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(Bloomberg) — Adobe Inc. gave a disappointing annual sales outlook, underscoring anxieties that the creative software giant could be disrupted by emerging artificial intelligence-based startups.
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Revenue will be about $23.4 billion in the fiscal year ending in November 2025, the company said Wednesday in a statement. Earnings, excluding some items, will be $20.20 a share to $20.50 a share. Analysts, on average, estimated sales of $23.8 billion and adjusted profit of $20.52 a share, according to data compiled by Bloomberg.
Adobe, known for its software for creative professionals, has been adding generative AI features to its applications, such as embedding its proprietary model, Firefly, into products like Photoshop. Adobe unveiled an AI tool to create videos during its annual user conference in October, which has been integrated into editing app Premiere and is slowly rolling out to the wider public.
The company will soon introduce a “new higher-priced Firefly offering,” which includes video models, said David Wadhwani, who leads Adobe’s creative business, according to a transcript of remarks prepared for a conference call after the results were released.
A closely watched metric of new creative software business — digital media net new annual recurring revenue — will increase 11% in the fiscal year, in line with estimates. Factored into guidance “is an ongoing strategy to introduce new tiered subscription offerings and add-ons,” Chief Financial Officer Dan Durn said in the prepared remarks.
The shares fell about 8% in extended trading after closing at $549.93 in New York. Adobe’s stock has dropped 7.8% this year, lagging behind software peers and industry benchmarks. Investors have voiced recurring anxieties that AI-based creative tools from firms like OpenAI or Runway AI could take market share from Adobe.
In the fiscal fourth quarter, sales increased 11% to $5.61 billion. Profit, excluding some items, was $4.81 a share. Analysts, on average, projected earnings of $4.67 a share on revenue of $5.54 billion. Adobe ended the quarter with digital media annual recurring revenue of $17.3 billion, slightly ahead of the average analyst estimate.
The digital media unit, which includes Adobe’s flagship creative and document-processing software, posted a 12% increase in sales to $4.15 billion in the quarter ended Nov. 29. Revenue from the unit that includes marketing and analytics software rose 10% to $1.4 billion.
