Adobe Achieves Largest Gains Since 2020 Following AI Sales Success
Adobe Inc. shares experienced their most significant rise in over four years after the company projected strong future sales for its creative products, indicating that customers are embracing the company’s new artificial intelligence-based tools. This development has allayed some investor concerns regarding the impact of generative AI on Adobe's market.

Adobe Inc. shares experienced their most significant rise in over four years after the company projected strong future sales for its creative products, indicating that customers are embracing the company’s new artificial intelligence-based tools. This development has allayed some investor concerns regarding the impact of generative AI on Adobe's market.
A closely watched metric, the net new annual recurring revenue from digital media, is expected to be $460 million in the current quarter, surpassing the average estimate of $435.2 million. This suggests that Adobe's efforts to integrate AI features into its products are resonating well with customers, helping the company to stand out against smaller rivals, including those focused on emerging technologies.
The shares rose by as much as 16.5% after trading opened on Friday, marking the biggest intraday jump since March 2020. After a 77% increase in 2023, the stock had dipped 23% through Thursday’s close. The impressive gain indicates a renewed investor confidence in Adobe's strategy and market position.
Adobe expects an acceleration in its new creative business for the remainder of the fiscal year. Chief Financial Officer Dan Durn stated during a conference call that the company is optimistic about the future growth driven by its AI capabilities. This positive outlook has also led to an increase in the fiscal-year profit forecast to as much as $18.20 a share, excluding some items, compared with a previous outlook of $18 a share. Analysts had, on average, estimated $18.02.
Adobe's proprietary AI model, Firefly, has been successfully integrated into popular products such as Photoshop and Illustrator. The company is also working on similar technology for its video-editing software, Premiere. The Firefly model has been used to generate over 9 billion images, demonstrating significant user engagement and satisfaction, according to Chief Executive Officer Shantanu Narayen.
The positive results and subsequent share reaction stand in contrast to some of Adobe's peers in the application software sector, who have faced slowing demand and investor anxiety. Tyler Radke, an analyst at Citigroup Inc., noted this contrast in a recent analysis, highlighting Adobe's successful adaptation to the changing market dynamics.
In the fiscal second quarter, Adobe reported a 10% increase in sales, reaching $5.31 billion. The profit, excluding some items, was $4.48 a share, surpassing Wall Street’s projection of $4.40 a share on revenue of $5.29 billion. The company also mentioned that customers are opting for more expensive plans that include greater use of Firefly, further driving revenue growth.
New innovations are attracting a broader range of users to Adobe's platforms. Narayen emphasized that these developments are expanding Adobe's user base and creating new opportunities for growth. A key area of focus for the company has been attracting new students and non-professional users, who have increasingly turned to rivals like Canva Inc.. David Wadhwani, who oversees Adobe's creative business, reported that the monthly active users of Express—Adobe's product for casual creators—more than doubled in the three months ending May 31 compared to the previous quarter.
Despite these advances, Adobe executives acknowledge that the company is still in the early stages of monetizing its AI products. Narayen mentioned that the focus is now on "converting the pipeline, interest and awareness of AI into monetization," signaling a strategic direction towards solidifying revenue from these innovations.
The digital media unit, which encompasses Adobe's flagship creative and document-processing software, saw an 11% increase in sales, totaling $3.91 billion. Revenue from the unit that includes marketing and analytics software rose by 9% to $1.33 billion. Notably, Adobe's document cloud business demonstrated particular strength, adding $165 million of new annual recurring business in the quarter, significantly surpassing analysts' expectations of $122.7 million. This growth was driven by users adopting a new AI-assistant feature designed to analyze and understand PDFs and other documents.
The robust outlook should alleviate investor concerns about other generative AI tools potentially impacting Adobe's growth prospects. Anurag Rana, an analyst at Bloomberg Intelligence, pointed out that Adobe's strong performance and strategic direction provide a reassuring signal to the market.