Going to take Adobe awhile to get over technology transition to AI, says Oppenheimer's Schwartz

Core Viewpoint - Adobe's stock has increased by 4% following a positive earnings report and revenue beat, although the company has faced challenges in recent years, including a 20% decline in stock value this year and trading at its lowest valuation in over a decade [1]. Group 1: Financial Performance - Adobe's net new digital media annual recurring revenue (ARR) is growing at 5%, while its top line revenue is increasing by 11%, indicating a potential slowdown in future growth [8]. Group 2: Competitive Landscape - Adobe faces significant competition from emerging AI-driven companies like OpenAI and Anthropic, which are enhancing content creation speed and efficiency, thereby commoditizing pricing for content creation tools [3][4]. - The company is also challenged by lower-end competitors such as Canva and higher-end rivals like Figma, which are impacting Adobe's traditional business model that relied on higher spending for advertising campaigns [7]. Group 3: Business Model Challenges - Adobe's headcount-based pricing model is under threat due to AI's productivity gains, which are reducing the need for large teams to create content, weakening Adobe's competitive moat [5]. - The transition to AI is expected to take time, and Adobe may not see significant benefits from AI integration for several years [3][5]. Group 4: Market Position - Despite challenges, Adobe's higher-end market position remains defensible due to enterprise organizations valuing compliance, governance, and a robust partner ecosystem, which allows them to command higher prices [6].