Adobe Gives Sales Outlook That Fails To Convince AI Skeptics

Adobe Inc. gave a sales outlook for the current quarter that topped analysts' estimates, but investors remain skeptical that the leader in creative software can outduel AI-focused upstarts.

Sales will be about $5.88 billion to $5.93 billion in the period ending in August, the company said Thursday in a statement. Analysts, on average, estimated $5.88 billion. Profit, excluding some items, will be $5.15 a share to $5.20 a share, compared with the average projection of $5.11.

Adobe has become a central focus of investors debating whether artificial intelligence tools will disrupt traditional software industry leaders. The company's quarterly results have served as a report card every three months on the competition. Design applications like those from Canva Inc. and image-creation tools from AI firm Midjourney Inc. have gained steam while Adobe has weaved generative AI tools through its products like Photoshop. In February, it introduced separate subscriptions for its AI video generator, trying to compete with similar tools from rivals including OpenAI and Runway.

“Somehow Adobe has been snagged as an AI loser,” said Gil Luria, an analyst at DA Davidson, in an interview on Bloomberg TV. “We think that's a misunderstanding of the technology,” he added.

Adobe's family of AI models, called Firefly, has been used to generate more than 24 billion pieces of content, Chief Financial Officer Dan Durn said in remarks prepared for a conference call after the results. That's up from 20 billion in March. Adobe had said then that it expected $250 million in annual recurring revenue from AI products.

The shares were little changed in extended trading after closing at $413.68 in New York. The stock has dropped 7% this year.

Fiscal second-quarter revenue increased 11% to $5.87 billion, compared with an average analyst estimate of $5.8 billion. Profit, excluding some items, was $5.06 per share, while Wall Street anticipated $4.98.

The digital media unit, which includes Adobe's flagship creative and document-processing software, posted an 11% increase in sales to $4.35 billion. Annual recurring revenue for the closely watched segment was $18.1 billion, in line with estimates. Revenue from the unit that includes marketing and analytics software rose 10% to $1.46 billion.

“Adobe's AI innovation is transforming industries enabling individuals and enterprises to achieve unprecedented levels of creativity,” Adobe Chief Executive Shantanu Narayen said in the statement.

(Updates with comments from analyst in the fourth paragraph.)