it's time to focus on Adobe After reporting its earnings last night it was really less about the earnings and more about the forecast that spooked Wall Street with having that stock down now more than 10% throughout the day down about 133% its biggest sell off in almost 3 years so what do we make of it it was a decent quarter Charlie Miner Analyst at third bridge and Sandra Cho founder president Point wealth Capital Management is there opportunity here or are they not you know competitive enough Sandra so I do think there is some opportunity here
I mean you have their user base of 224 million users that are not only used to going to them for other needs not just generative AI but also you know paying for subscriptions and for their services if you tap into that which they it looks like they are doing then I do think that there's potential um their biggest competitor would be you know open AI uh Sora but with Adobe adobe's got a much more robust um you know offering it just their generative AI uh just can develop more complex images and U just has it's
just more robust in general so I think if they develop what Sora has which is a text to image um offering then I think that they they do definitely have potential right what do you think char you see the potential too yeah certainly I mean what Adobe is really struggling with right now is a lack of a growth Catalyst you can go back to the fall of 2022 remember they proposed $20 billion to buy figma they knew that their Core Business this digital media segment was slowing in growth um because that deal fell through and
because of the development of gener of AI we're now looking to AI to Firefly um as that Catalyst the problem is Adobe is taking an adopt now monetized later approach and given the resources and the money they're putting into this investors are becoming increasingly frustrated that they're not pulling that monetization lever and what we're wondering is despite customers telling me and others that the products are good and that they're using them how much are they actually going to pay for them and how big of a revenue driver um is this going to be in 2025
and Beyond yeah understood I mean Sandra when you think about what happens here with Adobe how long does it take for it to sort of make up some of the missteps yeah so I mean they are making conversions um into you know Firefly people are using them more and more but it's true it has been quite slow and the amount of money that any company has to invest in generative Ai and AI in general is is substantial and because this is the launching period right of AI still so um but I think that you know
missteps as far as you know you getting getting people to you know monetizing for example their offering of generative AI I think that that can be rectified if they tap into their user base if they get the correct pricing and it seems like they are doing that you know raising pricing a bit uh for this new offering of firefly and then making that value add getting people to use it so that they keep paying more for its use right understood um Charlie you noted how the core digital media business continues to struggle with some macro
headwind some um competitive pressur so even though they they lowered their numbers a bit you still think that they can be competitive so what will be maybe a Tailwind or what will sort of make them Propel ahead of the competition yeah they continue to site macroeconomic challenges as a primary driver for that digital media business the thing is we're now looking at single-digit growth this is not a business where we're looking ahead of year and expecting some sudden acceleration um it's why Sandra it's why other analysts are now looking at AI as really that only
nonlinear growth opportunity how many more uh creative designers and professionals are going to go out uh and choose Adobe I actually think more more people are likely to switch to a platform like a canva which is now competing for Enterprise wins um I think just a pure re acceleration of that digital media business is unlikely at least in the short term um and it's why they're out there looking for different Catalyst um which to be fair could accelerate very quickly if they find the right product um they could see Mass adoption of their AI tool
it could drive 10 20 30% increases in overall spend um that's obviously looking at the most optimistic scenario but um it wouldn't be impossible yeah but it does sound like you're both uh seeing the opportunity so today would be a buying opportunity I guess when you sell off 14% is that right I don't know nods no who knows um I I think it's mixed right I think that if you look at um analyst consensus they're split and some analysts have you know said okay um you know we're going to downgrade to hold from buy and
some have kept their buy rating um just really it's going to be a matter of do you have conviction in 2025 that adobe can you know monetize their generative Ai and stay ahead of it smaller competitors yeah great question because that's been the whole thing how do you monetize AI not just for Adobe but for all the companies wonderful to see you both Sandra Cho thank you for that Sandra Cho Point wealth Capital Management and Charlie Miner of third Bridge Charlie Sandra thank you
