Key Takeout
- Adobe’s AI-driven products exceed annual recurring revenue goals, with the digital media sector growing by 12% year-over-year.
- Apple’s AI features are falling behind in major markets, and iPhone 16 sales depend on feature availability.
- Adobe’s price/sales ratio is more favorable compared to Apple’s, with revenue projections increasing for fiscal year 2025.
Adobe and Apple are both integrating artificial intelligence into their main offerings. While Adobe is embedding AI in its creative applications, Apple is incorporating Apple Intelligence into its core OS for devices such as iPhones, iPads, and Macs.
Data from IDC suggests that global investment in AI technology will exceed $74.9 billion by 2028. They also predict that 67% of the projected $227 billion AI spending in 2025 will come from businesses that implement AI in their core operations, which could bode well for both Adobe and Apple stocks.
However, both companies are trying to catch up with AI leaders like Microsoft, Amazon, and Alphabet. Both Adobe and Apple face the challenges of current economic conditions, with Adobe’s stock down 13.9% this year, while Apple has seen a larger decline of 21.8%.
Performance of Adobe and Apple Stocks
So which company is looking better right now?
Outlook for Adobe Stock
Adobe has broadened its AI portfolio with developments like Adobe Genstudio and Firefly Services. The company has rolled out a Firefly model for content generation within Premiere Pro, which utilizes AI to quickly create and lengthen video and audio clips. Recently, Adobe launched the Firefly Image Model 4, designed for lifelike images, which is expected to enhance the capabilities of Creative Cloud applications. Notably, the Firefly app has seen a 30% increase in first-time users.
The Acrobat AI Assistant aims to boost productivity, offering insights through a conversational interface. Adobe Express lets users design and publish engaging content remarkably quickly, thanks to AI integration. This focus on user experience has resulted in over 700 million active users for Adobe’s products by the end of the second quarter of fiscal year 2025.
Adobe predicts its AI First Product Book will achieve about $250 million in annual recurring revenue by the end of 2025, incorporating products like Acrobat AI Assistant and Firefly.
For Apple Stock
Apple reports improved iPhone 16 sales where Apple Intelligence is available. The company is expanding this technology with updates to iOS, iPadOS, and macOS in several new languages, making it accessible almost globally. By the end of 2025, additional language support will be offered.
At the recent Worldwide Developers Conference, Apple revealed new features of Apple Intelligence, including live translation and enhancements to existing services. These features are in testing phases and will be rolled out to supported devices later this year.
Apple forges ahead by integrating Apple Intelligence with Apple Wallet, enhancing convenience for users. Through this, Wallet can automatically identify and summarize tracking information for online orders, and Apple Pay is expanding its functionality to include varied payment options.
Revenue Projections for Adobe and Apple
Adobe’s revenue estimate for fiscal year 2025 is pegged at $20.41 per share, reflecting a slight increase over the past month and a growth of 10.8% compared to 2024 figures.
Conversely, the revenue consensus for Apple for 2025 has dipped to $7.11 per share, suggesting a modest growth of 5.33% from the previous fiscal year.
Pricing Comparison: Adobe vs. Apple
Both companies are perceived as overvalued based on their ratings. In terms of their price-to-sales ratio, Adobe trades at around 6.62, compared to Apple’s 7.04.
Reasoning Behind Favoring Adobe
Apple may face challenges due to the performance of Apple Intelligence and delays in launching in critical markets. The higher tariffs are anticipated to negatively impact Apple’s supply chain in China, expected to cost about $900 million in the third fiscal quarter of 2025.
On the other hand, Adobe is focusing on monetization through Firefly and Genstudio, allowing for tailored content creation for various platforms and enhancing partnerships with key players like Amazon and Microsoft. This could propel Adobe’s revenue growth, predicted to reach between $23.5 billion and $23.6 billion.
As it stands, Adobe holds a Zacks Rank of #2 (Buy) and presents a stronger investment option compared to Apple, rated #3 (Hold).
