(Bloomberg) -- Adobe Inc., one of the biggest success stories in enterprise software over the past decade, is facing new investor concern about the company’s ability to boost sales beyond its core audience of design professionals.  

Adobe’s shares have jumped almost 20-fold since early 2012 as its dominance in the creative market grew and the company expanded into marketing and e-commerce. But the stock has dropped almost 26% since hitting a record high two months ago and Adobe gave an annual revenue forecast that fell short of estimates, spurring more than a dozen analysts to cut their target prices.  

“There are now questions around Adobe for the first time in a really long time,” said Wells Fargo & Co. analyst Michael Turrin.

Adobe’s bid to sell its signature digital design products to customers such as small business and social media influencers is running into competition from upstarts like Figma Inc., Lightricks Ltd. and Canva Inc., which was early to recognize a market of nonprofessionals that crave access to content creation tools. Adobe often is criticized for the cost of Photoshop and other products in its Creative Suite, but most customers pay the price given a lack of other options. That isn’t as true for people and businesses that may only use the tools sporadically and don’t require the advanced capabilities of the higher-end products. 

While Adobe unveiled a nascent offering in 2016 aimed at targeting that audience, its first comprehensive tool wasn’t released until December. During that period, Canva surged to a $40 billion valuation, making it one of the world’s most valuable private companies. In a sign of the competitive pressure, Adobe priced its Express tool at $9.99 per month, less than the $12.99 that Canva charges, per its website. Both companies also offer a free version of the software.

In the digital experience segment -- which includes marketing, analytics and e-commerce products -- companies such as Salesforce.com Inc. and Twilio Inc. are strong competitors. Chief Executive Officer Shantanu Narayen is counting on the division to drive Adobe’s quest to reach $20 billion in annual revenue and beyond. The company estimates the market to be worth as much as $110 billion, compared with a potential $63 billion for design tools. But analysts suggest the uneven economy and shifting customer priorities may stall growth.   

“Most enterprise companies that are investing in this area see this as a long-term investment,” said Anil Chakravarthy, president of Adobe’s digital experience segment. “It’s a complex problem for customers.”

The digital experience business remains about one-quarter of Adobe’s $15.8 billion annual revenue. But obtaining that growth hasn’t been cheap. Over the past decade, it has spent billions of dollars to acquire companies like Magento, Workfront, Marketo and Omniture to build its offerings in the area.

Adobe expects digital experience unit sales to increase 17% in the fiscal year when adjusted to reflect a calendar that is shorter by one week than the previous year. Some analysts viewed the outlook as an indicator that spending on marketing and analytics tools is due for a slowdown after a boom the last several years.


“We worry that more ‘front-office/marketing’ tech spend was pulled forward in 2020/2021 than most investors think, pressuring Adobe’s growth rate in 2022,” UBS analyst Karl Keirstead wrote in a recent note, in which he also cut his rating on the company to neutral from buy.

Adobe’s product portfolio in the area is vast, spanning from technology to support e-commerce websites to systems that help manage projects for marketing teams. That has proven to be a big selling point for some.

When Lenovo Group Ltd.’s e-commerce division was deciding on customer personalization and analytics software, for example, it looked at several vendors, including Oracle Corp. and Alphabet Inc.’s Google, according to vice president Ajit Sivadasan. But Adobe won out given its vast array of tools and how well they worked alongside the computer maker’s current application portfolio.   

“The reason why Adobe is successful is they’ve collected all the right pieces,” Sivadasan said. “The challenge is going to be continuing to figure out how to drive adoption within originations that have bought their tools and how to help them drive return on investment with the tools that they have.”

Not every company will be willing to wade that deep into one software vendor’s ecosystem. The competitive landscape includes giants like Salesforce and Microsoft Corp. that can offer a similarly expansive suite of tools, as well as burgeoning companies like Twilio. Some startups also are finding success by offering customer analytics software as a standalone product.

Like its rivals, Adobe has pitched a vision where businesses tap troves of stored information across various applications, many that could already be from Adobe, to create a common data bank that helps provide hyper-personalized consumer profiles -- what the software industry calls a customer data platform, or CDP. It’s a similar strategy at Salesforce: if you’re a Salesforce customer, a Salesforce CDP is an easier sell.

And like many vendors, Adobe and Salesforce also are trying to make their systems work more easily with other programs. But customers and competitors say the promised smooth integration hasn’t happened yet.

“We’re going to be taking on Adobe,” said Amplitude Inc. Chief Executive Officer Spenser Skates, whose analytics software company went public last September in a direct listing. “They acquired a hodgepodge of different tools and stitched them all together. And the pitch is they make them all work together, but it doesn’t work in practice.”

Despite the competition, Adobe remains a powerhouse in all the segments it competes in. While it missed analysts’ revenue estimates for the current quarter, sales jumped 23% last year and are projected to increase in 2022 by a double-digit percentage for the eighth consecutive year. 

The digital media business, which includes products like Photoshop, remains the most significant sales engine for the company -- generating $11.5 billion in 2021. While that won’t change anytime soon, Adobe is under pressure to diversify, which is driving deeper investments in its marketing and analytics business. The key differentiator for the company, however, may be its ability to sell customers on both sides of its business.    

Adobe’s “added unique advantage is the connection to the digital media business, which no one else can offer,” said Griffin Securities Inc. managing director Jay Vleeschhouwer. “What Adobe has to execute on is staying within their areas of competence, their domain specific expertise.”

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