Adobe is facing skepticism about its ability to compete in the creative market with AI products disrupting it. The lack of confidence is despite efforts by Adobe to integrate rival AI models into its products.
Adobe Inc. is trying to prove it can remain a key player in the creative industry as artificial intelligence changes how people make content. The company gathered about 10,000 marketers, filmmakers, and creators at its annual conference this week to highlight how its software is adapting to the AI era.
Adobe is attempting to retain investor confidence
Many on Wall Street are unsure if Adobe can maintain its dominance as new AI-powered tools make it easier for people to create videos, posters, and graphics without professional software.
Citigroup analyst Tyler Radke warned that Adobe is “at risk of structural AI-driven competitive and pricing pressure,” even though the company has a strong strategy. The company’s shares have lost roughly a quarter of their value this year.
Other software firms like Salesforce Inc. and Workday Inc.’s stock prices have also struggled.
Many of the popular AI tools used for creating videos and images, such as OpenAI’s Sora or Google’s Veo, are made outside Adobe’s ecosystem. Consumer-focused platforms like Canva are also growing in popularity, allowing people to design without needing Adobe’s professional software.
Bloomberg’s analyst estimates suggest Adobe’s Digital Media revenue growth will slow over the next few years. Despite this, analysts like Kirk Materne from Evercore ISI described Adobe’s recent move as “another step toward addressing the ‘existential risk’ question” about the effect of generative AI on its business.
Adobe’s strategy
At the conference in Los Angeles, Adobe introduced several new features aimed at keeping AI-focused creators within its platform. One of the biggest additions is of AI models from competitors like Google and OpenAI into Adobe’s tools, including Photoshop.
For years, the company promoted its in-house Firefly AI models, which were trained to avoid copyright issues and offensive content. Firefly has already been used to create more than 29 billion images and other assets since launch.
However, Adobe is now also buying access to third-party AI models and offering them directly to its customers. This allows creators to choose between Adobe’s Firefly and external AI systems depending on their needs.
Adobe makes about $250 million a year from its AI products, but it says AI helps its business in more ways than that. The company now uses a broader term called “AI-influenced revenue,” which means any money earned with help from AI, such as charging higher prices or keeping more customers. By Adobe’s estimate, AI affects about $5 billion of its yearly revenue.
Adobe’s chief technology officer for its creative business, Ely Greenfield, pointed out that many customers use Firefly for commercial projects but turn to other AI models for brainstorming or experimental work.
“People are getting more comfortable with the idea that models are trained on a large number of things,” Greenfield said.
Jackson Ader from KeyBanc noted that customers at the event were enthusiastic about the expanded AI options.
“We welcome the strategy as we have been skeptical of Adobe’s ability to compete on the like-for-like merits of AI image and video generation,” he wrote.
Adobe’s CEO, Shantanu Narayen, insisted that his firm’s software remains essential for creators who want professional-quality results, and its stock price struggles are mainly due to investors’ distraction with semiconductor companies and AI model developers.
Sign up to Bybit and start trading with $30,050 in welcome gifts
Source: https://www.cryptopolitan.com/investors-question-adobes-future-in-ai-era/