Adobe or Not Adobe

Adobe or Not Adobe

Adobe is a digital-media company that creates and sells products and tools that are primarily suited towards the creative economy. Their products include Photoshop and Lightroom, which are used to alter images, Premiere Pro, which is the standard video editing tool, and Adobe Document Reader, which allows people to view and export a standardized version of a digital document. There are free versions of their products, but Adobe makes its money from charging users a subscription fee to access all the products’ features.

Two weeks ago, Adobe released their Q2 2024 results. Revenue for the quarter was $5.31 billion, up 10% year on year. And operating income was $1.89 billion, up 16% year on year. The table below is a snapshot from Adobe’s earnings slide, which shows their core driver of revenue: Digital Media (DMe). The Creative segment within DMe accounted for just under 59% of their total revenue this quarter. Creative grew just under 10% year on year – in line with their revenue growth.

Lunar Capital dme

Despite many of Adobe’s products being industry standard tools, they are facing an increasing number of headwinds from both competitors and regulators.

In 2022, Adobe agreed to buy Figma (an interface design tool) for $20 billion. At the time, the deal placed an astronomical 50x revenue valuation on Figma. The deal faced regulatory scrutiny in the EU and was therefore cancelled before it could be completed. Adobe had to pay Figma a cancellation fee of $1 billion. Adobe is now being sued in the US, as the Federal Trade Commission (FTC) claims that Adobe makes it too difficult for users to unsubscribe from their products.

Despite Adobe adding generative AI layers to their products, they are facing intense competition from the likes of Microsoft-backed OpenAI. OpenAI has many tools that directly compete with Adobe’s tools, allowing people to generate and edit texts and images using generative AI.

Adobe, once a gold standard, could be one of the first victims in the new generative AI world.

Security Held In:
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Security
Lunar Capital BCI Worldwide Flexible Fund
Lunar Capital Offshore Portfolio Clients
Key Indicators
Index / Fund / Rate
Start of Year
Last Week
This Week
% Change YTD
Index / Fund / Rate
Start of Year
188.33
Last Week
212.26
This Week
212.51
% Change YTD
12.84% Lunar Capital increasesymbol
Index / Fund / Rate
JSE ALSI
Start of Year
76 893
Last Week
77 054
This Week
79 768 Lunar Capital increasesymbol
% Change YTD
3.74% Lunar Capital increasesymbol
Index / Fund / Rate
NASDAQ Composite
Start of Year
15 011
Last Week
17 689
This Week
17 689 Lunar Capital increasesymbol
% Change YTD
17.84% Lunar Capital increasesymbol
Index / Fund / Rate
S&P 500
Start of Year
4 770
Last Week
5 432
This Week
5 465
% Change YTD
14.57% Lunar Capital increasesymbol
Index / Fund / Rate
Prime Lending Rate
Start of Year
11.75%
Last Week
11.75%
This Week
11.75%
% Change YTD
0.00%
Index / Fund / Rate
USD/ZAR
Start of Year
18.30
Last Week
18.38
This Week
17.95 Lunar Capital stocktake arrow down
% Change YTD
-1.91% Lunar Capital stocktake arrow down
Index / Fund / Rate
EUR/ZAR
Start of Year
20.17
Last Week
19.69
This Week
19.21 Lunar Capital stocktake arrow down
% Change YTD
-4.76% Lunar Capital stocktake arrow down
Index / Fund / Rate
Brent Crude ($'barrel)
Start of Year
76.97
Last Week
82.56
This Week
85.07 Lunar Capital increasesymbol
% Change YTD
10.52% Lunar Capital increasesymbol
Source: Iress

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Disclosures
Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
Our Privacy Notice: https://lunarcapital.co.za/privacy-policy/
The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.

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