Adobe stock faces biggest decline since 2002 as AI competition increases

The integration of Firefly AI models into its flagship products fails to allay investors’ concerns about innovations from competitors (EFE/Andrew Gombert)

Adobe Inc. fell as much as 14% Friday morning after a weak sales forecast for the current quarter stoked concerns that new AI startups are a competitive threat.

The company said in a statement on Thursday that revenue in this period will be between $5.25 billion and $5.3 billion. Analysts were expecting an average of $5.31 billion, according to data compiled by bloomberg, Excluding some items, earnings will be up to $4.40 per share, compared with analysts’ average estimate of $4.38.

The longtime leader in software for creative arts professionals has faced the same concerns that new startups are based on Generative AI They will close their market. Adobe has responded by integrating its proprietary artificial intelligence models, fireflyIts main products include Photoshop And illustrator, However, a recent performance by OpenAI Its video generation model, SoraRevived investors’ concerns about competition.

“Expectations were probably a little high in terms of the guidance we would give,” the CEO said. Shantanu Narayan During a conference after the results. “But you know I’m really optimistic about what we’ve done,” he said of the initiative. Aye Of the company.

Adobe It expects $440 million in new creative recurring business in the current quarter, below the $459 million expected by analysts. That probably disappointed investors who wanted to see a bigger financial impact from new AI features, Parker Lane, an analyst at Stifel, said in an interview. bloomberg tv,

“Investors are hearing a lot of great things from the company on the AI ​​front, such as usage growth, and they’re just waiting for that to be reflected in the fundamentals,” Lane said.

Shares hit a low of $490 as markets opened Friday morning New YorkBiggest fall since September 2022. After surging 77% in 2023, the stock has fallen 4.4% since the beginning of the year. This poor performance is due to the fear of competition from both generative startups and OpenAI as well as long-standing rivals such as Canva Inc.wrote keith weissan analyst Morgan StanleyBefore the results.

The recent announcement about the abandonment of the merger with Figma Inc. and the adjustment of strategies against competition comes in the financial context of Adobe (Reuters/Dado Ruvik).

Sales rose 11% to $5.18 billion in the fiscal first quarter. Excluding certain items, earnings were $4.48 per share. Wall Street had expected revenue of $5.14 billion and adjusted earnings of $4.38 per share.

Sales at the digital media unit, which includes Adobe’s flagship software for creativity and document processing, rose 12% to $3.82 billion in the period ended March 1. Revenue from the division, which includes marketing and analytics software, rose 10% to $1.29 billion.

The company is already starting to monetize new features Aye And will step up these efforts in the second half of the year, officials said on a conference call after the results. firefly It has been used to generate more than 6.5 billion pieces of media, said the executive vice president David Wadhwani,

Narayan said that new inventions video generation ai Demand for existing editing tools should accelerate Adobe, because creators will need to work with video. “The notion that the next oppenheimer This will be done using text-to-video prompts – that’s not going to happen for decades,” he said.

Wadhwani said Adobe will show off more video features in the coming months. The company announced a new share buyback program worth $25 billion. Adobe’s previous $15 billion share buyback plan was set to expire at the end of fiscal 2024.

In December, Adobe said it is abandoning its planned merger with a product design startup Figma Inc. In response to regulatory pressure, billions of cash were freed up. He is also ending his effort to create a product to compete internally Figand may instead explore the product category through partnerships.

(c) 2024, Bloomberg

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