Adobe is facing challenges with a weak outlook and disappointing progress in AI monetization.
Adobe is facing a downturn due to its underwhelming artificial intelligence (AI) monetization progress and a weak outlook. Despite the company’s efforts to capitalize on its AI product lineup, investors are not pleased with the results.
After Adobe’s earnings report was released after hours on Wednesday, shares of the creative software giant plummeted more than 10% in Thursday morning trading, marking the worst day of the year so far, reminiscent of the last earnings report in December.
The disappointment stems from Adobe’s AI revenue, which currently stands at just $125 million in annual recurring revenue. While the company anticipates that this figure will double by the end of the fiscal year, it only represents 2% of the overall revenue of $5.71 billion.
Investors are seemingly discontent with the slow rate at which cash is being generated, underscored by a lackluster revenue outlook and quarterly earnings guidance that fell short of expectations.
In an attempt to bolster its AI monetization efforts, Adobe introduced new paid subscriptions linked to Firefly, its generative-AI tool. The software claims to have produced over 20 billion images and assets. Initially, Adobe purportedly paid up to $3 per minute for videos to train its AI, but it now charges approximately $0.50 per AI video, as reported by Bloomberg.
It is evident that Adobe’s AI monetization strategy has not yet reached the desired level of success, prompting concerns among investors and leading to a significant drop in the company’s stock price. Despite the company’s optimistic expectations for doubling its AI revenue by the end of the fiscal year, there remains skepticism regarding the pace at which this goal will be achieved.
Adobe’s disappointing financial performance has raised questions about the effectiveness of its AI product lineup in generating substantial revenue. The recent developments suggest that Adobe may need to reassess its approach to AI monetization in order to meet investor expectations and regain market confidence.
