Will Adobe's AI reboost its YTD high?
Adobe MAX user conference and Analyst Day was centered around the theme of generative artificial intelligence, or Gen AI, and highlighted Adobe's range of offerings that support the needs of all audiences. $Adobe(ADBE)$
It seems like ADBE has moved towards its YTD high since last earnings. Is there still a buy on its AI-driven product?
Tuesday, Adobe unveiled Firefly Image 2 Model and also showcased Adobe GenStudio — a new service which brings together Creative Cloud, Express and Experience Cloud, with Firefly gen. AI — among other tools and features.
Photoshop's AI powers land on Chromebooks as Adobe debuts Firefly 2 | PCWorld
Our point on Adobe’s AI is that
Limited Firefly data disclosure.
Firefly is ADBE's core AI offering. In the six months since its release, Firefly has generated over 2 billion images, approximately 11 million images per day. Photoshop/Illustrator Beta downloads reached 3 million (this Beta could use Gen AI Expand and Gen AI Fill features before Firefly's official release). The company has concealed several key data points, such as MAU, and has employed a rather complex release strategy (Waitlist, Beta Test, and more), making it difficult to estimate the true state of Firefly. The company is expected to disclose more information in October or the next quarter.
Adobe's Revenue Segment
AI's performance increment takes time.
Despite the company's official launch of Firefly yesterday and a 6-10% price increase, the impact of Gen AI products on the 4Q23 520 million Net New ARR is minimal/modest. From a revenue perspective, the company has not significantly raised its performance. This is, of course, related to the timing of the new pricing rollout on November 1st. Still, considering the preceding 6 months of Beta Test, it also indicates that the performance increment brought by AI takes time.
AI inference may not be as expensive as people guess.
Although theoretically, ADBE's integrated approach to data, models, training, and inference, coupled with the massive volume of images, should lead to rapidly rising costs, the company says its operating profit margin will not be greatly affected and will still be maintained at the Mid-40s level. With the formal commercial use of Firefly, the marginal impact of large model training on the company is diminishing, and the free inference quota of 25 times/month at the inference end (equivalent to about $1.25) suggests that the company can bear the cost of inference.
Penetration rate is key.
The company continues to emphasize proliferation and states that the current goal is to continuously increase the penetration rate, while considerations regarding monetization will come later. With approximately 68 million Creative Pros, a penetration rate of 3 million for the Beta Product is still relatively low. We believe that ADBE, as a close partner of Huang Renxun, represents the development trend of AI-related fields in the near future, especially in video and image processing. We will closely monitor their MAX conference in the future.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
May Adobe hit $600/share and the board of directors approve a two for one stock split and include 5% dividends on the shares.
I genuinely invest on my own, but I've never been successful in the stock market. Sometimes I end up losing money instead of making it, which is frustrating.
Hello ADBE board of directors, please consider a 2 for 1 stock split and to put the cherry on top. Please include a 5% monthly dividend.
With all the love for AI and Tech night now, ADBE isn't getting near the attention it should IMO.
Wait for the adobe max 10-12 oct. This will gain min 5%