Photoshop maker Adobe on Wednesday forecast fiscal 2025 revenue below Wall Street estimates, suggesting that investments to weave AI into the company’s software applications are taking longer than expected to bear fruit.
Shares of the San Jose, Calif.-based company fell nearly 9% in extended trading.
The company estimates 2025 annual revenue of between $23.30 billion and $23.55 billion, compared with estimates of $23.78 billion, according to data compiled by LSEG.
Adobe is making significant investments in AI-powered image and video production technologies in response to growing competition from sustainability AI and well-capitalized startups like Midjourney.
Although Adobe forecast strong growth for the second half of the year in June, Wednesday’s forecast indicated that the company is still struggling to monetize its AI push.
“While initial market fears about AI disruption have eased, Adobe’s continued lack of AI monetization makes it more difficult to pick them as a clear AI winner,” said Third Bridge analyst Charlie Miner.
The company’s advances in video-generation technology put it head to head with ChatGPT maker OpenAI, which boasts its own model, Sora.
Adobe expects foreign exchange volatility and a shift toward subscriptions to cut its fiscal 2025 revenue by about $200 million.
However, DA Davidson analyst Gil Luria said the company is well-positioned to benefit from the return of enterprise spending, including AI.
“Adobe’s image and video AI generation capabilities are gaining widespread adoption, which should continue to grow as models get better,” Luria said.
Last month, the company added software tools that let customers use AI to create images based on Adobe’s library of stock images.
It forecast first-quarter revenue of between $5.63 billion and $5.68 billion, falling short of estimates of $5.73 billion.
Adobe’s fourth-quarter revenue rose 11% from a year ago to $5.61 billion, beating market expectations of $5.54 billion.
On an adjusted basis, the company earned $4.81 per share, compared to estimates of $4.66.