Photo Credit: midiman/Flickr.com
 

Adobe (Nasdaq: ADBE) recently reported its first-quarter results that outpaced market expectations. Adobe is also venturing into the AI space with the release of its Generative AI engine – the Firefly.
 

Adobe’s Financials

Adobe delivered a record first quarter with revenues growing 9% to $4.66 billion, ahead of the market’s estimates of $4.62 billion. Adjusted EPS of $3.80 also beat analyst estimates of $3.68.

By segment, revenues from the Digital Media segment grew 9% to $3.4 billion with Creative revenue up 8% to $2.76 billion and Document Cloud up 13% to $634 million. Revenues from the Digital Experience segment grew 11% to $1.18 billion.

Digital Media Annualized Recurring Revenue (ARR) was $13.67 billion. Net new Digital Media ARR was $410 million. Creative ARR was $11.28 billion, and Document Cloud ARR was $2.39 billion.

For the second quarter, Adobe expects revenues of $4.75-$4.78 billion and non-GAAP EPS of $3.75-$3.80. The market forecast revenues of $4.76 billion and an EPS of $3.76. Adobe increased its profit estimates for the year and now forecasts earnings of $15.30-$15.60, with $1.7 billion in net new annualized recurring revenue from Digital Media. Last quarter, Adobe had forecast earnings of $15.15-$15.45 per share for the year, with $1.65 billion in net-new Digital Media ARR. The market was looking for $15.31 in earnings per share for the year.      
 

Adobe’s AI Focus

Like other tech giants, Adobe remains focused on the AI space. It recently announced the release of Firefly, a new family of generative AI tools that is focused on improving AI usage by design professionals. Generative AI (GenAI) is that section of emerging AI technology that deals with the creation of all kinds of data, including audio, code, images, text, simulations, 3D objects, and videos. It learns from existing data and uses its learnings to create new outputs in the world of product design and art. Some of the professional tools available in the space are Stable Diffusion and OpenAI’s Dall-E 2. While there has been an increase in demand for Generative AI, it has also caused its share of controversy – the biggest one being issues surrounding copyright management.

The Firefly model currently offers both a text-to-image engine as well as the ability to do visual text effects. For instance, users can ask the engine to change the backdrop of a landscape from a summer day to a winter day by simply writing it out on the Firefly message box. But Adobe is also using this professional tool to address the concerns of artists.

FireFly has been trained on open license images in the public domain, along with images from Adobe Stock to address potential copyright issues. Initially, Firefly will be available in beta form on the web. Ultimately, Adobe plans to integrate it directly into its family of creative apps. Adobe is also looking at creating a monetization opportunity for those who contribute their work to Stock. But it has not revealed many details on how it will monitor and compensate artists.

To continue to address copyright issues, Adobe will automatically attach credentials to content that was developed with Firefly to indicate that generative AI was used in its creation. It is also releasing a universal “Do Not Train” tag that artists can deploy so that GenAI systems will not use those art pieces for AI training.

Adobe’s stock is currently trading at $368.03 with a market capitalization of $168.7 billion. It touched a 52-week high of $473.49 a year ago. It was trading at a 52-week low of $274.73 in September.

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