Adobe's Stock Plummeted Amid Growth Slowdown Fears... Finally a 'Fire Pillar'

Design software company Adobe announced earnings that exceeded market expectations as it launched products equipped with artificial intelligence (AI). After confirming that users are adopting AI tools, Adobe's stock price surged after market close.

On the 13th (local time), Adobe reported second-quarter fiscal year (March-May) revenue of $5.31 billion shortly after the New York Stock Exchange closed. This figure surpassed the expert consensus of $5.29 billion compiled by market research firm LESG. Earnings per share also came in at $4.48, beating the forecast of $4.39.

As a result, Adobe's stock, which had been sluggish earlier this year, jumped about 15% in after-hours trading. This was due to alleviated concerns that the rise of generative AI competition would weaken the market dominance of industry giant Adobe.

Adobe introduced its generative AI Firefly in the first half of last year and integrated it into Photoshop and Illustrator, riding the AI boom. However, with the failed acquisition of design platform company Figma and the emergence of strong competitor Canva from Australia, which acquired graphic tool Affinity earlier this year and announced plans to enhance generative AI capabilities, concerns about growth slowdown intensified. This is closely related to why Adobe's stock price had fallen 23% year-to-date before this day.

Signals are emerging that Adobe's AI products are becoming the market standard. Adobe estimated third-quarter (June-August) revenue to be between $5.33 billion and $5.38 billion, with earnings per share ranging from $4.50 to $4.55. The company raised its annual revenue forecast to $21.4 billion to $21.5 billion and increased its annual earnings per share guidance to $18 to $18.2. Dan Dunn, Chief Financial Officer (CFO), stated, "We expect new creative businesses to accelerate for the remainder of this fiscal year."

Tyler Radke, a Citigroup analyst, said, "(The market reaction to Adobe) stands in positive contrast to other enterprise software."