- First quarter earnings beat
- Second quarter guidance disappoints
- Worries over AI competition weigh
Adobe (ADBE:NASDAQ) was the biggest faller in the S&P 500 index on Thursday (13 March), dropping 14% despite first quarter earnings beating estimates, after the design software group issued an underwhelming outlook amid concerns over its AI strategy.
Shares in Adobe are down by around a third over the last 12-months compared with a gain of 7% for the S&P 500 index.
Revenue increased 10% to $5.71 billion, surpassing analysts’ estimates of $5.66 billion, while adjusted EPS (earnings per share) came in at $5.08 compared with consensus expectations of $4.97.
This was overshadowed by forward guidance for the current quarter with Adobe calling for second quarter revenue of between $5.77 billion and $5.82 billion compared with analyst estimates of $5.8 billion.
Adjusted EPS is expected to be between $4.95 and $5, while the consensus sits at $5.
Adobe reiterated full year guidance to November 2025 which calls for revenue of between $23.3 billion and $23.55 billion and adjusted EPS in the range of $15.8 to $16.1.
AI WORRIES
Matthew Swanson, an analyst at RBC Capital Markets said: ‘Investor sentiment has primarily been driven by views of Adobe’s AI, which has become increasingly interconnected with concerns around competition.’
Morgan Stanley wrote: ‘New disclosure of GenAI contribution is a step in the right direction, but investors need to see a clearer roadmap at the company’s investor meeting at its annual conference next week.’
The company generated $125 million of annual recurring revenue from AI in the quarter and Adobe expects it to double by the end of the fiscal year. Adobe has been integrating its AI model Firefly into its products such as Photoshop and Premiere.
CEO and chair Shantanu Narayen insisted: ‘Adobe is well-positioned to capitalise on the acceleration of the creative economy driven by AI and we are reaffirming our FY2025 financial targets.’
The firm announced it would charge $0.5 per AI-generated video as well as price increases for some of its applications.
