Adobe Inc. shares gained after the company raised its full-year revenue and profit outlooks on optimism that generative AI features will spur demand for its software.
Sales will be about $19.3 billion in the fiscal year ending in November, compared with an earlier forecast of about $19.2 billion, the company said. Adjusted profit will be as much as $15.75 a share, from a previous outlook of $15.60. Analysts, on average, estimated profit of $15.50 a share on sales of $19.3 billion. The stock rose 2.6% to $503.76 at 10:02 a.m. in New York.
Adobe, the longtime top seller of software for creative professionals, is adding generative AI features throughout its products. The company last week unveiled enterprise-level subscriptions for the new tools, which include legal assurance against copyright claims. As part of the forecast, Adobe raised the revenue projection for its Digital Media unit, which includes Photoshop and other creative software.
“Adobe’s groundbreaking innovation positions us to lead the new era of generative AI given our rich datasets, foundation models and ubiquitous product interfaces,” Chief Executive Officer Shantanu Narayen said in a statement.
The company has rallied by nearly 50% over the past month as it revealed more of its artificial intelligence strategy, overcoming earlier skepticism from investors and analysts who feared Adobe’s business would be undercut by startups specializing in the new technology.
The company, fighting to keep its top spot in creative software, has proposed a $20 billion acquisition of design startup Figma. That effort has been complicated by an in-depth review and potential lawsuit from US regulators. Adobe executives said they continue to talk with regulators in the US, UK and European Union and expect to complete the purchase by the year of the year, according to a transcript of remarks prepared for a conference call.
The uncertainty over the Figma deal presents some overhang on company shares, Alex Zukin, an analyst at Wolfe Research, wrote in a note ahead of earnings, If the deal closes, it could “generate meaningful cross-sell/upsell opportunities,” according to BMO Harris analyst Keith Bachman.
Fiscal second-quarter sales increased 10% to $4.82 billion, the San Jose, California-based company said Thursday in a statement. Analysts, on average, projected $4.77 billion, according to data compiled by Bloomberg. Profit, excluding some items, was $3.91 a share, compared with the average estimate of $3.79.
“Adobe moved swiftly from investors’ ‘AI loser’ list, before being viewed as an ‘AI winner,’ Keith Weiss, an analyst at Morgan Stanley, said in a note before the results were released.
Revenue generated by Digital Media increased 10% to $3.51 billion, topping estimates. Sales in Digital Experience, the marketing and analytics software division, rose 12% to $1.22 billion, in line with projections.
(Updates share price in second paragraph)