Adobe (ADBE) announced their quarterly results Dec 11 after the market closed. The stock dropped in after hours trading and continued to fall today - closed today at $474.63 a share, down $75.30 (13.69%) from yesterday.

The revenue and earnings for the quarter were good but the lower than expected growth for the coming fiscal year disappointed investors. They're worried that Adobe isn't able to "monetize" AI tools.

https://finance.yahoo.com/news/analysts-revisit-adobe-stock-price-123216031.html

https://www.investors.com/news/technology/adobe-stock-ai-monetization-in-focus/?src=A00220

From a Barron's article that's behind a paywall:

"Investors are concerned the company isn�t yet seeing major gains from its AI offerings, which it has been monetizing for about a year now. One of those offerings is Firefly, which gives Adobe users the ability to use gen-AI to create images and videos from text, edit images using AI, and more. " . . . �We don�t see GenAI helping to bend the growth curve in the foreseeable future. And [with] guide suggesting growth is teetering on single digits, we think this will weigh on valuations,�

From our perspective as contributors, I think the major concern for 2025 would be that our content will be used as needed to support their "AI tools and features are driving revenue/profit growth" message which may end up with lower royalty revenues for us. As we have been promised 33% of either customer payment or a computed payment for unlimited plans, that can still be true but meaningless. 33% of eff-all is eff-all.

The other day Adobe and Box announced a collaboration via Adobe Express. There was no specific mention of stock images (versus the customer's own product images) but if these are very low cost/high usage plans, we could see our "custom" royalties drop.

https://blog.adobe.com/en/publish/2024/12/10/adobe-express-for-box-bringing-together-creativity-collaboration-in-the-cloud

One analyst noted that Adobe had pointed to slower subscriber growth:

https://www.gurufocus.com/news/2631524/adobe-shares-slide-as-revenue-forecast-misses-expectations-ai-competition-looms

Adobe's slides and press release are on their Investor Relations page:

https://www.adobe.com/investor-relations.html

Adobe's CEO noted in his statement at the beginning of the earnings call that Firefly-powered generations had surpassed 16 billion. At first that struck me as a very big number for a not-very-good genAI tool. Uncharitably I first thought it meant that you had to generate so many times to get anything usable, thus driving up their counts!

I think the odd phrasing means that they're counting the Remove tool (Phtoshop and Lightroom) and the various generative expand options - those are OK for very low res images or very small sections, but are otherwise not up to scratch. I don't know how they're tracking every use of the Remove tool with Generative AI turned on, but assume they must be to calculate credits usage.

So the big number may be accurate, but not really comparable to Midjourney or any other genAI tool


Edited Dec 13 to add an article link:

https://finance.yahoo.com/news/lack-roi-ai-investments-rattles-190529459.html

"The earnings report is missing one key metric: Return on AI investments. In fact, it would be more accurate to say that the company does not even have a metric to measure those returns with. Investors can be very short-sighted, and they want to see visible improvements. AI offerings were supposed to improve the company�s subscriber base. They didn�t. The investments were supposed to aid the growth of a company that was otherwise reaching a stage of maturity. They didn�t. So what can the company do better during the next year so that 2026 is different?

That�s the million-dollar question that shareholders want answered. The company�s strategy will become clear with time. But with modest growth prospects, and reliance on share buybacks to reward investors, many shareholders are likely looking for a better investment."

ADBE was down again today; dropped as low as $456, but closed at $465.69.

Edited Dec 16: ADBE down today, closing at $461.53

The total collection size is now 603,641,179. In the last 6 days (Dec 10 - 16) it has grown by over 5 million (5,159,959). Over 4.2 million of that 5 million were genAI.

Edited Dec 17: ADBE down, closing at $455.23. That's down almost $100 a share since results were announced last week (closed at $549.93 Dec 11).

That aligns quite well with what I said months earlier, that Firefly is quite underwhelming (sucks real alot) and it seems obvious that many customers share the same opinion.

Adobe has invested for sure dozens of millions in researching and developing AI tools, which are surprisingly very weak and which do not offer any significant advantages over those offered by competitors. It`s definetly not the same when Adobe once held a dominant monopoly position in the graphics market with Photoshop.

Adobe's problem is that their AI tools are not sufficiently integrated into professional software like Photoshop, Illustrator, InDesign, etc. Professionals expect productivity gains that they're not getting any. If I still have to click through 5 menu tabs in Photoshop to select a filter, that's no longer state-of-the-art. It was 10 years ago.

The entire software needs to be completely overhauled to focus on AI with professional results. What's state-of-the-art is when I make a selection in an image and then write a prompt for what can be retouched, removed, or edited with filters (yes there is already generative fill in and AI select subject to remove background but it's very weak).
That's a productivity gain. And there are already competitors on market, who can offer these things.

And Adobe should finally realize that their Firefly just sucks and will suck in the future. They should completely  replace it with open-source AI models like Stable Diffusion or Flux, and provide a cloud service where they can earn money based on generation time.

They should also clean up their stock photo offerings. Introduce guidelines for contributors that are more aligned with customer needs, and steer better the huge amounts of AI images.

It's also time to introduce for contributors the technical ability to create their own series within their portfolios and move away from traditional keyword-based image searches. Instead, they should allow text-based prompting.

I wonder where all the development money is going. If I were an investor, I would also be very pissed of.

my money would be on adobe, the ai hype is being totally overhyped in finance, like many other tech trends before.

eta

also image ai is being poisoned because the content they are scraping from the internet is no longer pure normal content.

and content offered for training from many agencies is also poisoned with undeclared ai content.

so, the progress will be much slower than expected and the ai companies will need an unbelievable amount of fresh real content every year.

Midjourney + most other "ai" companies basically stole a bunch of people's work, and to explain it simply, is essentially re-blending it through image models it derives. In fact, in their 'code-base' they use things like "fairy-core", "fantasy-core", etc to describe the "cores" of images they stolen/scraped.

Companies like Midjourney (rather the ceos/execs that run them) want "infinite recurring income" based off of stolen works, and are so insanely greedy, don't want to pay money to those people they stole from. They are thieves. (more accurately, the "investors", aka vanguard/blackrock/statestreet/etc are trying to push that).

The proper solution is to:
a) retroactively pay people for derived works based off of stolen material. Yes, it is possible to do. Requires some coding, but possible.
b) Going forward, allow authors to specify what % of revenue they want if their materials/works are used, and on-the-fly opting-in/opting-out. (i.e., the entire dataset/model would be rebuilt say weekly, if not daily). Give authors the same perpetual, 'infinite' income/revenue.

The proper solution is also for authors to demand and take action to ensure that they are properly compensated for their stolen works.