Adobe Sees Lower Revenue for Fiscal 2025, Struggling to Monetize AI

Adobe projects lower-than-expected fiscal 2025 revenue, citing slow monetization of AI innovations, causing a 9% drop in its stock price.

Adobe, the Photoshop maker, said revenue for fiscal 2025 will be less than analysts had expected, a sign that its efforts to integrate artificial intelligence into its software are taking longer than expected to pay off. Shares of the San Jose, California-based company fell about 9% in extended trading following the announcement.

The company estimates revenues for the fiscal year 2025 to be between $23.30 billion and $23.55 billion, less than what analysts expect the company to reach $23.78 billion, according to LSEG data compiled. Adobe's move into AI-generated images and video comes in a response to how startups are increasingly gaining in intensity with money, especially those like Stability AI and Midjourney.

Although there were earlier expectations for strong performance for the year through the second half, Adobe's reassessment made it evident it has much work to do before it can extract money from all its AI brilliance. Still, the subsidence of fears of what AI is likely to disrupt keeps industry analyst Charlie Miner at arm's length from believing it can lead a space as difficult as what Adobe operates, because still, the inability to extract money from Adobe's AI capabilities keeps being the challenge.

Aggressively developing video-generation technology, Adobe was put directly head-to-head in competition with OpenAI, maker of ChatGPT, which offers its AI-powered models, including Sora. It also warned that foreign exchange volatility and its shift to subscription-based models could shave $200 million from its fiscal 2025 revenue.

However, DA Davidson analyst Gil Luria is optimistic that Adobe is well-positioned to capture enterprise spending return, including AI-related investments. He said the tools related to image and video AI generation are gaining broad adoption, and it only gets better with time.

Adobe's fourth-quarter revenue jumped 11% to $5.61 billion, beating market expectations of $5.54 billion. On an adjusted basis, the company earned $4.81 per share, exceeding analysts' forecast of $4.66.