Adobe Inc. (ADBE) shares plummeted by 12.02% in the pre-market trading on Thursday, following the company's better-than-expected fiscal fourth-quarter earnings report but disappointing guidance for fiscal 2025. The company's stock price slide reflects investor concerns about Adobe's ability to effectively monetize its artificial intelligence (AI) offerings and fend off rising competition from generative AI platforms.
While Adobe's Q4 non-GAAP earnings of $4.81 per share and revenue of $5.61 billion surpassed analysts' estimates, the company's outlook for fiscal 2025 fell short of Wall Street's expectations. Adobe projected fiscal 2025 revenue in the range of $23.30 billion to $23.55 billion, lower than the consensus estimate of $23.78 billion. Additionally, the software giant's non-GAAP earnings guidance of $20.20 to $20.50 per share for fiscal 2025 narrowly missed analysts' expectations of $20.54 per share.
The company attributed the muted outlook to headwinds from foreign exchange rates and the ongoing transition from perpetual licensing to subscription-based models. However, investors appear concerned about Adobe's ability to capitalize on the growing demand for AI-powered creative tools and generate substantial revenue growth in the face of increasing competition from well-capitalized startups such as OpenAI and Runway AI.
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