Investors are growing cautious about the timeline and payoff of Adobe’s AI initiatives, despite the company beating Q2 estimates and raising its full-year revenue forecast.
Adobe Inc.'s (ADBE) stock fell over 5% on Friday, as investors' worries over a slower-than-expected payoff from its AI integration efforts outweighed the company's increased full-year revenue outlook.
According to a Reuters report, analysts and market watchers are growing cautious over the timeline for Adobe’s AI integration to yield more revenue.
Despite the software giant lifting its annual forecast, skepticism around long-term AI monetization and increasing industry competition weighed heavily on investor sentiment.
The company’s second-quarter (Q2) revenue increased 11% year-on-year (YoY) to $5.87 billion, beating the analyst consensus estimate of $5.79 billion, as per FinChat data.
Adjusted earnings per share (EPS) of $5.06 also surpassed the consensus estimate of $4.97.
The company recently announced plans to embed generative AI models from both OpenAI and Alphabet Inc. (GOOGL) into its Firefly suite.
CFRA Research’s Angelo Zino highlighted ongoing competitive threats and the extended timeline likely needed to fully capitalize on generative AI features.
Analysts from RBC Capital echoed those concerns, saying the company must still demonstrate tangible results from its AI rollout.
As per TheFly, Evercore ISI said it doesn’t anticipate strong bullish or bearish reactions, as the reaffirmed Digital Media's annual recurring revenue (ARR) growth target of around 11% suggests a potential slowdown in the latter half of the year, even with more favorable YoY comparisons.
While downside risk appears minimal at current levels, the brokerage believes the second-half outlook probably won’t be compelling enough to re-engage hesitant investors.
Evercore maintains an ‘Outperform’ rating and a $475 price target on Adobe shares.
On Stocktwits, retail sentiment around Adobe remained in ‘extremely bullish’ territory.
Adobe stock has lost over 12% year-to-date and 15% in the last 12 months.
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