Adobe beats financial expectations, but shares fall on AI concerns

Adobe achieved higher sales and earnings in the last financial quarter than had been expected by observers and the stock market. Despite this, the software company's share price fell significantly. This is likely due to investor concerns about the company's growth strategy and the monetization plans for Adobe's own artificial intelligence (AI) offerings.

Adobe has already been integrating a cloud-based AI called Firefly into its Photoshop image editing software and Premiere Pro video editing program for some time. There, images can be generated from text input and video clips can be extended by a mere two seconds. The Adobe web app recently received a new addition in the form of an AI video generator. Adobe Firefly uses this to generate videos and translate audio tracks.

Nevertheless, there have been concerns for some months that Adobe is falling behind the competition in terms of AI. The software company puts the regular revenue from its own AI offerings at 125 million US dollars in the past three months. This is expected to double by the end of the current financial year (end of November).

Significant increase in sales and profits

However, these AI revenues are almost insignificant given the total revenue of 5.71 billion dollars in the first financial quarter of fiscal year 2025, which ended at the end of February. Observers had expected 5.66 billion dollars, but Adobe was able to increase this by 10 percent year-on-year. At the same time, the software company more than doubled its operating income to 2.16 billion dollars. Net profit almost tripled year-on-year to 1.8 billion dollars.

According to the Adobe press release, subscription fees continue to make up the lion's share of revenue. At 5.48 billion dollars, this accounts for 96 percent of total revenue. The rest comes from product sales (95 million dollars) and services (136 million dollars). Compared to the same period last year, these two divisions have also declined (by 20 and 7 percent respectively), while subscription fees have increased by 11.5 percent.

Adobe sees itself well positioned, analysts demand more

Despite external concerns, Adobe CEO Shantanu Narayen believes his company is "well positioned to benefit from AI-driven growth in the creative industries". In an interview with the US television channel CNBC, Narayen also explained: "Not only are we integrating AI into our existing products to create value, but it's also clear that the innovations we deliver are creating new revenue streams."

Analysts are hoping for more clarity on Adobe's AI strategy at the company's annual investor conference on March 18, Tuesday next week. It is clear that AI will not replace existing revenues, but investors should see a clear, longer-term strategy from Adobe, analysts said.

Initially, Adobe's share price was dampened. Following the announcement of the quarterly figures, the share price fell by almost 14 percent. Since the beginning of the year, Adobe shares had already lost almost four percent in value.

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