CEO Shantanu Narayen said Adobe is well-positioned to capitalize on the acceleration of the creative economy driven by AI, but retailers on Stocktwits see it as an expense AI play.

Adobe Inc. (ADBE) stock slumped in Thursday’s premarket session after the visual illustration and editing software marker issued weak revenue guidance despite reporting a quarterly beat.

The San Jose, California-based company reported adjusted earnings per share (EPS) of $5.08 for the first quarter of the fiscal year 2025, up from $4.48 for the year-ago quarter. 

The bottom-line result exceeded the Finchat-compiled consensus of $4.97 and the guidance of $4.95-$5.00.

Revenue rose 10% year over year (YoY) to a record $5.71 billion, beating the average analysts’ estimate of $5.66 billion and the guidance of $5.63 billion to $5.68 billion. 

Among business segments, Digital Media revenue climbed 11% to $4.23 billion, while the Digital Experience segment revenue increased 10% to $1.41 billion. 

The end-of-the-quarter annualized recurring revenue (ARR)  for the Digital Media segment was $17.63 billion, up 12.6%.

Subscription revenue for the Digital Experience segment climbed 11% to $1.30 billion.

The company exited the quarter with remaining performance obligations of $19.69 billion. 

CFO Dan Durn said, “Our continued innovation and diversified go-to-market strategy drove a record Q1, with new [artificial intelligence] AI-first standalone and add-on innovations exiting the quarter with over $125 million ending ARR book of business.”

Adobe expects second quarter adjusted EPS and revenue of $4.95 to $5.00 and $5.77 billion to $5.82 billion, respectively. Analysts, on average, estimate the metrics to be $4.97 and $5.801 billion, respectively.

Shantanu Narayen, CEO of Adobe, said, “Adobe is well-positioned to capitalize on the acceleration of the creative economy driven by AI, and we are reaffirming our FY2025 financial targets.” 

The company affirmed its 2025 guidance, which calls for an adjusted EPS of $20.20 to $20.50 and revenue of $23.30 billion to $23.55 billion, compared to the consensus estimates of $20.41 and $23.51 billion, respectively. 

On Stocktwits, retail sentiment toward the stock remained ‘extremely bearish’ (7/100), with the degree of pessimism aggravating from a day ago. The message volume perked up to ‘extremely high’ levels.

ADBE sentiment and message volume March 13, premarket as of 8:39 am ET | Source: Stocktwits

A bearish watcher said the stock's valuation is “atrocious” and should drop to $250-$280. 

Another user expressed the same view.

Adobe stock slid 6.52% to $410 in premarket trading after declining by about 1.4% this year. The premarket levels marked the lowest since mid-January.

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