Despite increased AI competition and subscription changes, Adobe's stock is struggling, but its profits growth is consistent. Will it recover in 2025?

Over the past year, Adobe's stock (ADBE) has fallen 29.8%, far less than the Zacks Computer Software industry's 14.2% increase and the Zacks Computer and Technology sector's 28.5% rise.

Growing competition in the Generative AI (GenAI) market, especially from Microsoft-backed OpenAI, is threatening the company's prospects for 2025. Investor trust has also been impacted by Adobe's AI solutions' lack of significant revenue generation.

Adobe projects that its Digital Media Annual Recurring Revenue would climb by about 11% in fiscal 2025, with sector sales ranging from $17.25 billion to $17.40 billion, which represents a 9% growth at the halfway point of fiscal 2024. Lower-than-expected price gains result from the company's decision to refocus its efforts from rapid AI monetization to boosting user engagement.

In fiscal 2025, Adobe expects total sales to increase from $21.51 billion in 2024 to between $23.30 billion and $23.55 billion. However, income might be cut by $200 million due to unfavorable foreign currency rates and the continuous shift from one-time software sales to subscription-based services.

According to projections, the company's non-GAAP earnings in 2025 would be between $20.20 and $20.50 per share, up from $18.42 per share in 2024. The Zacks Consensus Estimate for Adobe's 2025 profits is $20.39 per share, which is a 10.69% growth from 2024 but a modest 0.7% drop over the last 60 days.

With an average profit surprise of 2.55% over the previous four quarters, Adobe has routinely surpassed Zacks Consensus Estimates despite the difficulties. The company's ability to properly integrate subscription-based revenue models and handle AI competition will determine how well it does going forward.