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'AI Loser' Label Follows Slumping Adobe Stock After Disappointing Sales Outlook

NEW YORK --- Shares of tech giant Adobe Inc. plummeted 5.3% to $391.68 in Friday's trading, the biggest single-day decline since March 13, as investors expressed skepticism over the company's ability to compete with AI-focused upstarts.

The disappointing sales outlook came despite Adobe exceeding analysts' estimates, saying $5.88 billion to $5.93 billion in revenue for the period ending in August. However, investors seemed unconvinced, sending shares reeling to their third-biggest drop in three months.

Adobe's struggles are part of a wider debate about whether traditional software industry leaders such as Adobe can withstand the disruption caused by AI-focused new entrants. Design applications from Canva Inc. and image-creation tools from Midjourney Inc. have gained steam, while Adobe has introduced generative AI tools for its products, including Photoshop.

"We think that's a misunderstanding of the technology," Gil Luria, an analyst at DA Davidson, told Bloomberg TV in an interview. "Somehow Adobe has been snagged as an AI loser."

Despite the disappointing results, Adobe's Chief Financial Officer Dan Durn said the company's family of AI models, called Firefly, has been used to generate more than 24 billion pieces of content since its introduction.

In a statement, Adobe's CEO Shantanu Narayen stated that Adobe's AI innovation is "transforming industries enabling individuals and enterprises to achieve unprecedented levels of creativity."

The digital media unit, which includes Adobe's flagship creative and document-processing software, posted an 11% increase in sales to $4.35 billion.

However, Annual recurring revenue from the 'marketing and analytics software' segment was at stake. This could be a major contributor to investors' concerns over whether Adobe can navigate this rapidly changing and AI-driven industry landscape effectively. The company reported that fiscal second-quarter revenue increased 11% to $5.87 billion, exceeding analysts' estimates of $5.8 billion.

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