Adobe's Sales Forecast Amid Artificial Intelligence Enthusiasm

Adobe’s sales forecast matched analysts but disappointed investors expecting Artificial Intelligence tool-driven revenue surge.

Sales Outlook and Artificial intelligence Integration

The San Jose-based company stated in a Thursday announcement that sales for the period ending in November would range between $4.98 billion and $5.03 billion. However, analysts, on average, had anticipated $5 billion, according to Bloomberg’s compiled data. Profit, excluding certain items, could reach as high as $4.15 per-share, compared to the average estimate of $4.06.

AI-Powered Price Increases

Adobe, a longstanding leader in creative software for graphic artists, is incorporating generative Artificial intelligence features across its product lineup. In light of these new tools, the company plans to raise prices for its products starting on November 1 and impose additional charges for AI power-users. Analysts anticipate that this new pricing strategy will rapidly boost revenue. Jake Roberge, an analyst at William Bair, estimates the increase at over $600 million in the next year, while Bloomberg Intelligence’s Anurag Rana predicts a 10% sales increase in the first year of availability.

CEO’s Vision

“We are ushering in a new era of AI-enhanced creativity around the world with innovations across our product portfolio,” stated Chief Executive Officer Shantanu Narayen.

Analyst Caution

However, some analysts expressed caution regarding the potential impact of the price hike on demand. “We do see more risk around this year’s price increase given the company just raised prices 18 months ago, and the competitive landscape is rapidly evolving,” noted Tyler Radke, an analyst at Citigroup, in his pre-results commentary.

Sales Projections

The company projected fiscal fourth-quarter sales in the Digital Media unit, which includes flagship offerings like Photoshop, to reach as high as $3.7 billion, surpassing the average estimate of $3.66 billion. Revenue in the Digital Experience unit, encompassing marketing and analytics software, is expected to be approximately $1.26 billion, in line with the average projection.

Stock Performance and Growth

Following the announcement, Adobe’s stock showed minimal change in extended trading, having closed at $552.16 in New York. The stock has surged by 64% this year.

Strong Third-Quarter Performance

For the fiscal third quarter, sales increased by 10% to $4.89 billion, surpassing the average projection of $4.87 billion. Profit, excluding certain items, reached $4.09 per-share, exceeding the average estimate of $3.98. Digital Media revenue saw an 11% increase, reaching $3.59 billion for the period ending on September 1. Sales in the Digital Experience unit also jumped 10%, reaching $1.23 billion.

Challenges in Acquiring Figma

To secure its creative software leadership, Adobe eyes a $20B acquisition of design startup Figma. However, this initiative has been complicated by an in-depth review and potential legal action from US regulators.

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