Adobe’s second-quarter revenue forecast has met Wall Street expectations, but concerns over the company’s ability to monetise its AI offerings have weighed on investor sentiment. The stock dropped more than 4% in extended trading as investors questioned whether Adobe’s AI-driven products could generate substantial revenue growth amid rising competition from AI-focused startups.
For the second quarter of fiscal year 2025 (Q2 FY25), Adobe expects revenue between $5.77bn and $5.82bn, aligning with analyst forecasts compiled by LSEG. The US-based design software company also reaffirmed its full-year revenue target of $23.3bn to $23.55bn, reflecting confidence in its long-term strategy despite challenges in AI adoption. However, the outlook has not been enough to ease investor concerns regarding the scalability of AI monetisation.
“Adobe’s success over the next decade will be driven by customer-focused innovation and new offerings for creators, marketing professionals, business professionals and consumers,” said Adobe chair and CEO Shantanu Narayen. “Adobe is well-positioned to capitalise on the acceleration of the creative economy driven by AI, and we are reaffirming our FY2025 financial targets.”
Adobe’s quarterly performance and AI growth strategy
Adobe’s first-quarter results (Q1 FY25) showed strong revenue growth, with the company reporting total revenue of $5.71bn, a 10% year-over-year (YoY) increase, slightly ahead of the $5.66bn consensus estimate. Digital Media revenue, which includes its core Creative Cloud and Document Cloud offerings, reached $4.23bn, surpassing projections of $4.19bn. The company’s adjusted earnings per share stood at $5.08, exceeding expectations of $4.97.
Digital Experience revenue totalled $1.41bn, driven by growth in Adobe Experience Platform (AEP) and its associated applications. Within this segment, subscription revenue reached $1.3bn, reflecting an 11% year-over-year increase. The company has introduced Real-Time CDP Collaboration, enabling advertisers and publishers to jointly analyse and activate audience data for personalised marketing campaigns. Clients including NBCUniversal, Warner Bros. Discovery, and Major League Baseball have begun piloting the solution.
Despite the strong financial performance, the primary concern remains Adobe’s ability to scale AI monetisation. The company has made significant investments in AI-powered solutions, including Firefly generative AI models, which have been integrated into Photoshop, Illustrator, and Express. Firefly enables users to generate images, vectors, and now videos through AI-powered prompts. Adobe recently launched new Firefly subscription tiers, Firefly Standard, Firefly Pro, and Firefly Premium, as part of its strategy to drive AI-driven revenue.
The AI Assistant in Acrobat and Reader is another key initiative, providing features such as document summarisation, intelligent search, and language translation. Adobe has also introduced GenStudio for Performance Marketing, which helps brands automate content creation and campaign management. The company claimed that more than 1,400 custom AI models have been developed since the launch of Firefly, with Deloitte Digital, IBM, and Mattel among those using the technology. GenStudio for Performance Marketing has also been adopted by firms including AT&T, Lenovo, Red Hat, Delta Airlines, Ford, and Microsoft as part of their content automation strategies.
However, Adobe’s AI monetisation figures remain modest. The company reported that its annual recurring revenue (ARR) from AI-powered tools and add-on offerings was $125m at the end of the first quarter. Chief financial officer Dan Durn, during the earnings call, stated that Adobe expects to double this AI-driven ARR by the end of fiscal 2025.
Read more: Adobe’s AI integration push faces challenges amid disappointing FY25 outlook
