Adobe is 'trembling' at AI startups

According to TechNewsSpace , despite meeting analysts' expectations in the first quarter of the fiscal year (ending March 1), Adobe gave a less-than-optimistic forecast for the current quarter, causing its stock to drop 10%.

Adobe's revenue rose 11% to $5.18 billion in the quarter. Earnings per share (excluding certain items) were $4.48, compared with Wall Street analysts' expectations of $5.14 billion and $4.38, respectively. The Digital Media segment, which includes Adobe's flagship creative software products, saw revenue grow 12% to $3.82 billion, while marketing and analytics software revenue rose 10% to $1.29 billion.

Adobe is scared of AI startups

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However, Adobe's forecast for the current period did not meet analysts' expectations, as the company expected revenue of $5.25 billion to $5.3 billion, lower than the expected $5.31 billion; earnings per share of $4.40 compared to analysts' forecast of $4.38.

As a leading name in software development for creative professionals, Adobe is facing the fear of being invaded by startups developing new generation of artificial intelligence (AI)-based systems. To counter this threat, Adobe has introduced its own AI model called Firefly into advanced products such as Photoshop and Illustrator.

The emergence of OpenAI's Sora video generation model has investors skeptical. "Perhaps expectations were a little higher than what we delivered," said Adobe CEO Shantanu Narayen. "But I'm very optimistic about what we've achieved."

Innovations in AI video creation, in turn, will increase demand for Adobe’s existing products, Narayen said. He believes that in 10 years, AI won’t be able to “recreate” an Oscar-winning film like Oppenheimer based on a written request alone. The company will introduce new video tools in the coming months.

Adobe also announced a new $25 billion share buyback program. The previous $15 billion share buyback program was set to expire at the end of fiscal year 2024.

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