Adobe, the renowned software company known for its creative tools like Photoshop and Acrobat PDF software, has established itself as a pioneer in the field of artificial intelligence (AI). With recent advancements in generative AI, Adobe has harnessed the power of AI to develop innovative solutions that streamline content creation and enhance user experiences.
Back in 2016, Adobe unveiled Adobe Sensei, a framework and set of intelligent services that leveraged AI, machine learning, and deep learning technologies. This groundbreaking system enabled creators to perform complex tasks such as image-matching across millions of images, understanding document meanings and sentiments, and fine-tuning approaches based on target audiences. These capabilities were integrated into Adobe’s Creative Cloud, Document Cloud, and Marketing Cloud, providing users with AI-based tools years ahead of their time.
Building on this foundation, Adobe introduced Firefly, a suite of generative AI models designed to amplify creativity and intelligence without replacing human imagination. Firefly tools enable users to create, edit, measure, optimize, and review vast amounts of content with precision, speed, and ease. By offering these tools, Adobe has attracted more users to its free-to-use software versions and successfully converted them into paying customers, driving future growth.
The success of Adobe’s AI-driven software tools is evident in its recent financial results. In the second quarter of fiscal year 2024, Adobe achieved record revenue of $5.31 billion, a 10% increase year over year. Earnings per share (EPS) also saw a significant jump, reaching $3.49, a 24% increase. Additionally, the company’s remaining performance obligation (RPO), representing contractually obligated sales yet to be recognized as revenue, rose to $17.86 billion, marking a 17% increase. This growth in RPO indicates promising future sales trends.
Looking ahead, Adobe’s management is optimistic about the company’s continued growth. They have raised their full fiscal year outlook, projecting revenue of $21.45 billion at the midpoint of their guidance, an 11% increase year over year. Adjusted EPS is expected to reach $18.10, a 13% increase.
Shares of Adobe currently trade at approximately 27 times analysts’ estimates for the company’s fiscal 2025 earnings. This valuation presents an attractive opportunity for investors, considering Adobe’s pioneering role in AI, consistent growth, substantial recurring subscription-based revenue, and the potential to capitalize on the increasing adoption of AI.