AdobeADBE

has held a decade-long monopoly on creative software — charging creatives $659 a year for its Creative Cloud subscription. But now, analysts think Adobe has finally met their match with GenAI, which could soon see the masses swapping their Photoshop subscriptions for AI tools. Could this really wash away one of the creative industry’s most powerful names? After Adobe’s stellar earnings report, it seems unlikely.

Fighting fire with Firefly: If you want something done right, you gotta do it yourself — or at least with a bit of help from AI. And Adobe is betting that industry creatives will agree. Last year, it launched its own design AI model, Firefly, which is now integrated into Photoshop and Illustrator. This move aims to reassure users that Adobe remains at the cutting edge and attracts new clients.

• Last Friday,ADBE
  jumped 14% — its highest single-day gain in four years — after posting record earnings, with sales rising 10% thanks to strong demand for new AI features.
• The company added $460M in net new annual recurring revenue, with Adobe CFO Dan Durn expecting an “acceleration” in new creative business throughout the year.

Good Artists Borrow, Great Artists Steal (Adobe’s Version)

Adobe’s AI integration could shield it from competitors. However, AI is becoming increasingly controversial among creatives, and backlash could pose a significant threat. Recently, Adobe upset clients by adding a clause to its terms and conditions allowing it to “access [user] content through both automated and manual methods, such as for content review.”

• Adobe had to clarify in a blog post that Firefly is not (and will not be) trained on consumer content.
• Internally, some Adobe employees expressed concerns — with one stating, “The general perception is: Adobe is an evil company that will do whatever it takes to F its users.”

Art or science? Investing involves numbers, and Adobe’s forward price-to-earnings ratio of 24x is now below its historical average, following a 9% drop this year. Analysts predict the company will continue to boost its sales by at least double digits in the coming years, with free cash flow growing even faster. However, hitting these numbers might be more art than science — as Adobe tries to convince customers that the extra cost for AI features will deliver value.