Adobe forecasts downbeat quarterly earnings on cautious tech spending

(Reuters) - Photoshop maker Adobe forecast fourth-quarter earnings below analysts' estimates on Thursday, signaling stiff competition and soft demand for its AI-integrated editing tools amid challenging economic conditions.

Shares of the company fell 9.2% in extended trading.

High interest rates and a tough economy have led enterprises and individuals to focus on cutting costs, putting pressure on Adobe's growth.

Founded in 1982, Adobe is one of the largest suppliers of software for visual and video artists, which include household names such as Acrobat, Photoshop and Premiere Pro.

The San Jose, California-based company also faces competition from startups such as Stability AI and Midjourney, which provide similar AI services - including generating images from text prompts.

Adobe expects revenue for the fourth quarter to be between $5.50 billion and $5.55 billion, compared with LSEG estimates of $5.61 billion.

Excluding items, it expects quarterly profit to be between $4.63 and $4.68 per share, compared with estimates of $4.67 per share.

Adobe is set to launch a new generative AI-powered video creation tool called Adobe Firefly Video Model in a limited series later this year, which is expected to garner the attention of creative professionals.

Revenue for the quarter ended Aug. 30 was $5.41 billion, above LSEG estimates of $5.37 billion.

Operating expenses for the third quarter were $2.86 billion, compared with $2.61 billion a year earlier.

(Reporting by Harshita Mary Varghese in Bengaluru; Editing by Krishna Chandra Eluri)