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Adobe Faces Its Biggest Downturn in More Than 20 Years

On Friday, March 15, a decrease in the price of Adobe shares was recorded after the company released its sales outlook for the current quarter, which turned out to be disappointing compared to preliminary expectations regarding what commercial goals the firm sets for itself.

Adobe Faces Its Biggest Downturn in More Than 20 Years

Against the background of the mentioned forecast, concerns have strengthened that Adobe is facing increasing competition from startups in the artificial intelligence industry. Currently, there is no firm confidence that the company will be able to successfully cope with the challenges associated with the growth in the number of players in the advanced technology sector. In this case, it is also important that AI startups can sometimes offer technologies that large firms do not have.

Adobe expects its revenue for the current quarter to range from $5.25 billion to $5.3 billion. It is worth noting that analysts interviewed by the media predicted that this figure would amount to $5.31 billion. This is not a significant difference in expectations, but the fact that Adobe’s vision of its future commercial results is more pessimistic than the market’s point of view has become a factor in the negative impact on the cost of the company’s securities.

At the same time, the firm predicts that its profit per share, excluding some items, will be $4.40. In this case, the company’s expectations turned out to be more optimistic compared to the point of view of the analysts interviewed by the media, according to whom the mentioned indicator should have been equal to $ 4.38.

During its existence, Adobe has become one of the main players in the sphere of software development for professionals in the creative arts area. Recently, the company has been facing steady reinforcement of the competition from startups specializing in generative artificial intelligence. These firms, which are in the early stages of existence, have the potential to challenge Adobe’s market position.

It is worth noting that the long-term leader in the sphere of software for professionals in the creative arts area is aware of the specifics of the current configuration of reality in the advanced technology sector. This is evidenced by the fact that the company has released its own artificial intelligence model called Firefly. This development has been integrated into Adobe products such as Photoshop and Illustrator.

The company’s useful efforts are obvious. Adobe realizes that artificial intelligence is gradually becoming the main driving force in the technology area, and ignoring this means depriving yourself of a successful future. At the same time, competition in this industry shows a tendency to increase and, in a sense, to tighten. After OpenAI presented its new artificial intelligence model called Sora, designed for video generation, there was a kind of anxiety among investors about Adobe’s prospects in the context of its ability to hold market positions.

The company’s chief executive officer, Shantanu Narayen, said that expectations regarding commercial results may have been higher than what the firm is guided by. At the same time, he noted his optimistic attitude about Adobe’s initiatives in the area of artificial intelligence.

The company expects the new recurring creative business to generate $440 million in revenue in the current quarter. Analysts interviewed by the media predicted that this figure would amount to $459 million. Parker Lane, an expert at Stifel, said during a conversation with media representatives that the mentioned expectation difference probably became a factor of disappointment for investors who believed that the new artificial intelligence functions would be more financially effective.

Adobe shares hit an intraday low of $490 on Friday morning as markets opened in New York. This dynamic was the biggest decline since September 2022. It is worth noting that last year the company’s share price rose by 77%.

Keith Weiss, an analyst at Morgan Stanley, says that the negative dynamic to the cost of Adobe securities is the result of concerns about competition.

In the first fiscal quarter, the company’s sales totaled $5.18 billion. This indicator increased by 11% year-on-year. It is worth noting that analysts forgiven by the media predicted that revenue would amount to $5.14 billion.

Adobe has already started monetizing new artificial intelligence features and intends to step up its efforts in the corresponding direction in the second half of 2024. David Wadhwani, the company’s executive vice president, said that Firefly has been used to generate more than 6.5 billion media files.

As we have reported earlier, Adobe Launches AI Assistant.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.