Adobe's execs are trying to get their investors on the AI hype train with this new little nugget of intel

• One number stood out in Adobe's earnings report: AI's annual recurring revenue.
• Investors are eyeing Adobe's ARR from AI as the company bets big on the technology.
• CEO Shantanu Narayen says Adobe plans to double its AI ARR by year-end.

One number from Adobe's quarterly earnings on Wednesday caught investors' attention: annual recurring revenue from AI.

At $125 million from the first quarter this year, it's a small slice of Adobe's $5.71 billion in total quarterly revenue. But analysts were quick to talk about the breakout number on Wednesday's earnings call.

Shantanu Narayen, Adobe's CEO, said on the call that the company expects to double its AI ARR by the end of the financial year.

"Whether it is innovation, having our own models, integrating it across all of our products, brand new revenue streams like GenStudio in the enterprise and then usage and monetization, I feel really good about it," Narayen said on the call.

The company said it expects revenue to increase to between $5.77 billion and $5.82 billion in the second quarter.

Adobe's stock dipped 4.5% in after-hours trading, extending a rough year that has seen shares slide 23%, even as the S&P 500 climbed 8%.

As AI spending surges, investors are watching closely to see if tech companies can turn big bets into real returns.

Narayen said on the earnings call that future info on AI's ARR would be released "periodically" — not quarterly.

In a research note ahead of earnings, Gregg Moskowitz, a managing director at Mizuho, wrote, "Adobe is unquestionably a frustrating stock in 2024."

He wrote that analysts remain optimistic that Adobe would successfully monetize its generative AI offerings and see strong growth in ARR and revenue guidance for the financial year.

Equity analysts from Jefferies said in a report published on Sunday that chief information officers they surveyed expect their companies' spend on Adobe's creative software to accelerate in 2025.

The surveys included 15 chief information officers and 40 end users. The report said that Adobe's AI offerings are "competitive" and that "fears of AI reducing the need for Adobe may be overblown."

Of end users surveyed, 65% told Jefferies their use of Adobe's creative software would increase within the next three years, while 50% evaluated Adobe's AI offerings "as better than competitors."

Adobe did not respond to a request for comment from Business Insider, sent outside business hours.