What risks could derail ADBE's EPS momentum in 2025?

Adobe's (ADBE) EPS momentum in 2025 could be derailed by several risks, including:

1. **Monetization of AI Products**: Uncertainty around monetizing AI products is a significant risk. While AI initiatives showed promising results, generating $125 million in ending annualized recurring revenue, investor concerns persist about the company's ability to fully capitalize on AI. If Adobe fails to develop a clear and effective strategy for monetizing its AI offerings, it could impact revenue growth and, consequently, EPS.
2. **Rising Competition**: The creative software market is becoming increasingly competitive, with rising competition from other software companies. Adobe's ability to maintain its edge in generative AI is a concern, as competitors may develop similar or superior technology. If Adobe cannot differentiate itself through innovation or superior product offerings, it could lead to a decline in market share and EPS.
3. **Economic Conditions**: Adobe's Digital Media business is sensitive to economic conditions, and tough economic conditions have already hurt its performance. If the economic environment remains challenging in 2025, it could lead to decreased demand for Adobe's products and services, negatively impacting revenue and EPS.
4. **Guidance and Investor Sentiment**: Adobe's conservative guidance for upcoming quarters has fallen short of market expectations, causing investor sentiment to decline despite strong earnings results. If guidance continues to be conservative or misses expectations, it could lead to a negative perception of the company's future prospects, derailing EPS momentum.
5. **Remaining Performance Obligations**: While Adobe's revenue exceeded expectations in Q1, its remaining performance obligations were slightly below anticipated levels. If this trend continues, it could indicate a slowdown in future sales, which could impact EPS growth.

In summary, Adobe's EPS momentum in 2025 could be disrupted by uncertainties surrounding the monetization of AI products, rising competition, economic conditions, guidance and investor sentiment, and remaining performance obligations. Managing these risks will be crucial for maintaining strong EPS growth.