(Reuters) -Adobe shares fell 12% on Friday as a lackluster quarterly forecast reinforced concerns about rising competition for the company's creative suite including Photoshop and disappointed investors hoping for a boost from AI integration.
The company expects about $440 million in net new annual recurring revenue for the digital media segment, which houses its cloud products for documents and creative applications. Last year, the unit had reported $470 million.
"Adobe (NASDAQ:ADBE) has enjoyed a high competitive moat over its corporate history and we think that AI has significantly eroded many of these competitive barriers and see competitive pressures building over time," HSBC analysts said in a note.
Artificial-intelligence startups such as Stability AI and Midjourney are looking to challenge Adobe's years-long grip of the graphics industry.
Overall revenue forecast was also below estimates, with Adobe CEO Shantanu Narayen saying "expectations were perhaps a little higher ... in terms of what we would guide for Q2".
If losses hold, the company will shed more than $30 billion in market value. Its shares have fallen about 4% this year, after jumping 77% in 2023.
"Mixed messages are hard to interpret," Piper Sandler analysts said, adding Adobe was still in the early stages of monetizing AI across its main platforms.
Adobe also announced a $25 billion stock buyback on Thursday, months after shelving its $20 billion deal for cloud-based designer platform Figma due to regulatory roadblocks.
Adobe's stock trades at 30.41 times its forward profit estimates, compared with 32.87 for Microsoft (NASDAQ:MSFT) and 30.42 for Salesforce (NYSE:CRM).