Adobe(ADBE.US) CEO Shantanu Narayen stated that the company is being undervalued by the market as Wall Street overly focuses on chips and AI training infrastructure. In an interview ahead of the company's annual product launch event, Narayen remarked, "There's a current misunderstanding of the entire software sector, and this misjudgment is particularly evident when we examine our own profitability and growth prospects." He added that market attention will eventually shift to AI delivery within applications, where Adobe excels.

As a leader in creative software, Adobe has seen its market value drop by approximately 20% this year, as investors worry that competitors like Canva may leverage AI advancements more effectively. Other business software developers, such as Salesforce, also face disruption from AI-native startups.

This week, Narayen and other executives will demonstrate at Adobe's annual conference in Los Angeles that the company remains a cornerstone in creative software. On Tuesday, Adobe unveiled an updated version of its image-generation model, Firefly, which ensures commercial safety by avoiding intellectual property infringement and inappropriate content. The new Firefly supports automated photo editing through natural language commands.

Additionally, Adobe announced that users can now integrate third-party models from OpenAI, Google, and ElevenLabs into flagship applications like Photoshop. Narayen noted that customers primarily use these third-party models for creative ideation rather than final outputs, emphasizing Adobe's continued investment in its proprietary models.

Adobe's AI strategy centers on deeply integrating AI into industry-standard applications—such as intelligently replacing or expanding image elements in Photoshop. New features launched Tuesday also include AI-generated music and voice. The company disclosed that its AI models have generated over 29 billion digital assets as of September.

Narayen acknowledged that while Wall Street recognizes Adobe's AI innovation, investors are more focused on commercial returns. He expressed confidence that the company will benefit as users increasingly adopt AI-powered features in its applications. Reiterating long-term optimism, he pointed to Adobe's $9 billion stock buyback program as evidence of undervaluation: "Our current valuation is clearly underestimated, which is why we're aggressively repurchasing shares."