Adobe surges as AI optimism fuels annual revenue forecast

A logo of Adobe Inc. is pictured at the company's office in Citywest Business Campus, Saggart, Ireland October 19, 2021. Picture taken October 19, 2021. REUTERS/ Tom Bergin/File Photo

(Reuters) -Adobe shares soared 16% on Friday, putting the Photoshop-maker on track for its best day in more than four years, after the company raised its annual revenue forecast as more customers turned to its AI-powered editing tools.

The forecast allayed investor fears that Adobe, a major player in the market for editing tools for photos and videos, could lose customers to AI startups such as Dall-E maker OpenAI that allow users to generate images with simple text prompts.

"Generative artificial intelligence adoption should help drive growth over the next several quarters," Morningstar analysts said in a note.

Results showed Adobe's AI efforts, including the Firefly image-generating software it rolled out last year, were paying off, with senior executive David Wadhwani saying existing users were moving to higher-priced plans to gain access to Firefly.

At $528.81, the company's shares hit their highest level since March 14, and if the gains hold, Adobe was set to add more than $30 billion to its market value.

Its shares have lost about 23% of their value this year, compared with a nearly 14% gain for the S&P 500 index.

The company raised the midpoint of its fiscal 2024 revenue forecast to $21.45 billion on Thursday, compared with its prior midpoint of $21.40 billion.

It reported $3.91 billion as revenue from its digital media business, which made up about 74% of its total second-quarter revenue of $5.31 billion. Analysts had expected total sales of $5.29 billion.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Mohammed Safi Shamsi)

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