Adobe Inc. had a good fourth quarter of fiscal year 2024, but not good enough to meet Wall Street’s high expectations about its ability to monetize artificial intelligence (AI) investments.
Both numbers beat analyst estimates, but Wall Street looked beyond these numbers to the company’s guidance numbers for the fiscal 2025. They came on the conservative side, slightly below analysts’ estimates, as the company’s AI investments may take much longer to deliver the desired returns.
That was a disappointment for Wall Street’s bulls at a time when expectations about AI investments run high, sending the company’s share sharply lower in after-hours trading and early morning trade on Thursday. Adobe’s shares are down 7.82 percent for the year, underperforming the broader market, with the S&P 500 Index up 27.56 percent.
Still, company executives had a few reassuring words for Wall Street. “Adobe delivered record fiscal year 2024 revenue, demonstrating strong demand and the mission-critical role Creative Cloud, Document Cloud, and Experience Cloud play in fueling the AI economy,” Adobe chair and CEO Shantanu Narayen said in a statement accompanying the release of the fourth-quarter financial results.
“Our highly differentiated technology platforms, rapid pace of innovation, diversified go-to-market and the integration of our clouds position us for a great year ahead.”
Before Adobe’s earnings release, Jamie Meyers, senior analyst at Laffer Tengler Investments, expressed cautious optimism about the company’s potential while highlighting key challenges it faces.
“It’s important to recognize that Adobe is deeply embedded across enterprises, giving them what they refer to as a ‘right to win’ in certain workloads and creative aspects of enterprise operations,” he said in a comment emailed to The Epoch Times.
“However, competition is something we’re closely monitoring. We need to see increased adoption and momentum to reassess our position with the company.”
Meyers said that “the sentiment around the stock remains closely tied to competitive threats and the pace of AI monetization.”
AI expert Suriel Arellano thinks the growth of Adobe’s Creative Cloud segment has been boosted by the company’s Firefly generative AI technology. “Firefly has been integrated into key Creative Cloud products, such as Photoshop and Illustrator, which is where its potential value to the overall Adobe offering shines,” he told The Epoch Times via email.
“According to Adobe, the ‘integrated’ nature of Firefly’s value proposition is part of what may have contributed to that 10 percent Creative revenue growth seen in third quarter 2023.”
Sidharth Ramsinghaney, director of strategy and operations at cloud communications company Twilio, believes the market’s focus on near-term guidance is misplaced. The real story is Adobe’s strategic pivot, which implemented AI by systematically embedding it into its value proposition across digital media and enterprise experiences.
“The most interesting dimension here is their monetization strategy,” he told The Epoch Times via email. “Watching how they’re introducing AI-powered tiers, particularly in their digital experience platform, shows a sophisticated understanding of enterprise willingness to pay for genuine productivity acceleration. Their Acrobat AI Assistant expanding into multiple languages isn’t just a feature upgrade—it’s a calculated market expansion play.”
“The slight conservatism in their 2025 guidance shouldn’t be misinterpreted as weakness,” he concluded. “In my experience, this often signals strategic investment, potential foreign exchange considerations, and a disciplined approach to market expectations. The underlying business fundamentals remain robust.”
Arellano provided a few more insights into Adobe’s positioning in the AI era. “Adobe centers its operations around ’responsible AI,' which is a fledged concept in development,” he explained. “Within this framework, the company strives to present a vastly differentiated narrative compared with its industry peers. This is valuable and strategically important for two reasons: First, it enables Adobe to tackle head-on the burgeoning issue of AI ethics—it allows the company, in essence, to comment on and take a position regarding this hot topic.”
He expects Adobe to continue investing substantial money into AI research and development. “The company’s forecast revenue growth for fiscal year 2025 almost certainly actors in the impact of new AI-driven features and products that will be available by 2025,” he added.
