Adobe Shares Drop 2% Despite AI Product Sales Growth

Adobe Systems shares dipped 2% late Thursday after its third-quarter earnings report, as some investors appear to unsure about how much its AI products will drive future revenue growth.

Adobe, which began breaking out revenue for its AI products in March, is continuing to highlight this area of its business. On an earnings call, Adobe chair and CEO Shantanu Narayen said annual recurring revenue from AI products—the value of its contracts over the next 12 months—surpassed $650 million during its August quarter, up more than 150% from last year and $150 million from last quarter.

Anil Chakravarthy, an Adobe president who oversees its business products and is taking over for Narayen on Dec. 1, said the company is taking a short-term hit to ARR by offering freemium versions of some of its AI products, while betting that some of them will become paying customers and further boost its AI product sales.

For the three months to Aug. 28, Adobe reported $6.76 billion in revenue, up 13% from last year and exceeding its earlier forecast by around $40 million. The company expects revenue of $6.8 billion to $6.85 billion for its current quarter, which would represent growth of around 10% compared to last year.

Adobe raised its full-year revenue forecast by around $75 million to between $26.576 billion and $26.626 billion.