Adobe (ADBE.US) "blows up": 2025 fiscal year guidance falls short of expectations, AI "job stealing" fears come true
1min read Adobe (ADBE.US) reported its fourth-quarter 2024 earnings after the market closed on Wednesday, ending November 29, 2024. The data showed that the company's Q4 revenue was US$5.61 billion, up 11% YoY, topping the market's expectation of US$5.54 billion; its adjusted EPS was US$4.81, topping the market's expectation of US$4.67.Adobe's digital media annual recurring revenue (ARR) in the quarter was US$17.3 billion, slightly above analysts' average expectations.The digital media segment, which includes Adobe's flagship creative and document processing software, generated revenue of US$4.15 billion, up 12% YoY. The segment's revenue, which includes marketing and analytics software, was US$1.4 billion, up 10% YoY.However, Adobe's disappointing 2025 revenue guidance has intensified investors' concerns that the creative software giant may be disrupted by emerging AI startups.Adobe expects its revenue to be about US$23.4 billion in the fiscal year ending November 2025, with adjusted EPS between US$20.20 and US$20.50. In comparison, analysts on average expect revenue of US$23.8 billion and adjusted EPS of US$20.52.Adobe is known for its software for creative professionals, and the company has been adding generative AI features to its applications, such as embedding its proprietary model Firefly into products like Photoshop. Adobe released an AI tool for video creation at its annual user conference in October, which has been integrated into the Premiere editing app and is being rolled out gradually to the general public.David Wadhwani, head of Adobe's creative business, said during the earnings call that the company would soon launch "a new Firefly product with a higher price point," including a video model.The new key metric for Adobe's creative business, net digital media annual recurring revenue, is expected to grow 11% in 2025, in line with market expectations. Dan Durn, Adobe's chief financial officer, said that the company's "strategy of continuously launching new tiered subscription services and add-ons" was included in the guidance.Adobe's stock price fell 8.97% after-hours on Wednesday to US$500.61. Adobe's stock price has already fallen 7.8% this year, lagging its software peers and the industry benchmark. Investors have been concerned that AI-based creative tools from companies like OpenAI or Runway AI may steal Adobe's market share.