Adobe Shares Drop 12% After Weak Revenue Forecast Raises Concerns Over Delayed AI Returns
Adobe’s stock plummeted nearly 12% on Thursday, following a disappointing revenue forecast for the full year, which sparked concerns that the company’s artificial intelligence (AI) investments might take longer to deliver returns than initially expected.
Despite remaining on track with its GenAI product roadmap, RBC analyst Matthew Swanson noted, “The absence of clear monetization metrics has made it difficult for investors to feel confident about Adobe’s progress.”
On Wednesday, the San Jose, California-based company projected fiscal 2025 revenue between $23.30 billion and $23.55 billion, below analysts’ expectations, which had averaged $23.78 billion, according to data compiled by LSEG.
Morningstar analysts highlighted a growing divide between Adobe’s optimistic outlook and investor sentiment: “We see a clear disconnect between management’s excitement and the internal signs of success they observe, compared to what investors are seeing.”
Adobe has been ramping up its investments in AI-driven image and video generation technologies, attempting to keep pace with well-funded startups like Stability AI and Midjourney. Its progress in video-generation technology now places it in direct competition with OpenAI’s Sora.
In June, Adobe had forecasted strong growth for the second half of the year, but at least seven brokerages downgraded their price targets following the revenue projection. Evercore ISI remarked, “Adobe has underperformed the S&P for more than five years, and it needs to establish a consistent pattern of positive earnings reports to regain investor confidence.”
With Adobe’s shares currently priced at $493.10, the company could lose nearly $25 billion in market value if the downward trend continues. The stock is down about 8% year-to-date, in stark contrast to the S&P 500’s 27.6% gain.
Additionally, Adobe’s 12-month forward price-to-earnings ratio is 26.46, lagging behind competitors like Autodesk, which boasts a ratio of 33.63.