Adobe's investment in AI has started to pay off. Is it time to buy its stock?

Adobe reported that its annual recurring revenue from AI-powered feature products exceeded $5 billion, and gave a strong revenue outlook for the current quarter. That says a lot about the performance of the company's investments in AI-powered features, Bloomberg notes. Previously, investors feared that the introduction of AI would lead to a loss of popularity of the creative industries software developer's products. After the publication of reports for the third quarter, Adobe shares rose by more than 3% on the postmarket.

Adobe, a developer of software for the creative industries, said Sept. 11 that its revenue for the current quarter will be between $6.08 billion and $6.13 billion. Analysts on average expected the figure at the lower end of that range, Bloomberg notes. Adjusted earnings per share are expected to be between $5.35 and $5.4 versus Wall Street's forecast of $5.33. The company also improved its full-year forecast.

Adobe is actively incorporating AI features into its programs, often based on its own generative models. This is helping to drive growth, according to Bloomberg. The company said annual recurring revenue from AI-enabled products exceeded $5 billion. "Adobe is the category leader in AI tools for creative applications," said CEO Shantanu Narayen.

According to Adobe, 99% of Fortune 100 companies have used AI in one of Adobe's applications, and more than 40% of its top 50 enterprise customers have doubled their annual recurring revenue (ARR) since the beginning of fiscal year 2023.

The company's shares rose 3% in extended trading after Thursday's report, reaching $360.7. Since the beginning of the year, as of Thursday's close of main trading, Adobe's securities were down 21%.

Adobe's revenue rose 11% to $5.99 billion in the third quarter of fiscal 2025, which ended Aug. 29. Analysts polled by LSEG had expected $5.91 billion, CNBC writes. Adjusted earnings came in at $5.31 per share, also above expectations ($5.18). Net income rose 5.3% to $1.77 billion, or $4.18 per share.

The Digital Media division, which includes the company's flagship creative content and document products, posted sales growth of 12% to $4.46 billion, with recurring annualized revenue in this key segment reaching $18.6 billion.

Before the report, investors expressed concern about Adobe's ability to make money from its AI developments, said Morgan Stanley analyst Keith Weiss, a note cited by Bloomberg. The agency explains that Wall Street has generally cooled toward application software makers in recent months due to fears of competition from AI-focused startups. Adobe, which has long been a leader in creative software, is facing increasing pressure from players such as Canva and Midjourney.

However, Goldman Sachs analyst Kash Rangan believes that SaaS companies like Salesforce, Adobe and ServiceNow, which sell software on a subscription basis, will not lose from the introduction of AI, but on the contrary - will get better. Rangan emphasized that many of his favorites in the market are not experiencing a bubble right now, but rather a depression. This is especially true for application software companies, whose valuations have sagged significantly, while infrastructure-level players like Snowflake and MongoDB have been more resilient. According to Rangan, the pressure on the sector could open up opportunities for long-term investors.

According to MarketWatch, of the 42 analysts tracking Adobe stock, 28 of them recommend buying (Buy and Overweight ratings), 13 recommend holding (Hold), and only one advises selling (Sell). The Wall Street consensus price target is $470.3, up 34% from the closing price on September 11.

This article was AI-translated and verified by a human editor