(Bloomberg) – Adobe Inc.'s stock fell the most three months after Creative-Software Company gave AI-focused Upstarts sales prospects for the current quarter when it failed to calm investors who could hold their own investors.
Adobe has become the central focus of investors debating whether artificial intelligence tools will disrupt traditional software industry leaders. Design applications like Canva Inc. and image creation tools from AI company Midjourney Inc. won Steam, but Adobe weaved the generation AI tools through products including 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 Thursday on Bloomberg's television. “I think that's a misunderstanding of technology,” he added.
Stocks fell 5.3% to $391.68 at New York's Friday ending 5.3%, the biggest drop since March 13th. This year there was a 12% decrease.
Investors were less responsive to Adobe's financial updates, despite Outlook surpassing analyst estimates. 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. Wall Street is estimated to average $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'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.
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.
(Update by closing the stock price)
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