Adobe, on Wednesday, forecasted its second-quarter revenue in line with Wall Street expectations despite facing challenges related to slower monetization of AI offerings and stiff competition from startups. The company's shares dropped over 4% in after-hours trading.
The projected revenue for the second quarter is expected to range between $5.77 billion and $5.82 billion, matching analysts' forecasts. Adobe also restated its annual revenue outlook, with its CEO expressing confidence in the company's ability to benefit from the rise of AI-driven creative economy.
Investors and analysts are keenly monitoring Adobe's progress in monetizing its generative AI products as it strives to set itself apart from competitors by enhancing its portfolio with advanced AI editing tools.
In its pursuit of a competitive edge, Adobe has been actively integrating AI technology into its software suite, particularly bolstering products like Photoshop, widely used across various professional sectors.
During the last quarter, Adobe generated $5.71 billion in revenue, surpassing the projected $5.66 billion, with digital media revenue reaching $4.23 billion, exceeding the estimated $4.19 billion.
Commenting on the company's AI transition, analyst Parker Snook remarked on the challenges, while another analyst, Gil Luria, pointed out that as Adobe introduces new AI-driven products, concerns are expected to shift to excitement about these innovations. Adobe aims to double its annual recurring revenue for AI and add-on offerings from $125 million to $250 million by the end of fiscal year 2025, according to CFO Dan Durn.