Adobe Sees AI Demand Driving Revenue Gains After Q2 Earnings Beat; Shares Jump

Updated at 8:09 am EDT

Adobe Inc.  (ADBE) - Get Free Report shares moved firmly higher Friday after the cloud software group posted stronger-than-expected second quarter earnings with a solid near-term outlook powered in part by AI demand.

Adobe said revenue for the three months ending in April rose 9.8% from last year to $4.82 billion, topping Street forecasts and powering an adjusted bottom line of $3.91 per share which handily beat analysts' estimates.

CEO Shantanu Narayen boosted the group's full-year profit forecast, citing the impact of AI-related technologies embedded in its creative cloud products, and will year sales forecast in the region of $19.3 billion at the mid-point. Earnings, Adobe said, would rise to between $15.65 and $15.75 per share, a 15 cents per share improvement at the higher end.

"Every disruptive technology has presented exciting opportunities for Adobe to innovate and increase our addressable market opportunity," Narayen told investors on a conference call late Thursday. "Our ongoing R&D investments have enabled a rapid development and deployment of Firefly, our generative AI technology. We believe generative AI will drive both further accessibility and adoption of our products."

"We are executing against our strategy to unleash creativity for all, accelerate document productivity, and power digital businesses.." he added. 

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Adobe shares were marked 4.7% higher in pre-market trading to indicate an opening bell price of $513.96 each, a move that would extend the stock's year-to-date gain to around 53%.

Revenues from the group's Digital Media segment were up 10% from last year at $3.51 billion, while Digital Experience revenues were up 12% at $1.22 billion. Net new annualized recurring revenue from Digital media was $470 million.

"Adobe is executing well across its vision of changing the world through personalized digital experiences, and while we are positive about Adobe’s approach to embedding artificial intelligence into its solutions, particularly its focus on copyright-compliant generative AI, we are more cautious about its exposure to global competition regulation and to a challenging macroeconomic environment," said JMP Securities analyst Patrick Walravens.