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By Siddharth S
(Reuters) – Shares in Adobe (NASDAQ: ) fell nearly 10% in premarket trading on Thursday after the Photoshop maker’s poor full-year revenue forecast led to concerns that returns from investments in artificial intelligence in its software applications would could take longer than expected.
“While the company remains on track with its GenAI product roadmap, we think the lack of … explicit monetization metrics has made it difficult for investors to tune in to the progress,” RBC analyst Matthew Swanson said.
The San Jose, Calif.-based company on Wednesday forecast annual revenue for fiscal 2025 of between $23.30 billion and $23.55 billion, compared with the average analyst estimate of $23.78 billion, according to data compiled by LSEG.
“Given another selloff, we’re seeing a clear disconnect between management’s excitement and the internal signs of success they’re seeing versus what investors are seeing,” Morningstar analysts said.
Having recently released software tools related to artificial intelligence, Adobe is making significant investments in AI-based image and video generation technologies in response to growing competition from well-capitalized startups such as Stability AI and Midjourney.
Adobe’s advances in video generation technology have put it at odds with ChatGPT-maker OpenAI’s Sora.
Although Adobe in June projected strong growth for the second half of the year, at least seven brokerages cut their price targets on the company’s stock after the earnings forecast.
“With Adobe underperforming the S&P for more than 5 years, a return to a more consistent beat/raise rhythm is essentially a necessity to reignite long-term investor interest,” Evercore ISI said, adding that the lack of clarity around generative AI monetization also works against stocks.
Adobe shares are down about 8% so far this year, compared with a 27.6% gain.
The company’s 12-month price-to-earnings ratio is 26.46, compared to Autodesk ( NASDAQ: )’s 33.63.
