Adobe Inc (NASDAQ:ADBE) stock fell 12.79% (As on March 13, 11:46:00 AM UTC-4, Source: Google Finance) after the company gave a disappointing outlook for revenue growth in the current quarter despite a recent focus on monetizing its new generative artificial intelligence features. During the quarter, Adobe announced it would charge about 50 cents per AI-generated video and separately announced price increases for some of its applications. Remaining performance obligations, a metric of future sales, were $19.7 billion, compared with analysts’ average estimate of $19.8 billion, according to data compiled by Bloomberg. The digital media unit, which includes Adobe’s flagship creative and document-processing software, posted a 11% increase in sales to $4.23 billion. Revenue from the unit that includes marketing and analytics software rose 10% to $1.41 billion. Annual recurring revenue for Adobe’s AI and add-on offerings was $125 million at the end of quarter. Adobe expects to double this ARR figure in the next three quarters as it exits fiscal 2025.
Moreover, Digital Experience segment revenue was $1.41 billion, representing 10 percent year-over-year growth as reported and in constant currency. Digital Experience subscription revenue was $1.30 billion, representing 11 percent year-over-year growth as reported and in constant currency. The company delivered non-GAAP operating income was $2.72 billion and non-GAAP net income was $2.22 billion. Cash flows from operations were $2.48 billion. Adobe, the top maker of software for creative professionals, has been incorporating its AI model, Firefly, into apps like Photoshop and Premiere.
ADBE in the first quarter of FY25 has reported the adjusted earnings per share of $5.08, beating the analysts’ estimates for the adjusted earnings per share of $4.97. The company had reported the adjusted revenue growth of 10 percent to $5.71 billion in the first quarter of FY25, beating the analysts’ estimates for revenue of $5.66 billion.
Sales in the period ending in May will be $5.77 billion to $5.82 billion, while the Analysts, on average, estimated $5.8 billion. Profit, excluding some items, will be $4.95 a share to $5 a share, compared with the average projection of $5. In December, Adobe gave a fiscal year outlook for revenue of $23.3 billion to $23.6 billion and adjusted profit of $20.20 a share to $20.50 a share.
The company also said it would change the way it reports subscription revenue, and would now announce the data in two groups: “business professionals and consumers” and “creative and marketing professionals.”