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Adobe shares slump as pessimistic forecast fans fears about competition, AI ambitions

A logo of Adobe Inc. is visible at the company's office at Citywest Business Campus, Saggart, Ireland October 19, 2021

March 15 (mod1s) - Adobe (ADBE.O), opens new tab shares sank 12% on Friday as a poor quarterly outlook confirmed fears about increased competition for the company's creative suite including Photoshop and disappointed investors looking for a lift from AI integration. 

The business forecasts around $440 million in net new annual recurring revenue for the digital media sector, which contains its cloud offerings for documents and creative applications. Last year, the unit had reported $470 million.

"Adobe has enjoyed a high competitive moat over its corporate history and we think that AI has significantly eroded many of these competitive barriers and see competitive pressures building over time," HSBC analysts wrote in a note. 

Artificial-intelligence businesses such as Stability AI and Midjourney are seeking to disrupt Adobe's years-long dominance on the graphics industry. 

Overall revenue prediction was also below forecasts, with Adobe CEO Shantanu Narayen adding "expectations were perhaps a little higher ... in terms of what we would guide for Q2".

If losses hold, the corporation would lost more than $30 billion in market value. Its shares have decreased around 4% this year, after soaring 77% in 2023. 

"Mixed messages are hard to interpret," Piper Sandler analysts said, adding Adobe was still in the early stages of monetizing AI across its primary platforms. 

Adobe also announced a $25 billion stock repurchase on Thursday, months after scrapping its $20 billion bid for cloud-based designer platform Figma owing to regulatory obstacles.

Adobe's stock trades at 30.41 times its future earnings forecasts, compared with 32.87 for Microsoft (MSFT.O), opens new tab and 30.42 for Salesforce (CRM.N), opens new tab.


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