Adobe shares fall on weak profit forecast, concerns about delayed AI profits

Sept 13 (Askume) – Adobe (ADBE.O) shares fell nearly 10% on Friday as the Photoshop maker’s disappointing quarterly profit forecast raised concerns about its work on artificial intelligence design.

Adobe, one of the world’s largest software companies, has invested heavily in AI imaging and filmmaking to maintain its lead in the design software industry amid growing competition from well-funded startups such as Stability AI and Midjourney.

The company on Thursday forecast fourth-quarter revenue in the range of $5.5 billion and $5.55 billion , while analysts surveyed by LSEG had expected $5.61 billion.

Excluding items, quarterly profit was expected to be $4.63 to $4.68 per share, compared with expectations of $4.67 per share.

If current losses continue, Adobe stands to lose more than $25 billion in market value.

The company’s shares are down about 2% this year after rising more than 77% through 2023.

Although fourth quarter revenue was below expectations, Adobe said it expects annual net new recurring revenue (NNARR) to exceed expectations, indicating that Adobe’s subscription sign-ups remain healthy.

“Adobe expects year-over-year Creative Cloud NNNR growth in the fourth quarter and is one of the few software companies to report net new bookings growth,” JPMorgan analysts said in a note.

The company said in June that it expected stronger growth in the second half of the year, but the weak forecast suggests the shopping environment will remain under pressure.

Bernstein analysts said, “We believe there are no clear near-term catalysts for the stock unless Adobe somehow manages to reassure investors of strong growth next year.”