Adobe (NASDAQ:ADBE) saw its stock drop over 12% intra-day today after delivering a quarterly outlook that met expectations but failed to spark enthusiasm among investors. While the company’s latest financial results were broadly in line with Wall Street projections, analysts noted that they did little to strengthen the overall investment case for the stock.
A key focal point for Adobe remains its artificial intelligence (AI) strategy, which is seen as both a competitive advantage and a response to emerging threats from smaller, more agile rivals. While the company has integrated AI across its product suite, investors are eager for clearer guidance on when these efforts will translate into meaningful revenue growth.
Despite concerns about competition, some analysts argue that Adobe’s AI-driven revenue potential is being undervalued. Mizuho analysts believe that as AI monetization ramps up, its impact will become more visible in the second half of the year. They pointed to AI-related recurring revenue, which includes tools like Acrobat AI Assistant and GenStudio for Performance Marketing, reaching $125 million by the end of the first quarter. Company executives expect this figure to double by the end of fiscal 2025, reinforcing the long-term growth trajectory.
Adobe reported adjusted earnings per share of $5.08 on revenue of $5.71 billion, surpassing analysts’ expectations of $4.97 EPS and $5.66 billion in revenue. For the upcoming quarter, the company forecasted revenue between $5.77 billion and $5.82 billion, aligning with consensus estimates. Its full-year guidance of $23.30 billion to $23.55 billion also remained steady, closely matching market expectations.