Adobe (ADBE) shares tumbled 5.12% in pre-market trading on Friday, despite the company reporting better-than-expected second-quarter earnings and raising its full-year guidance. The sharp decline reflects ongoing investor concerns about the software giant's ability to compete in the rapidly evolving artificial intelligence landscape.

For the fiscal second quarter, Adobe posted adjusted earnings of $5.06 per share on revenue of $5.87 billion, surpassing analyst estimates. The company also raised its fiscal year 2025 outlook, now expecting revenue between $23.5 billion and $23.6 billion, up from its previous forecast of $23.3 billion to $23.55 billion. However, these positive results weren't enough to allay investor worries about Adobe's long-term growth prospects in the face of intensifying AI competition.

Analysts noted that while Adobe is making strides in AI adoption, with its AI-influenced revenue already in the billions, investors remain skeptical about the company's ability to fend off AI-focused upstarts and maintain its market leadership. The consistent outlook for Digital Media ARR (Annual Recurring Revenue) growth, despite the quarterly beat, also appeared to disappoint some investors who were looking for more aggressive growth projections in light of the AI boom.