Adobe
stock has surged this year as the company has made a full-court press to add generative artificial intelligence capabilities across its broad suite of content creation and marketing tools.
The uptake has been swift: People experimenting with the company’s Firefly AI software have already generated more than two billion new images.
The question Adobe (ticker: ADBE) will face when it reports its latest quarterly earnings Thursday afternoon is when the big AI push will start to show up in its financial results. At this point, the AI investment surge has gotten a little ahead of the leading players’ ability to generate revenue from the trend.
While that should be no surprise—it hasn’t even been a year since OpenAI kicked off the current mania with the launch of ChatGPT—some stocks that had big AI-driven runs have spiraled back to earth when near-term financial results failed to demonstrate any lift from the trend.
Microsoft
(MSFT) and
Oracle
(ORCL) are two examples.
Adobe will report earnings after the market closes Thursday. it results will come just the day after a flurry of announcements from the company that includes additions to its AI software lineup, as well as updates on its strategy for monetizing its work in the field. The company has launched an enterprise version of Firefly as well as a plan to meter the use of AI features, giving customers the option to pay more for additional AI capacity.
RBC Capital analyst Matthew Hedberg points outs that Adobe is increasing prices by about 8% to 10% for various creative cloud plans as of Nov. 1, to reflect the costs associated with generative AI content creation. The pricing news, along with Wednesday’s other announcements, “sets the stage to dive deeper during earnings as management had previously noted that they would be updating their customers on pricing before letting investors know,” he writes in a note previewing the quarter. Hedberg maintains an Outperform rating and $615 target on Adobe stock. Shares of Adobe closed at $553.56 Wednesday, marking a 64% rise so far this year.
Citi’s Tyler Radke is more cautious, keeping his Neutral rating, though he raised his price target on the stock this week to $570 from $544.
“Firefly will be a key focus on the call, particularly on any monetization announcements over the next month,” he writes. “While Firefly momentum looks impressive so far, we’d like to see further evidence it will drive long-term growth sustainably as GenAI structurally lowers barriers to entry for new competitors in the creative category.”
Adobe’s guidance for the August quarter calls for revenue between $4.83 billion and $4.87 billion, with adjusted earnings ranging from $3.95 to $4 a share. Wall Street consensus estimates, as tracked by FactSet, call for revenue of $4.87 billion and adjusted profits of $3.98 a share.
For the November fiscal year, Adobe’s forecast was for revenue of $19.25 billion to $19.35 billion, with non-GAAP profits of $14.65 to $15.75 a share. Street consensus sits at $19.43 billion in revenue, a little above the guidance, with adjusted profits of $14.63 a share.
For the fiscal fourth quarter ending in November, Street consensus calls for $5 billion in revenue, and per-share earnings on an adjusted basis of $4.06.
Write to Eric J. Savitz at [email protected]
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