Key Takeaways

  • Adobe, the developer of Photoshop and Acrobat, in its latest quarter ending February 28,saw total revenue jump to $5.7 billion, a 10% year-over-year increase, the company reported on Wednesday, driven largely by recent investments in artificial intelligence.
  • CEO Shantanu Narayen said on Wednesday's earnings call that AI standalone products and add-ons, such as Acrobat AI Assistant, reached an annual recurring revenue of $125 million by quarter-end, a figure he expects to double within the next nine months.
  • "If you're not leveraging AI, it's a disruption," he said. "For us, the intent is clear: to show how it can be a tailwind."

Deeper Dive

Despite the revenue growth, following the earnings release,Adobe's stockfell 13.85%, closing Thursday at $377.84.

According to Yahoo Finance, this was likely partly because Adobe's full-year revenue and earnings per share guidance merely met market expectations, indicating a lack of near-term growth momentum.

"Wall Street likes companies to beat and raise, and this wasn't impressive," the report said. "Adding to the weakness, growth in the quarter was slow-moving rather than accelerating."

The company plans to host an investor summit next week, where it is expected to provide further updates on strategy, innovation initiatives, and finances.

In a client note Thursday, Morningstar senior equity analyst Dan Romanoff said Adobe's recent product launches, such as Firefly—an AI tool that can generate video clips—are encouraging, though commercialization is still in its "early stages."

"We still believe that recent price increases, product launches, and rapid adoption of generative AI should help drive growth in 2025," he said.