Adobe shares drop 13% as concerns about AI growth overshadow better-than-expected results

Core Insights - Adobe's shares fell 13% after the quarterly earnings report due to concerns over growth and AI monetization strategy [1] - Despite better-than-expected results, including adjusted earnings of $5.08 per share and $5.71 billion in revenue, investor sentiment remained negative [2] - The company is facing competition in generative AI, with annualized recurring revenue from AI at $125 million, expected to double by fiscal year-end [3] Financial Performance - Total revenue increased by 10% year-over-year, with net income rising to $1.81 billion or $4.14 per share, up from $620 million or $1.36 per share in the same quarter last year [5] - For the current quarter, Adobe forecasts adjusted earnings per share between $4.95 and $5.00, with revenue expectations of $5.77 billion to $5.82 billion [2] - For fiscal year 2025, the company anticipates adjusted earnings per share of $20.20 to $20.50, with revenue between $23.3 billion and $23.55 billion, indicating approximately 9% growth [6] Analyst Perspectives - Bernstein's Mark Moerdler suggests that investors need to observe longer-term trends to believe in Adobe's AI potential [4] - Morgan Stanley's Keith Weiss acknowledges the new disclosure of GenAI contributions but emphasizes the need for a clearer roadmap at the upcoming investor meeting [4] - CEO Shantanu Narayen asserts that AI integration is creating new revenue streams and enhancing existing products [5]