Is the era of Photoshop ending? You might be forgiven for thinking so.
I'm sure we'll all be playing the world's smallest violin for Adobe. After years of locking users in with aggressive "cancellation fees" and extortionate prices for its oft-less-than-stable software suite, you could blame the firm's stock rout on karma. But, you'd be wrong. At least a little wrong.
Company | Description | 1Y Performance (as of writing) | 3Y Performance (as of writing) | Data via |
|---|---|---|---|---|
Palantir | Data analytics platform | 146.92% | 2318.11% | |
Search engine company | 71.73% | 264.22% | ||
NVIDIA | GPU chip manufacturer | 39.37% | 953.10% | |
CrowdStrike | Endpoint security software | 24.91% | 334.63% | |
S&P 500 | Broad market index | 16.89% | 78.29% | |
Apple | Consumer electronics maker | 12.45% | 90.81% | |
Microsoft | Technology software company | 9.11% | 95.90% | |
Meta | Social networking company | 1.78% | 361.43% | |
Workday | Enterprise cloud applications | -25.46% | 12.10% | |
Salesforce | Customer relationship management | -28.56% | 54.83% | |
Adobe | Digital media software | -30.64% | -14.01% | |
Asana | Project management software | -44.88% | -23.94% | |
Atlassian | Team collaboration tools | -53.37% | -22.47% |
The hyperscaler companies providing the infrastructure for artificial intelligence platforms, such as Microsoft, NVIDIA, and Google, have seen some of the biggest gains over the last three years as we all know. But companies that don't seem to have a strong or convincing value proposition in the AI universe seem to be under-performing the baseline stock market.
Investment banks like Goldman Sachs have downgraded Adobe stock to "Hold" or even "Sell" in some analyses as a result. The expectation that tools being offered by OpenAI, Microsoft, and Google will become increasingly effective and efficient, rendering programs like Adobe Photoshop essentially obsolete. Adobe's own AI tools like Firefly don't seem to be winning it users.
Tools offered by companies like Salesforce are also seeing AI-related jitters. Microsoft's "Agentic AI" push is creating the perception that many traditional software systems could end up being fully automated, with the cash flowing to companies offering these tools at scale, via Microsoft Azure, Dynamics 365, and Office 365. Microsoft is seeing rapid uptake of tools like Microsoft 365 Copilot at a nation state level, with many Fortune 500 companies backing the tech to automate workflows and documentation cataloguing without falling afoul of data protection laws and other aspects of regulatory compliance.
Companies that operation in more traditional means have struggled to react quickly enough to some of these pivots, at least in investor's eyes.
Some of these shifts could be chalked up to hype and post-Covid corrections, according to some analysts. Concerns about data sovereignty have risen to the fore given the state of global politics flowing from the United States, forcing major markets to reconsider investments in U.S.-originating tech. Many very major companies with sensitive, and massive operations are also hesitant about integrating AI for high-stakes operations, owing to its propensity for making huge, often catastrophic errors. Microsoft Dynamics 365 for example is often regarded as "fine" for small to mid size, more generalized businesses, but it doesn't compete with SAP for highly complex, global operations — AI or not.
Adobe is uniquely likely to suffer in this post-AI world, given that many of its tools are uniquely vulnerable to artificial intelligence solutions. It doesn't help that its home-grown AI Firefly is absolutely terrible. I used the prompt "generate me an article banner showing the Photoshop logo sinking into the ocean," and it spat out the above with garbled text that means absolutely nothing. The actual article banner was generated by Microsoft Copilot using OpenAI's DALLE-3, which nailed the prompt exactly as asked. I generally don't use AI for my article banners and prefer my own photographs, but here it felt pretty illustrative of the weak position Adobe finds itself in, sadly.
Adobe attempted to acquire its way out of its weak position by buying Figma, but the deal was blocked over competition concerns. Both Figma and competing products like Canva have been offering cheaper, simpler tools that give it an inarguably stronger position in the quick-and-easy AI universe.
Adobe is probably a good case study for what might happen to other traditional software companies. Younger cohorts are growing up expecting these types of tools and experiences. As the money in traditional high-end content creation becomes increasingly diluted and AI-driven, so too will the availability of users willing to pay for Adobe Suite, and other similar old-school products.
Perhaps it also offers an insight into why Microsoft has been rushing with an odd sense of panic to integrate AI into some of its products. But as Adobe is finding out, it's hardly a silver bullet to simply "integrate" AI — it has to actually be useful.
Today's trends could flip on a dime at any minute, though. Things are incredibly chaotic, with component costs and electricity availability putting a massive bottle neck on AI infra growth. Companies like OpenAI are under tons of pressure to begin delivering profitability, which is why they're integrating ads and hiking prices in some cases.
Perhaps traditional software services and good old human creativity will win in the end ... who am I kidding.
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