Adobe forecast fiscal 2025 revenue below estimates due to lower subscription spending

(Reuters) – Photoshop maker Adobe on Wednesday forecast fiscal 2025 revenue below Wall Street estimates, suggesting the company’s investments to incorporate AI into its software applications were taking longer than expected to arrive they bore fruit.

Shares of the San Jose, California-based company fell nearly 8% in extended trading.

The company forecast annual revenue of between $23.30 billion and $23.55 billion in 2025, compared with estimates of $23.78 billion, according to data compiled by LSEG.

Adobe expects foreign exchange volatility and the company’s shift to subscriptions to reduce its revenue by about $200 million in fiscal 2025.

In response to growing competition from well-capitalized startups such as Stability AI and Midjourney, the company is making significant investments in AI-driven image and video generation technologies.

While Adobe forecast strong growth for the second half of the year in June, its forecast on Wednesday suggested the company was still struggling to monetize its AI push.

Adobe last year launched Firefly, a family of generative AI models integrated into its various applications and products.

Last month, the company added software tools that let customers use AI to create images based on Adobe’s stock image library.

First-quarter revenue was forecast between $5.63 billion and $5.68 billion, falling short of estimates of $5.73 billion.

Adobe’s fourth-quarter revenue rose 11% year over year to $5.61 billion, beating market expectations of $5.54 billion.

(Reporting by Kritika Lamba and Zaheer Kachwala in Bengaluru; Editing by Krishna Chandra Eluri and Shreya Biswas)