and a 29.8 P/E based on forward GAAP guidance. The main difference between the calculations is that GAAP accounts for stock-based compensation, which Adobe arguably over-relies on to retain and attract top talent. Adobe sports an inexpensive valuation for being a high-margin business with more cash and cash equivalents than debt on its balance sheet. Investors who believe that Adobe will eventually be able to transition from experimentation to the monetization phase with AI are getting an excellent opportunity to buy the stock at a relatively cheap price. Adobe has set the bar fairly low for fiscal 2025 from a revenue and earnings perspective. If AI adoption improves, Adobe could gain some momentum. But if the year drags on and fiscal 2026 starts to look like a continuation of the low-double-digit revenue growth pattern, it wouldn't be surprising for investors to lose patience and drive a further sell-off.

Adobe Shares Sink Despite Record Revenue. Should Investors Buy the Stock on the Dip? | The Motley Fool

Despite posting record revenue to close out its fiscal year ended Nov. 29, shares of Adobe (ADBE -1.88%) were sinking as investors were disappointed with the company's guidance. Adobe has been at the forefront of generative artificial intelligence (AI) with both its Creative Cloud suite of products that includes Photoshop, and with its Document Cloud business featuring Acrobat. However, its monetization strategy related to AI has been a bit behind. With its latest dip, the stock is now down about 18% year to date as of this writing. Let's take a close look at its results to see if this is a buying opportunity for investors going into 2025. Adobe closed out its fiscal year showing solid growth, with revenue increasing 11% to $5.61 billion. That was solidly ahead of its prior guidance calling for revenue of between $5.5 billion to $5.55 billion. Its adjusted earnings per share (EPS), meanwhile, jumped nearly 13% to $4.81, ahead of its $4.63 to $4.68 forecast. Among its individual segments, Digital Media, which is home to both its Creative and Document Cloud businesses, saw revenue rise 12% to $4.15 billion. Within the segment, Document Cloud led the way with revenue jumping 17% to $843 million. Its larger Creative business saw revenue rise by 10% to $3.30 billion. The company generated $578 million in new Digital Media annualized recurring revenue (ARR), ending the quarter with Digital Media ARR of $17.33 billion. That was just 2% growth from the $569 million in new Digital Media ARR it generated last year. Adobe continued to hype its AI tools, saying AI image generations from its Firefly AI model continue to accelerate and have now crossed 16 billion cumulative generations. It recently launched its Firefly video model in beta, saying it saw massive interest in it, and it should be more broadly available in early 2025. Adobe's Digital Experience segment, which is involved in digital analytics and online marketing, saw its revenue increase by 10% to $1.4 billion, with digital experience subscription revenue jumping 13% to $1.27 billion. The company said it is seeing strong demand for its new Adobe GenStudio for Performance Marketing. While the quarter itself was solid, what disappointed investors was Adobe's guidance. For the fiscal year 2025, the company projected revenue of between $23.30 billion to $23.55 billion, representing growth of between 8% to 9%. That was below the analyst consensus, as compiled by LSEG, looking for revenue of $23.78 billion. It guided for adjusted EPS of between $20.20 and $20.50. For the fiscal first quarter, the company guided toward a revenue range of $5.63 billion to $5.68 billion, up from $5.18 billion a year ago and representing 9% to 10% growth. That was below the $5.73 billion analyst consensus. It's looking for adjusted EPS of between $4.95 to $5. Below is a chart of the company's fiscal Q1 and full-year guidance. Data source: Adobe earnings releases. Adobe's stock has underperformed this year, and despite all of Adobe's talk of AI innovation, that innovation has not translated into accelerating revenue growth. Creative Cloud, its largest business, saw new ARR increase just 2% in the quarter, while it forecast decelerating revenue growth for 2025. The company is trying to balance drawing in new AI users versus its monetization of AI at the moment. That is currently leading to solid growth, but it hasn't lifted its revenue growth rate, which is what investors want to see. And while Adobe likely issued somewhat conservative guidance that it can beat, it gave no indication that its revenue growth could accelerate next year. Adobe has been using a credit model for using generative AI, and its biggest AI opportunity may be moving away from this model. On the call, the company mentioned that it has the opportunity to create more tiers across its Creative products, and that will likely be the better way to monetize its AI efforts. From a valuation standpoint, the stock currently trades at a forward price-to-earnings (P/E) ratio of 23.5 times fiscal year 2025 analyst estimates and a forward price-to-sales (P/S) multiple of under 9. That seems like a relatively attractive valuation. While I think Adobe still has a lot to prove, I like its product innovation roadmap, with things like Firefly video. More importantly, I think it can find a better monetization model through tiered plans. For this reason, I think investors can consider buying the dip in the stock.

Adobe's $400 million shortfall sparks Wall Street panic

Adobe shares fell 14% on December 12, 2024, after the company issued disappointing annual revenue guidance for 2025. Analysts had anticipated revenue of $23.8 billion, but Adobe's forecast is approximately $23.4 billion, causing investor concern. CEO Shantanu Narayen discussed these results during a CNBC interview on the New York Stock Exchange. The revenue guidance reflects earnings estimates of $20.20 to $20.50 per share, falling short of the average adjusted profit forecast of $20.52 per share. This decline is Adobe's steepest single-day drop since September 2022, with the stock now down 20% year-to-date, diverging from the Nasdaq's 33% gain. Analysts at TD Cowen have downgraded Adobe to a hold rating, while Wells Fargo maintains a buy rating, highlighting a "frustrating" year for the software vendor. Adobe's fourth-quarter results, however, surpassed expectations, with adjusted earnings per share at $4.81 compared to analysts' estimates of $4.66 and quarterly revenue rising 11% to $5.61 billion. This also exceeded the average revenue estimate of $5.54 billion. Despite surpassing quarterly estimates, the overall guidance indicated uncertainty surrounding future performance. Adobe's ongoing strategy to capitalize on generative AI is central to its growth, particularly through products like Firefly, an image generation tool. Analysts at Deutsche Bank upheld their buy rating but adjusted the target price from $650 to $600. They noted, "We see tangible evidence that Adobe is one of few application software companies in our coverage successfully monetizing generative AI today." Despite this, concerns linger among investors about potential competition from emerging AI-based startups. Notably, tools from companies like OpenAI and Runway AI are perceived as threats that could capture market share from Adobe. This sentiment has influenced stock performance, with recent analysts expressing skepticism over Adobe's ability to sustain its market position amid rapid AI developments. Analysts pointed out that while the company is integrating AI features across its platform, there is still apprehension regarding the pace at which AI adoption might affect overall business performance. In the latest fiscal quarter, Adobe reported that digital media annual recurring revenue reached $17.3 billion, slightly surpassing forecasts. The company's anticipated growth in digital media net new annual recurring revenue (ARR) should increase 11% over the next fiscal year. While Adobe has made significant strides by embedding its proprietary AI model into applications, including video creation tools in Premiere, the broader market remains unpredictable. Analyst Anurag Rana told Bloomberg that the conservative guidance may be a reflection of the "uncertain pace at which AI usage may take root." Disclaimer: The content of this article is for informational purposes only and should not be construed as investment advice. We do not endorse any specific investment strategies or make recommendations regarding the purchase or sale of any securities.

Adobe's weak forecast stokes fears around AI monetization, sending its stock lower - SiliconANGLE

Adobe's weak forecast stokes fears around AI monetization, sending its stock lower Shares of Adobe Inc. were sent into a tailspin today after the maker of Photoshop could only offer a light forecast for the coming quarter and full year. The company said it's looking for first quarter revenue of between $5.63 billion and $5.68 billion, which is some way below Wall Street's consensus estimate of $5.72 billion. In terms of fiscal 2025 revenue, Adobe is guiding for a range of $23.3 billion to $23.6 billion, trailing the analyst's forecast of $23.8 billion. Adobe's stock was down more than 9% after-hours, completely erasing a slight gain it had made earlier during the regular trading session. The soft guidance took the sheen off of what were otherwise some pretty solid results in the company's fiscal 2024 fourth quarter. The company reported earnings before certain costs such as stock compensation of $4.81 per share, easily beating the Street's estimate of $4.67 per share. Revenue for the period rose 11% to $5.61 billion, surpassing expectations of $5.54 billion. Founded back in 1982, Adobe is an iconic name in the technology industry, best known for its creative software products like Photoshop, Acrobat and Premiere Pro, which are widely used by visual and video artists. Although it's one of the world's most recognizable software companies, it has come under considerable pressure in recent months, with high interest rates and a sluggish economy forcing enterprises to cut back on software spending. In addition, Adobe faces growing competition from rivals in the artificial intelligence industry, such as Stability AI Inc., OpenAI and Midjourney Inc., which all provide access to tools that can generate professional-looking images from text prompts. Adobe has attempted to hit back at those rivals with its own AI tools. It has embedded its proprietary image generating model Firefly into many of its products, including Photoshop. The company also announced a new, AI-powered video creation tool during its annual user conference in October, which comes with its Premiere video editing application. Third Bridge analyst Charlie Miner said the problem is not so much the lack of AI offerings on Adobe's side, but rather its seeming inability to monetize them effectively. "The market's initial fears about AI disruption have subsided, but Adobe's continue lack of AI monetization makes it increasingly difficult to pick the company as a clear AI winner," Miner said. "Investors are increasingly frustrated with its 'adopt-first, monetize-later' AI strategy. With significant capital already invested and limited returns, it's hard not to be concerned that it's falling behind." In a conference call with analysts today, David Wadhwani, president of Adobe's digital media business, appeared to respond to those concerns, saying the company is planning to launch a new, "higher-priced Firefly offering" that includes video models. But he didn't say when that offering will become available. The digital media segment is Adobe's largest business unit, and it generated $4.2 billion in sales during the quarter, up 12% from a year earlier. Within the segment, Document Cloud revenue surged 17% to $843 million, while Creative revenue rose 10% to $3.3 billion. Looking to the new fiscal year, Adobe said it's expecting net new annual recurring revenue in the digital media business to grow 11%, in-line with Wall Street's targets. Adobe's chief financial officer Dan Durn said the company's "ongoing strategy to introduce new, tiered subscription offerings and add-ons" has been factored into that guidance. Adobe's other main business segment, Digital Experience, saw revenue increase 10% to $1.4 billion. Adobe Chair and Chief Executive Officer Shantanu Narayen (pictured) hailed the company's record-breaking revenue in fiscal 2024, saying this highlights the critical role its software is playing in fueling the AI economy. "Our highly differentiated technology platforms, rapid pace of innovation and the integration of our cloud positions us for a great year ahead," he insisted. Wall Street investors are less than optimistic, however. With today's after-hours drop, Adobe's stock is down 8% in the year to date, lagging behind many of its peers and also industry benchmarks.

Adobe falls as annual revenue forecast triggers concerns on delayed AI returns

Dec 12 (Reuters) - Shares of Adobe (ADBE.O), opens new tab fell nearly 10% in premarket trading on Thursday after the Photoshop maker's downbeat full-year revenue forecast led to concerns that returns from AI investments into its software applications might take longer than expected. "While the company remains on track with its GenAI product roadmap, we think the lack of ... explicit monetization metrics has made it harder for investors to get comfortable with the progress," RBC analyst Matthew Swanson said. The San Jose, California-based company on Wednesday forecast fiscal 2025 annual revenue between $23.30 billion and $23.55 billion, compared with the average analyst estimate of $23.78 billion, according to data compiled by LSEG. "Given another selloff, we observe a clear disconnect between management's excitement and the internal signs of success that they see relative to what investors are seeing," according to Morningstar analysts. Having recently released AI-related software tools, Adobe is making significant investments in artificial intelligence-driven image and video generation technologies in response to growing competition from well-capitalized startups such as Stability AI and Midjourney. Adobe's advances in video-generation technology put it head-to-head with ChatGPT-maker OpenAI's Sora. Although Adobe projected strong growth for the second half of the year in June, at least seven brokerages cut price targets on the company's shares following the revenue forecast. "With Adobe underperforming the S&P for over 5 years now, getting back into a more consistent cadence of beat/raise is basically a necessity to rekindle long-term investor interest," Evercore ISI said, adding that the lack of clarity around generative AI monetization is also working against the stock. Adobe's stock has fallen about 8% so far this year, compared with the S&P 500 index's (.SPX), opens new tab 27.6% gain. The company's 12-month forward price-to-earnings ratio stands at 26.46, compared with Autodesk's (ADSK.O), opens new tab 33.63. Reporting by Siddarth S in Bengaluru; Editing by Shounak Dasgupta Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Technology

Adobe's Stock Fell 15% as Investors Are Uncertain of Its AI Direction

Despite posting record profits quarter after quarter, Adobe's stock fell hard last week as investors appeared uncertain that the company's AI strategy will result in future revenue. Adobe's stock fell 14.61% in the last five days despite a slight bump in the positive direction this morning, from a high of $549.93 on Wednesday to $468.24 at the time of publication this morning. It's not the lowest Adobe's stock has reached this year but it would be an inauspicious end to the company's 2024 should it not recover before the new year. The fall is also in contrast with the company's profitability, which remains strong. On December 11, Adobe told investors that it had delivered record revenues in the 2024 fiscal year. It brought in $5.61 billion in the fourth quarter alone which is an 11% increase year-over-year. Digital Media brought in $4.15 billion, a 12% year-over-year growth while creative revenue grew to $3.30 billion, a 10 percent year-over-year. All of these reports would typically signal a stock price jump, but the opposite happened. According to industry experts, investors believe there is a "fundamental disconnect over AI" at Adobe, namely between what management is saying versus what the numbers show. "Investors are finding it hard to reconcile company's bullish AI commentary with soft results and growth guidance," Bernstein analyst Mark Moerdler tells MarketWatch. "We have said for a while that Adobe was a 'show me story' and has now become an 'explain to me and show me story.' It could take multiple quarters depending on how visible it is to investors that AI monetization will happen." Adobe has yet to monetize its generative AI offerings, although the pricing structure and systems are in place should the company decide to flip that switch. Adobe's current plan is to build a user base for its AI tools before charging for them, a strategy that allows creative professionals like photographers to use Adobe's AI tools as part of a normal Creative Cloud subscription, which some investors aren't keen on since it involves waiting in order to see returns. On the other side of the coin, users aren't exactly always thrilled with the results from Adobe's AI tools. The most recent update to its Firefly Generative AI system seemed to be a step backward, providing worse results than before and even coming in behind competitor offerings. Adobe has been made aware of these issues but has not been able to provide an explanation -- or a fix -- to PetaPixel despite repeated inquiries. Needless to say, though, Adobe's AI tools would need to get better before photographers would be willing to pay for them. Thus, Adobe is now stuck between investors clamoring for faster monetization and users who want better results.

Adobe falls as annual revenue forecast triggers concerns on delayed AI returns

(Reuters) - Shares of Adobe fell nearly 10% in premarket trading on Thursday after the Photoshop maker's downbeat full-year revenue forecast led to concerns that returns from AI investments into its software applications might take longer than expected. "While the company remains on track with its GenAI product roadmap, we think the lack of ... explicit monetization metrics has made it harder for investors to get comfortable with the progress," RBC analyst Matthew Swanson said. The San Jose, California-based company on Wednesday forecast fiscal 2025 annual revenue between $23.30 billion and $23.55 billion, compared with the average analyst estimate of $23.78 billion, according to data compiled by LSEG. "Given another selloff, we observe a clear disconnect between management's excitement and the internal signs of success that they see relative to what investors are seeing," according to Morningstar analysts. Having recently released AI-related software tools, Adobe is making significant investments in artificial intelligence-driven image and video generation technologies in response to growing competition from well-capitalized startups such as Stability AI and Midjourney. Adobe's advances in video-generation technology put it head-to-head with ChatGPT-maker OpenAI's Sora. Although Adobe projected strong growth for the second half of the year in June, at least seven brokerages cut price targets on the company's shares following the revenue forecast. "With Adobe underperforming the S&P for over 5 years now, getting back into a more consistent cadence of beat/raise is basically a necessity to rekindle long-term investor interest," Evercore ISI said, adding that the lack of clarity around generative AI monetization is also working against the stock. Adobe's stock has fallen about 8% so far this year, compared with the S&P 500 index's 27.6% gain. The company's 12-month forward price-to-earnings ratio stands at 26.46, compared with Autodesk's 33.63. (Reporting by Siddarth S in Bengaluru; Editing by Shounak Dasgupta)

Adobe Inc: Staying the course

It's not easy for investors to know which foot to stand on. Adobe, for a start, is in the crosshairs of the US competition authorities: after blocking the Figma takeover, the FTC is now taking the group to court for illegal business practices. Secondly, the attempt to acquire Figma betrayed the intense sense of vulnerability that had gripped Adobe's management team. Based on a valuation of over fifty times revenues - unprecedented - this defensive transaction, before being repudiated by the regulator, had aroused the ire of shareholders. The rapid emergence of new artificial intelligence technologies and more democratic competition - from Figma to Canva and a myriad of new specialized platforms - is threatening what was once the company's core business. threaten what was once described as a monopoly, with Adobe's creative franchises becoming a standard comparable to Microsoft Office in the office world. Incidentally, this is not the market's first mood swing in the face of the uncertainties surrounding the San Jose-based group. MarketScreener capitalized remarkably well on the previous one, just before the FTC opposed the Figma takeover. It's true that Adobe had long been a "star" among our quantitative selections, given the company's impressive growth performance and stratospheric profitability. the kind of combination MarketScreener actively tracks when it comes to filling its stock portfolios or its Europa One fund. On the other hand, while the risks are real and should not be underestimated, rather than suffered, it should also be remembered that the San José-based group has taken full advantage of all previous technological pivots. It has, of course, quickly got to grips with AI, with the recent launch of Firefly. Its results for 2024 are excellent in this respect. Sales are up again by $2 billion, as - to put it simply - they have been every year since almost 2016. This, while the group has quadrupled in scale in the meantime, is an astounding achievement in the face of the implacable law of large numbers. The small dent in profits is attributable to the $1 billion penalty paid to Figma as compensation for the aborted acquisition attempt. But cash generation remains prodigious: in 2024, it should reach an all-time high after three years of stagnation. This free cash flow, as is customary at Adobe, will be entirely redirected to share buy-backs. MarketScreener has always questioned the relevance of these share buy-backs, carried out at average valuations of forty times earnings; however, we must admit that the formula has worked rather well for the Group and its shareholders.

Adobe Results Seen as 'Make-or-Break' to Prove AI Credentials

Adobe Inc. is running out of time to show investors it can be a winner in the artificial intelligence era. The shares are down 8.3% this year, underperforming an index that tracks the software sector, which is up more than 30%. And after last quarter's guidance disappointed Wall Street, the pressure is on for results due after Wednesday's market close. Adobe needs to demonstrate it can make money from its AI tools and stand up to rising competition from generative AI platforms that create images and videos from user prompts.

Adobe Gives Disappointing Outlook, Stoking AI Disruption Fears

Adobe Inc. gave a disappointing annual sales outlook, underscoring anxieties that the creative software giant could be disrupted by emerging artificial intelligence-based startups. Revenue will be about $23.4 billion in the fiscal year ending in November 2025, the company said Wednesday in a statement. Earnings, excluding some items, will be $20.20 a share to $20.50 a share. Analysts, on average, estimated sales of $23.8 billion and adjusted profit of $20.52 a share, according to data compiled by Bloomberg.

Adobe forecasts annual revenue below estimates

Dec 11 (Reuters) - Photoshop maker Adobe (ADBE.O), opens new tab forecast annual revenue below Wall Street estimates on Wednesday, indicating the company's investments to weave AI into its software applications were taking longer to bear fruit. Shares of the San Jose, California-based company fell over 6% in extended trading. The company forecast revenue between $23.30 billion and $23.55 billion compared with estimates of $23.78 billion, according to data compiled by LSEG. While Adobe projected strong growth for the second half of the year in June, its forecast on Wednesday indicated the company was still struggling to monetize its AI push. Reporting by Kritika Lamba and Zaheer Kachwala in Bengaluru; Editing by Krishna Chandra Eluri Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence