Adobe Forecast Misses Views, Renewing Fears About AI Impact

Revenue will be $6.8 billion to $6.85 billion in the quarter ending in November, the company said Thursday in a statement. The midpoint of that range missed the $6.85 billion average prediction, according to data compiled by Bloomberg.

The software maker is navigating a crisis of investor confidence over the impact of AI. Known for tools like Photoshop, Adobe's software has long been the standard for creative and marketing professionals. But generative AI has made it easier to produce visual media without the company's expensive products, and many of the most popular new AI tools are built by competitors.

ALSO READ: Who Is Anil Chakravarthy? Adobe Names New CEO To Succeed Shantanu Narayen

Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay

The shares fell about 2% in extended trading after closing at $248.83 in New York. The stock was already down 29% this year heading into the quarterly report.

Profit, excluding some items, will be $6.30 to $6.35 a share, the company said. Analysts estimated $6.30 a share on average.

Last week, Adobe named one of its internal division leaders, Anil Chakravarthy, as its next chief executive officer, effective Dec. 1, succeeding Shantanu Narayen. The decision caught some investors by surprise, as the unit Chakravarthy ran - marketing and analytics software - is much smaller than the company's flagship creative unit. The other leading candidate to become CEO, David Wadhwani, oversaw Adobe's creative business. He will leave the company later this month.

"A soft Q4 forecast adds questions about how Adobe will continue to compete - and what strategy its new CEO will take - as AI reshapes the creative software market," Emarketer analyst Grace Harmon said in a note.

Adobe has argued that it stands to benefit from the shift to artificial intelligence. Annual recurring revenue from "AI-first" products grew more than 150% last quarter, the company said. And Adobe passed a milestone of 1 billion monthly active users.

"Our strategy for business professionals and consumers is to deliver AI-powered applications that transform how users comprehend, create and share content," Chakravarthy said on a conference call with analysts after the results were released.

For the fiscal third quarter, which ended Aug. 28, revenue increased 13% to $6.76 billion. Profit, excluding some items, was $6.13 a share. Analysts, on average, estimated earnings of $6.08 per share on $6.7 billion of revenue.

ALSO READ: Adobe Expands In Middle East With $4-Billion Free AI Access Deal With Saudi Arabia

After naming a new CEO, Adobe is still looking for a finance chief. The company announced in June that Chief Financial Officer Dan Durn would exit his post, and Senior Vice President Steve Day would serve as interim CFO until a successor was hired.