Adobe shares drop 13% as concerns about AI growth overshadow better-than-expected results
Shantanu Narayen, Chairman and CEO of Adobe Systems addresses the gathering on the first day of the three-day B20 Summit in New Delhi on August 25, 2023.
Sajjad Hussain | AFP | Getty Images
Adobe shares dropped 13% following the company’s quarterly earnings report as investors fretted over lingering growth concerns and the software maker’s artificial intelligence monetization strategy.
The sell-off came despite better-than-expected results, which included adjusted earnings of $5.08 per share and $5.71 billion in revenue. That surpassed analysts’ estimates of $4.97 in earnings per share and $5.66 billion in revenue, according to LSEG.
Adobe called for $4.95 to $5.00 in adjusted earnings per share for the current quarter on $5.77 billion to $5.82 billion in revenue. Analysts polled by LSEG had expected $5.00 per share on $5.80 billion in revenue.
Worries have mounted in recent months that the company is falling behind some competitors and losing its advantage in generative AI. The company’s annualized recurring revenue from AI contributed $125 million during the period and Adobe expects that to double by the end of the fiscal year.
Bernstein’s Mark Moerdler, who recommends buying on the stock, wrote in a report that to “believe that ADBE is an AI winner and that AI is not replacing existing revenue streams, investors need to be able to observe longer-term trends.”
Keith Weiss, an analyst at Morgan Stanley, wrote that “new disclosure of GenAI contribution is a step in the right direction,” but that investors need to see a “clearer roadmap” at the company’s investor meeting at its annual conference next week. Morgan Stanley has the equivalent of a buy rating on the stock.
In an interview with CNBC’s “Closing Bell: Overtime” on Wednesday, Adobe CEO Shantanu Narayen said that, “Not only are we infusing AI in our existing products and delivering value, but it’s clear that the innovation that we’ve delivered is creating new revenue streams.”
Total revenue increased 10% year over year in the quarter that ended on Feb. 28, according to a statement. Net income of $1.81 billion, or $4.14 per share, was up from $620 million, or $1.36 per share, in the same quarter a year earlier. Adjusted earnings per share exclude impact from stock-based compensation and income taxes.
For the 2025 fiscal year, the company expects adjusted earnings per share of between $20.20 and $20.50, with $23.3 billion to $23.55 billion in revenue. That implies about 9% growth at the middle of the range. The LSEG consensus was for earnings of $20.40 per share, with $23.49 billion in revenue.
Mike Intrator, co-founder and CEO of CoreWeave, speaks at the Nasdaq headquarters in New York on March 28, 2025.
Michael M. Santiago | Getty Images News | Getty Images
CoreWeave shares fell about 6% in extended trading on Tuesday even as the provider of artificial intelligence infrastructure beat estimates for second-quarter revenue
Here’s how the company did in comparison with LSEG consensus:
- Earnings per share: Loss of 21 cents
- Revenue: $1.21 billion vs. $1.08 billion expected
Revenue more than tripled from $395.4 million a year earlier, CoreWeave said in a statement. The company registered a $290.5 million net loss, compared with a $323 million loss in second quarter of 2024. CoreWeave’s earnings per share figure wasn’t immediately comparable with estimates from LSEG.
CoreWeave’s operating margin shrank to 2% from 20% a year ago due primarily to $145 million in stock-based compensation costs. This is CoreWeave’s second quarter of full financial results as a public company following its IPO in March.
CoreWeave pointed to an expansion in business with OpenAI, a major client and investor. Also during the quarter, CoreWeave acquired Weights and Biases, a startup with software for monitoring AI models, for $1.4 billion.
In May, management touted 420% revenue growth, alongside widening losses and nearly $9 billion in debt. The stock still doubled anyway over the course of the next month.
CoreWeave shares became available on Nasdaq at the end of the first quarter, after the company sold 37.5 shares at $40 each, yielding $1.5 billion in proceeds. As of Tuesday’s close, the stock was trading at $148.75 for a market cap of over $72 billion.
A CoreWeave data center project with up to 250 megawatts of capacity is set to be delivered in 2026, the company said in the statement.
Executives will discuss the results and issue guidance on a conference call starting at 5 p.m. ET.
This is breaking news. Please check back for updates.
WATCH: Citi’s Tyler Radke’s bullish call on CoreWeave, upgraded to buy
U.S. President Donald Trump (L) invites Nvidia CEO Jensen Huang to speak in the Cross Hall of the White House during an event on “Investing in America” on April 30, 2025 in Washington, DC.
Andrew Harnik | Getty Images
The Trump administration is still working out the details of its 15% export tax on Nvidia and AMD and could bring deals of this kind to more companies, the White House’s Karoline Leavitt said Tuesday.
“Right now it stands with these two companies. Perhaps it could expand in the future to other companies,” said Leavitt, the White House’s spokesperson.
“The legality of it, the mechanics of it, is still being ironed out by the Department of Commerce, and I would defer you to them for any further details on how it will actually be implemented,” she continued.
President Donald Trump confirmed on Monday that he had negotiated a deal with Nvidia in which the U.S. government approves export licenses for the China-specific H20 AI chip in exchange for a 15% cut of revenue. Advanced Micro Devices also got licenses approved in exchange for a proportion of its China sales, the White House confirmed.
“I said, ‘If I’m going to do that, I want you to pay us as a country something, because I’m giving you a release,'” Trump said Monday.
“We follow rules the U.S. government sets for our participation in worldwide markets,” Nvidia said in a statement this week.
Trump said the export licenses for AMD and Nvidia were a done deal. But lawyers and experts who follow trade have warned that Trump’s deal may be complicated because of existing laws that regulate how the government can charge fees for export licenses.
The Commerce Department didn’t immediately return a request for comment.
The H20 is Nvidia’s Chinese-specific chip that is slowed down on purpose to comply with U.S. export relations. It’s related to the H100 and H200 chips that are used in the U.S., and was introduced after the Biden administration implemented export controls on artificial intelligence chips in 2023.
Earlier this year, Nvidia said that it was on track to sell more than $8 billion worth of H20 chips in a single quarter before the Trump administration in April said that it would require a license to export the chip.
Trump signaled in July that he was likely to approve export licenses for the chip after Nvidia CEO Jensen Huang visited the White House.
The U.S. regulates AI chips like those made by Nvidia for national security reasons, saying that they could be used by the Chinese government to leapfrog U.S. capabilities in AI, or they could be used by the Chinese military or linked groups.
The Chinese government has been encouraging local companies in recent weeks to avoid using Nvidia’s H20 chips for any government or national security-related work, Bloomberg reported on Tuesday.
WATCH: Access to Nvidia’s H20 won’t hand China an AI advantage: Analyst
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike