(Bloomberg) — Adobe Inc. shares fell the most in three months after the creative-software company gave a sales outlook for the current quarter that failed to calm investors who have been skeptical it can hold its own against AI-focused upstarts.
Adobe has become a central focus of investors debating whether artificial intelligence tools will disrupt traditional software industry leaders. 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, including 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 Thursday on Bloomberg TV. “We think that’s a misunderstanding of the technology,” he added.
The shares slid 5.3% to $391.68 at the close Friday in New York, the biggest since day decline since March 13. The stock had dropped 12% this year.
Investors responded poorly to Adobe’s financial update even though the outlook topped analysts’ estimates. Sales will be about $5.88 billion to $5.93 billion in the period ending in August, the company said Thursday in a statement. Wall Street, 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’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.
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 closing share price in the)
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