Adobe (ADBE.US) issued an upbeat annual earnings forecast, but investor response remained muted as they sought clearer signs of the software giant's ability to thrive in the AI era.

On Wednesday, Adobe projected fiscal 2026 revenue of $25.9 billion to $26.1 billion for the year ending November 2026. While the midpoint of this range surpassed Wall Street analysts' average estimate, it fell short of some expectations exceeding $26.4 billion. The company also forecast adjusted EPS of $23.30 to $23.50 for FY2026, with the midpoint slightly above the consensus estimate of $23.37.

For Q4 FY2025 (ended November 28), Adobe reported record revenue of $6.19 billion, up 10% year-over-year and beating analysts' $6.11 billion estimate. Non-GAAP net income rose 8% to $2.29 billion from $2.13 billion a year earlier, with adjusted EPS of $5.50 outperforming the $5.39 consensus.

The Digital Media segment, including Adobe's flagship creative and document software, saw revenue grow 11% to $4.62 billion, with annual recurring revenue (ARR) reaching $19.2 billion. Digital Experience revenue increased 9% to $1.52 billion.

CEO Shantanu Narayen attributed Adobe's stronger-than-expected FY2025 performance to its "growing importance in the global AI ecosystem and rapid adoption of our AI-powered tools." However, the company didn't update key AI metrics disclosed three months prior, including over $5 billion in AI-influenced ARR and $250 million in AI-first product sales.

Investor concerns persist about generative AI's potential disruption to Adobe's business. The company faces competition from smaller rivals like Canva and Figma, while tech giants like Meta integrate more AI capabilities. Emerging AI-native tools like Midjourney also challenge Adobe's creative software dominance.

Despite billions of AI feature uses in products like Photoshop, many popular AI tools—such as Google's Veo video generator—are developed externally. These worries have contributed to Adobe's underperformance relative to tech peers this year.

Jefferies analyst Brent Thill noted pre-earnings: "AI disruption fears are weighing on Adobe and the broader application software space." He suggested investors may await "sufficiently significant and sustainable acceleration to alleviate AI disruption concerns before re-engaging."

To expand visibility, Adobe announced integrating Photoshop and Acrobat into OpenAI's ChatGPT, offering some features free to chatbot users.