Adobe set for biggest gain since 2020 after AI sales success

The results signal that Adobe’s efforts to incorporate AI features into its products are gaining support among customers as the company battles smaller rivals, including startups focused on the emerging technology. Pic: AP Photo/Paul Sakuma

Adobe shares are set for their biggest gain in about four years after projecting strong future sales for its creative products, suggesting customers are adopting the company’s new artificial intelligence-based tools.

A closely watched metric of new creative software business — digital media net new annual recurring revenue — will be $460m in the current quarter, compared with the average estimate of $435m.

The long-time leader in software for graphic arts professionals has faced a fresh wave of investor anxiety that generative AI will cut into its market.

Application software peers like Salesforce, Workday and ServiceNow have confronted similar concerns in recent weeks after reporting slowing demand. 

The results signal that Adobe’s efforts to incorporate AI features into its products are gaining support among customers as the company battles smaller rivals, including start-ups focused on the emerging technology.

The shares rose about 15% in pre-market trading on Friday before New York exchanges opened after closing at $458.74. If those gains hold, it will be the biggest intraday jump since March 2020. After rising 77% in 2023, the stock has dipped 23% since the start of the year.

Adobe expects an acceleration in new creative business through the rest of the fiscal year, chief financial officer Dan Durn said in a conference call after the quarterly results were released.

The company also raised its fiscal year profit forecast to as much as $18.20 a share, excluding some items, compared with a previous outlook of $18 a share. Analysts, on average, estimated $18.02.

Adobe’s proprietary AI model, Firefly, has been integrated into products such as Photoshop and Illustrator while the company is working on developing similar technology for its video-editing software, Premiere.

- Bloomberg