(Bloomberg) — Adobe Inc. fell in extended trading after disappointing annual sales prospects, underscoring fears that the creative software company could lose sales to emerging artificial intelligence-based startups.
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Sales will be about $23.4 billion in the fiscal year ending November 2025, the company said in a statement Wednesday. Earnings, excluding some items, will be $20.20 per share to $20.50 per share. Analysts on average estimated revenue at $23.8 billion and adjusted earnings at $20.52 per share, according to data compiled by Bloomberg.
Adobe, known for its software for creative professionals, has added generative AI features to its applications, such as embedding its own model, Firefly, into products like Photoshop. The company unveiled an AI video creation tool at its annual user conference in October, which has been integrated into the editing app Premiere and is slowly being rolled out to the wider public.
The software maker will soon introduce a “new, higher-priced Firefly offering” including video models, David Wadhwani, who heads the company’s creative operations, said on a conference call after the results were announced.
A closely watched measure of new creative software business – net new annual recurring digital media revenue – will rise 11% this fiscal year, in line with estimates. The guidance takes into account “an ongoing strategy to introduce new tiered subscription offerings and add-ons,” Chief Financial Officer Dan Durn said on the call.
Adobe’s outlook may be conservative because of “the uncertain pace at which AI use may take root,” wrote Anurag Rana, an analyst at Bloomberg Intelligence.
Shares fell nearly 9% in extended trading after closing at $549.93 in New York. The stock is down 7.8% this year, lagging software peers and industry benchmarks. Investors have expressed recurring fears that AI-based creative tools from companies like OpenAI or Runway AI could take market share from Adobe.
While company executives and customers are touting the value of Adobe’s new AI tools, “investors aren’t feeling that excitement,” Keith Weiss, an analyst at Morgan Stanley, said on the conference call.
In its fiscal fourth quarter, Adobe reported revenue rose 11% to $5.61 billion. Profit, excluding some items, amounted to $4.81 per share. Analysts on average had forecast earnings of $4.67 per share on revenue of $5.54 billion. The company ended the quarter with annual digital media revenue of $17.3 billion, slightly higher than the average analyst estimate.
The digital media unit, which includes Adobe’s flagship creative and document processing software, posted a 12% increase in revenue to $4.15 billion in the quarter ended Nov. 29. Revenue at the unit, which includes marketing and analytics software, rose 10% to $1.4 billion. .
Firefly’s integration into applications within the company’s products “will drive record customer adoption and usage,” said Chief Executive Officer Shantanu Narayen. Firefly has been used more than 16 billion times, he added.
On Monday, OpenAI made its video-generating model Sora available to those who already paid for its chatbot ChatGPT. Wadhwani said Adobe’s video model “will be more widely available in early 2025.”
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