Adobe’s stock (ADBE) dropped as much as 13% on Thursday after the company’s fiscal year 2025 outlook fell short of Wall Street expectations, fueling concerns over the slow payoff from its AI tools amid rising competition. Adobe projected revenue between $23.3 billion and $23.6 billion and adjusted earnings per share (EPS) of $20.20 to $20.50 for the next fiscal year. Analysts had anticipated $23.8 billion in revenue and $20.52 in EPS, according to Bloomberg data.
Generative AI Competition Intensifies
Since launching its Firefly generative AI models in March 2023, Adobe has introduced tools for creating images, text effects, and videos. However, the company’s AI rollout has lagged behind competitors, including Google, OpenAI, and startups such as Stability AI and Runway. OpenAI’s recent release of its text-to-video bot Sora underscores the escalating competition in the generative AI space.
Adobe shares have fallen roughly 20% this year as investors question the company’s ability to effectively monetize its AI offerings and fend off rivals.
Analysts Criticize Communication and Growth Strategy
Wall Street analysts have expressed frustration with Adobe’s unclear path to monetizing its AI tools. Bernstein analyst Mark Moerdler noted a disconnect between Adobe’s bullish AI commentary and its subdued financial guidance, reducing his price target to $587 from $644 while maintaining an Outperform rating.
Morgan Stanley analyst Keith Weiss also highlighted poor communication, particularly Adobe’s decision to stop providing quarterly guidance on net new annualized recurring revenue (NNARR) for its Digital Media segment, which includes Creative Cloud and Document Cloud. Weiss maintained a $660 price target and an Overweight rating but warned that investor confidence may hinge on seeing measurable improvements in AI-driven growth.
Long-Term AI Potential Remains
Despite near-term challenges, some analysts remain optimistic about Adobe’s long-term prospects in generative AI. William Blair analyst Jake Roberge acknowledged the immediate overhang on Adobe’s stock due to weak guidance but argued the company is playing a “long game” by building a strong user base for its AI solutions. Roberge believes Adobe is well-positioned to capitalize on generative AI opportunities in the future.
Monetization Levers for 2025
Adobe management indicated that monetization efforts could gain traction in 2025 through new subscription tiers and add-ons for its Firefly AI tools. However, investors and analysts are demanding clearer strategies and results to regain confidence in Adobe’s ability to compete effectively and drive growth.
