Adobe: Adobe Expands Portfolio with AI Solution: Buy or Hold the Stock

In This Article: Adobe ADBE launched Firefly Video Model-powered Generative Extend in Premiere Pro on Tuesday, which leverages AI to instantly generate and expand the length of video and audio clips. AI-powered Media Intelligence is used to quickly find specific clips in terabytes of footage in seconds. Adobe Generative Extend and Media Intelligence are now generally available with additional upgrades, including AI-powered Caption Translation available in Premiere Pro. Adobe introduced a new version of After Effects with a high-performance preview playback engine, powerful new 3D motion design tools and HDR monitoring. New Frame.io V4 upgrades include expanded storage that scales with teams. This removes workflow fractures and ensures creators can share, manage and organize their work-in-progress and finished assets without limitations. Adobe's Expanding AI Portfolio to Boost Prospects Adobe has expanded its AI portfolio with Adobe GenStudio and Firefly Services, which helps brands and their agency partners collaborate on marketing campaigns. ADBE is set to launch the most comprehensive set of web, mobile and desktop applications, delivered through various subscription tiers for creative professionals and creators. Adobe plans to monetize standalone subscriptions for Firefly through the introduction of multiple Creative Cloud offerings that include Firefly tiering. Adobe plans to invest in its sales capacity to deliver Adobe-wide offerings across business, education and government. The integration of AI Assistant in Acrobat, Reader and Express bodes well for Adobe's prospects. ADBE is infusing Generative AI (Gen-AI) innovations across its portfolio, including AI-first standalone and add-on products such as Acrobat AI Assistant, Firefly App and Services and GenStudio for Performance Marketing. These factors are expected to boost top-line growth. Adobe Offers Positive Guidance for FY25 For fiscal 2025, Digital Media Annual Recurring Revenue is now expected to grow roughly 11%. Digital Media segment revenues are expected between $17.25 billion and $17.40 billion. Digital Experience segment revenues are expected between $5.8 billion and $5.9 billion, while Digital Experience subscription segment revenues are expected between $5.375 billion and $5.425 billion. Adobe reaffirmed its total revenue guidance, which is expected between $23.30 billion and $23.55 billion ($21.51 billion in fiscal 2024). Fiscal 2025 non-GAAP earnings are still expected between $20.20 and $20.50 ($18.42 per share in fiscal 2024). ADBE's 2025 Estimate Revision Trends Higher For fiscal 2025, the Zacks Consensus Estimate for earnings is pegged at $20.41 per share, up couple of cents over the past 30 days. The figure indicates 10.8% growth from fiscal 2024. The Zacks Consensus Estimate for second-quarter fiscal 2025 earnings is pegged at $4.97 per share, unchanged over the past 30 days, suggesting 10.94% growth from the year-ago quarter. Adobe Inc. Price and Consensus Adobe Inc. Price and Consensus Adobe Inc. price-consensus-chart | Adobe Inc. Quote ADBE's earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 2.53%. Find the latest EPS estimates and surprises on Zacks Earnings Calendar . ADBE Stock: Buy or Hold? Adobe's deepening GenAI focus is a key catalyst. However, shares have declined 11% year to date (YTD), reflecting the negative impact of stiff competition in the AI and GenAI space from the likes of Microsoft MSFT-backed OpenAI, as well as a lack of monetization of its AI solutions. Adobe's AI business is minuscule compared with the likes of Microsoft, Alphabet GOOGL and Synopsis SNPS. Microsoft's Intelligent Cloud revenues are benefiting from growth in Azure AI services and a rise in AI Copilot business. Alphabet's Google Cloud is benefiting from accelerated growth across AI infrastructure, enterprise AI platform Vertex and strong adoption of Gen AI solutions. Synopsys' penetration into new and growing AI chip companies is a major growth driver. In terms of share price performance, Microsoft and Synopsis outperformed Adobe, while Alphabet lagged YTD. Shares of Microsoft and Synopsis have declined 9.4% and 8%, respectively, while Alphabet has dropped 17.1%. ADBE currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable time to accumulate the stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Microsoft Corporation (MSFT) : Free Stock Analysis Report Adobe Inc. (ADBE) : Free Stock Analysis Report Synopsys, Inc. (SNPS) : Free Stock Analysis Report Alphabet Inc. (GOOGL) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research Adobe Inc. Price and Consensus