(Bloomberg) – Adobe Inc. gives its current quarter sales outlook, surpassing analyst estimates, but investors are skeptical that Creative Software leaders can outperform AI-focused upstarts.
The company said in a statement that its revenues will range from around $5.88 billion to $5.933 billion for the period ending in August. Analysts estimated an average of $5.88 billion. Profits excluding some items are $5.20 per share to $5.15 per share compared to the average forecast of $5.11.
Adobe has become the central focus of investors debating whether artificial intelligence tools will disrupt traditional software industry leaders. The company's quarterly results serve as a report card every three months of the competition. Design applications like Canva Inc. and image creation tools from AI company Midjourney Inc. have won Steam, but Adobe has weaved the generation AI tools through products such as Photoshop. In February, they introduced separate subscriptions to AI video generators, attempting to compete with similar tools from rivals such as Openai and Runway.
“For some reason, Adobe was caught up as an AI loser,” said Da Davidson analyst Gil Luria in an interview with Bloomberg TV. “I think that's a misunderstanding of technology,” he added.
Adobe's family of AI models, called Firefly, is being used to generate more than 24 billion pieces of content, Dan Durn's chief financial officer said in a statement prepared for a conference call after the results. That's up from 20 billion in March. Adobe said it expects $250 million in annual recurring revenues from AI products.
The shares were largely unchanged in the extension transaction after closing in New York at $413.68. The stock price fell 7% this year.
Second quarter revenue rose 11% to $5.87 billion, compared to an average analyst estimate of $5.8 billion. The profits were $5.06 per share except for some items, but Wall Street had expected $4.98.
The digital media unit, which includes Adobe's flagship creative and document processing software, rose 11% to $435 billion. The closely monitored segment's recurring annual revenues were $18.1 billion, in line with estimates. Revenue from units, including marketing and analytics software, increased 10% to $1.46 billion.
“Adobe's AI innovation is transforming industries that enable individuals and businesses to achieve unprecedented levels of creativity,” Adobe CEO Shantanu Narayen said in a statement.
(Updated in the fourth paragraph with comments from the analyst.)
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