Adobe's financial report shines, is AI software on the eve of an explosion?

After the surge of AI hardware representative Nvidia, AI software leader Adobe is also expected to usher in a round of explosive growth under performance verification. The AI software side may be on the eve of an outbreak.

On Thursday local time, design software provider Adobe announced its second-quarter results for the 23 fiscal year ending June 2. The financial report showed that Adobe's revenue for this quarter was US$4.82 billion, a year-on-year increase of 10%, higher than analysts' expected US$4.77 billion. The EPS under generally accepted accounting principles is US$2.82, also exceeding the target range of analysts' expected 2.65 to 2.70 US dollars.

Looking at the business, Adobe's digital media department's revenue was US$3.51 billion, a year-on-year increase of 10%, higher than analysts' expectations; the revenue of the digital experience department was US$1.22 billion, a year-on-year increase of 12%, consistent with analysts' expectations.

What is particularly exciting for the market is that Adobe has raised its full-year revenue and profit guidance, and stated that the boost of AI to the business will be further reflected in the third and fourth quarter financial reports; and the management repeatedly emphasized on the conference call that Adobe's technological innovation can "lead the AIGC new era."

After the financial report was released, Adobe rose more than 2% and rose more than 3.5% in after-hours trading. Since the beginning of this year, the company's stock price has risen by nearly 46%, becoming a quite eye-catching existence among AI concept stocks.

If you can't beat them, join them! Adobe responds quickly to AI impact

As a software company serving professional designers, the market was once worried that AIGC would have an impact on Adobe's business. But Adobe's response to the AI wave was very rapid.

Wall Street News has previously introduced that in March, Adobe launched the differentiated AI creation assistant tool "Firefly", which is aimed at assisting rather than "replacing" creators, and pays attention to protecting the rights and interests of creators. Therefore, unlike other AIGC tools, it is not easy to be resisted by professional creators.

Since its launch, Firefly has been updated many times, and Adobe has opened a paid TOB version in early June. In addition, Adobe has recently provided new AIGC functions for its famous photo editing application Photoshop.

Adobe executives emphasized on the conference call that AIGC will become the driving force for the company's revenue and profit growth for many years to come.

The company's CEO, Shantanu Narayen, said:

"Given our rich data sets, basic models, and full-end product portfolio, Adobe's breakthrough innovation enables us to lead the new era of AIGC."

In addition, part of Adobe's stock price increase also comes from its acquisition of Figma. Figma is a rising star in the design industry and one of Adobe's biggest competitors. In September of last year, Adobe spent $20 billion to acquire Figma, the largest acquisition in the company's history.

However, due to regulatory factors, the transaction has not yet been completed. Adobe management stated on a conference call that the company continues to engage with regulatory agencies in the United States, the United Kingdom, and the European Union, and the acquisition may be completed by the end of the year.

AI software is on the eve of an explosion

From the recent trend of the US stock market, the logic behind Adobe's stock price growth is similar to that of Nvidia. Nvidia represents the AI hardware side, and its growth has been validated by performance. Adobe represents the AI software side, and the performance validation point is slightly later than Nvidia, or may need to wait until the third quarter report in August to reflect.

However, Adobe's business layout and frequent actions in the AI field have led the market to believe that the performance increment brought by AIGC is not empty talk.

Shenwan Hongyuan Securities recently published a research report stating that similar to Duolingo, Notion, Kingsoft Office, IFLYTEK and other domestic and foreign companies, after launching AI products, they have raised the subscription prices of their services.

Kirk Materne, an analyst at Evercore ISI, previously stated in his evaluation of Microsoft that he believes that by 2027, AI will bring Microsoft $100 billion in revenue growth.

Materne wrote in the report:

"Although we all agree that today's 'hype' is ahead of reality, we believe that the impact of artificial intelligence will eventually cross every industry and region, and Microsoft is uniquely positioned in the next few years to transfer to the artificial intelligence platform and achieve profitability."

By analogy, it is not difficult to envision the performance imagination space brought by the price increase of AI value-added services. In the short term, software companies that are the first to monetize AI innovation also have stronger financial certainty. Companies like Adobe that can successfully solve practical problems in work and life with the power of AI may become the market darlings of the new round of Hype after the explosion of AI software.