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(Bloomberg) -- Adobe Inc. shares slid by the most in six months after the company issued an outlook that disappointed investors who are growing impatient to see new artificial intelligence tools generate cash.
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Known for making software for creative professionals, Adobe has been adding AI features to its applications. The company has embedded its proprietary technology, Firefly, into products including Photoshop and Illustrator. Investors are looking for evidence that Adobe can make money from those tools, especially as small startup rivals are trying take business from traditional software companies like Adobe, Salesforce Inc. and Workday Inc.
The company’s fiscal fourth-quarter sales guidance heightened investors’ concerns, falling short of Wall Street estimates. A closely watched metric that tracks the growth of recurring revenue in its creative software business — digital media net new annual recurring revenue — will be $550 million in the period ending in November, the company said Thursday in a statement. Analysts, on average, estimated $561.1 million. Total revenue will be as much as $5.55 billion in the period, compared with analysts’ average estimate of $5.6 billion.
The shares fell as much as 10% in New York trading on Friday to $526.60, the lowest intraday level since March 15. The stock has declined about 11% this year.
On a call with analysts, David Wadhwani, digital media division chief, said Adobe is still focused on making sure customers use its AI innovations rather than seeking to directly make money from the tools. The company is also working on developing similar technology for its 3D and video-editing software. Chief Executive Officer Shantanu Narayen added that content types such as video will give Adobe more ways to sell the tools in the future.
But investors were expecting Adobe to show results from AI in the second half of this fiscal year, Michael Turrin, an analyst at Wells Fargo, said in an interview with Bloomberg Television. They were likely hoping for better fourth-quarter guidance, he added.
Wadhwani touted price increases announced last year as one way Adobe is seeing a return on investment for its AI features. Canva Inc., an Australian-based closely held company that generally is considered Adobe’s largest competitive threat, cited new AI tools when it sharply raised prices on business users earlier this month.