Adobe ADBE has been harnessing AI to power solutions like GenStudio and Firefly Services, which have gained strong adoption. Adobe’s tools, like Acrobat AI Assistant and Adobe Express, are attracting business professionals and creators. Its strategy of offering an AI-powered, comprehensive creative platform that extends from idea generation through creation to mass production and delivery is addressing the needs of Creative and Marketing Professionals.
The company’s latest Acrobat Studio, which unites Adobe Acrobat, Adobe Express and AI agents, is expected to help Adobe expand its footprint among business and creative professionals, as well as students. Acrobat Studio converts PDFs into a conversational knowledge hub that users, with the help of a customizable AI assistant, can delve into to gain insights, answers and recommendations. Adobe Express creation tools and templates, as well as Firefly-powered image and video generation tools, can then be used to create content from the gathered information.
Firefly is enhancing the capabilities of Creative Cloud desktop applications. The Firefly App is attracting users for AI-powered content ideation, creation and production, and its support for third-party models, including from Alphabet GOOGL division Google’s Imagen and Veo, Microsoft MSFT-backed OpenAI’s image generation and Black Forest Labs’ Flux, is a key catalyst.
Adobe’s AI book of business from AI-first products, including Acrobat AI assistant, Firefly App, and Services and GenStudio for Performance Marketing, is tracking ahead of the $250-million ending Annual Recurring Revenue (ARR) target by the end of fiscal 2025.
The Zacks Consensus Estimate for third-quarter fiscal 2025 Digital Media revenues is pegged at $4.38 billion, suggesting 9.6% growth over the figure reported in the year-ago quarter. The consensus mark for Digital Experience revenues is pegged at $1.46 billion, indicating 8.1% growth over the figure reported in the year-ago quarter.
Adobe Faces Tough Competition in AI Domain
ADBE’s AI business is minuscule compared with Microsoft and Alphabet. Microsoft’s Intelligent Cloud revenues are benefiting from growth in Azure AI services and a rise in the AI Copilot business. AI assistants, including Microsoft 365 Copilot for commercial customers and the consumer Copilot in Windows, reached 100 million monthly active users in fourth-quarter fiscal 2025.
Alphabet’s focus on leveraging AI to drive growth is a key catalyst. AI is infused heavily across its offerings, including Search and Google Cloud. Alphabet is leveraging AI to boost search dominance with the launch of Gemini 2.5. Search revenues are driven by improving engagement with features like AI Overview, which now has 2 billion users per month and is available in more than 40 languages across 200 countries.
ADBE’s Share Price Performance, Valuation & Estimates
Adobe shares have dropped 18.8% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 11.8%.
Adobe Stock’s Performance
Image Source: Zacks Investment Research
The ADBE stock is trading at a premium, as suggested by a Value Score of C.
In terms of 12-month forward price/earnings (P/E), Adobe shares are trading at a lower multiple of 16.02X compared with Microsoft’s 32.51X and Alphabet’s 19.48X, as shown in the charts below.
Valuation ADBE vs. MSFT
Image Source: Zacks Investment Research
Valuation ADBE vs. GOOGL
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for fiscal 2025 earnings is pegged at $20.63 per share, unchanged over the past 30 days, suggesting 12% year-over-year growth.
Apple Inc. Price and Consensus
Apple Inc. price-consensus-chart | Apple Inc. Quote
Adobe currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
