Photoshop owner Adobe is gearing up to post third quarter results on Thursday which, according to analysts, are looking bright for the company as it pins hopes on artificial intelligence (AI).
Analyst consensus expects revenue for the design software compare to rise to $4.87bn (£3.88bn), up from $4.52bn in the third quarter last year and at the higher end of its own estimates of $4.83bn-$4.87bn.
Profits are also expected to grow annually, rising 17 per cent to $3.97 per share.
According to Mizuho Securities, a Japanese capital markets company, the third quarter is likely to show a “generally healthy” performance, but it will be “much better” in the final three months of 2023.
Meanwhile, Gregg Moskowitz, managing director at Mizuho’s US division, said he was optimistic generative AI could be a “significant growth driver for Adobe”, whose shares are up 68 per cent year to date.
Adobe launched Firefly, its generative AI model for creative work, in March.
While Adobe did not release any data on how Firefly is doing in its most recent results, Shantanu Narayen, chair and chief executive of Adobe, said: “Adobe’s ground-breaking innovation positions us to lead the new era of generative AI given our rich datasets, foundation models and ubiquitous product interfaces.”
Moskowitz upgraded his rating for Adobe to ‘buy’ from ‘neutral’ and lifted the price target from $520 to $630.
Barclays analyst Saket Kalia also raised his price target on Adobe up to $630 from $620, citing web traffic strength which is “nearly” back to the highs of Covid-19 levels.
It comes as Adobe’s tie-up with Figma, a cloud-based collaborative design platform, is still under investigation by Britain’s competition regulator.
In July, the regulator announced an in-depth probe of Adobe’s $20bn bid for rival Figma, after the Photoshop owner refused to offer any remedies to ease the regulator’s concerns.
More deals could be around the corner for Adobe, Moskowitz said.