Adobe’s stock plummeted nearly 12% on Thursday after the company’s disappointing full-year revenue forecast raised concerns about the delayed returns from its artificial intelligence (AI) investments. The drop followed Adobe’s projection for fiscal 2025 revenue between $23.30 billion and $23.55 billion, falling short of the average analyst estimate of $23.78 billion, according to LSEG data.
RBC analyst Matthew Swanson noted that despite Adobe’s alignment with its GenAI product roadmap, the lack of clear monetization metrics has made it difficult for investors to fully gauge the progress and long-term potential of the company’s AI ventures.
Morningstar analysts observed a growing divide between the enthusiasm expressed by Adobe’s management and the more cautious investor sentiment. “There is a clear disconnect between management’s excitement about their AI developments and the mixed signals investors are receiving,” they said.
As Adobe continues to invest heavily in AI-driven image and video generation tools, it faces mounting competition from well-funded startups like Stability AI and Midjourney. Adobe’s recent advancements in video-generation technology have put it in direct competition with OpenAI’s Sora, further intensifying the battle for dominance in the generative AI space.
Despite projecting strong growth in June for the latter half of the year, Adobe’s revenue forecast has led at least seven brokerages to lower their price targets. “Adobe’s performance has underperformed the S&P 500 for over five years, and to reignite long-term investor confidence, the company needs a more consistent track record of beating or raising expectations,” said Evercore ISI. Analysts also pointed out that the uncertainty surrounding AI monetization is weighing on the stock’s performance.
At its current price of $493.10 per share, Adobe is on track to lose nearly $25 billion in market value if the losses persist. The stock has fallen about 8% this year, while the S&P 500 has risen by 27.6%. Adobe’s 12-month forward price-to-earnings ratio stands at 26.46, compared to Autodesk’s 33.63.
