Dive Brief:
- Photoshop and Acrobat maker Adobe’s total revenues jumped to $5.7 billion during its most recent quarter ended Feb. 28, a 10% year-over-year increase, the company reported Wednesday, giving much of the credit to recent artificial intelligence investments.
- The company’s annual recurring revenue for AI standalone and add-on products such as Acrobat AI Assistant was $125 million at the end of quarter, with that figure projected to double in the next nine months, Adobe CEO Shantanu Narayen said during a Wednesday earnings call.
- “If you don't take advantage of AI, it is a disruption,” he said. “In our particular case, the intent is clearly to show how it's a tailwind.”
Dive Insight:
Despite the revenue growth, Adobe shares fell 13.85% to close at $377.84 Thursday after the earnings release.
This was likely due in part to the fact that Adobe’s full-year revenue and earnings per share guidance were just in line with estimates, which signaled a lack of near-term momentum, according to a Yahoo Finance report.
“Wall Street likes to see companies beat and raise, and this wasn't impressive,” the report said. “Adding to the weakness, growth trudged along in the quarter rather than accelerate.”
The company is scheduled to host a summit for investors next week in which it is expected to provide further updates on its strategy, innovation plans and finances.
In a Thursday client’s note, Morningstar senior equity analyst Dan Romanoff said Adobe’s recent introduction of products such as Firefly — an AI tool that can generate video clips — is encouraging, although monetization is still “in the early stages.”
“We continue to think recent price increases, product launches, and rapid generative AI adoption should help drive growth in 2025,” he said.
