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Despite Adobe Inc. management's optimism, AI-related revenue accounted for just 2.2% of FQ1 earnings and is expected to reach only ~$250 million for FY 2025, or 1% annual contribution to revenue. I believe management failed to provide a clear timeline for when AI will become a material revenue driver. Therefore, I remain skeptical about the long-term impact on revenue growth. With potential inflationary pressures and business spending cuts, I anticipate a downward revision in guidance for FY 2025, which could happen in the next two quarters.

Adobe (ADBE) slips despite 1Q earnings beating Street expectations. Jenny Horne looks at analyst activity, pointing to several price target cuts on the software provider.

Adobe Inc (NASDAQ:ADBE) shares fell about 6.7% on Thursday morning after investors reacted negatively to the company's latest earnings report and AI-related disclosures. The software company had already declined 4% in after-hours trading on Wednesday, as its updated presentation on artificial intelligence (AI) revenue and growth failed to generate enthusiasm.

Here's our initial take on Adobe's (ADBE 1.14%) financial report.

Adobe's premium growth is moderating, and its aggressive share buybacks are weakening its balance sheet without boosting stock value. Despite stable 11% y/y revenue growth, Adobe's valuation at 24x forward free cash flow is unappealing given its modest growth. Adobe faces stiff competition from Canva, Microsoft, and Google, raising concerns about its pricing power and market position.

Shares in the creative software company were sliding Thursday. The economic slowdown could hit its bottom line.

One number stood out in Adobe's earnings report: AI's annual recurring revenue. Investors are eyeing Adobe's ARR from AI as the company bets big on the technology.

Adobe Inc. (NASDAQ:ADBE ) Q1 2025 Earnings Conference Call March 12, 2025 5:00 PM ET Company Participants Steve Day - SVP, DX CFO & Corporate Finance, Interim Head of IR Shantanu Narayen - Chair & CEO David Wadhwani - President, Digital Media Business Anil Chakravarthy - President, Digital Experience Business Dan Durn - EVP & CFO Conference Call Participants Brent Thill - Jefferies Brent Bracelin - Piper Sandler Keith Weiss - Morgan Stanley Kash Rangan - Goldman Sachs Mark Moerdler - Bernstein Research Alex Zukin - Wolfe Research Mark Murphy - JPMorgan Saket Kalia - Barclays Operator Good day, and welcome to the Q1 FY 2025 Adobe Earnings Conference Call. Today's conference is being recorded.

On Market Domination Overtime for March 12, 2025, anchors Josh Lipton and Julie Hyman report on and get an analyst's reaction to Adobe's first quarter results. They also speak with BlackRock's Americas chief investment and portfolio strategist Gargi Chaudhuri about the market volatility and why investors may want to stay invested in U.S. stocks.

The final trades of the day with CNBC's Melissa Lee and the Fast Money traders.