12:27 PM EDT, 09/24/2025 (MT Newswires) -- Adobe's (ADBE) slowing digital media revenue growth has sparked doubts around generative artificial intelligence monetization, Morgan Stanley said in a note emailed Wednesday.

The investment bank said the software maker's direct GenAI monetization efforts have fallen short of investor expectations as the digital media segment has seen revenue growth decelerate since the first quarter of 2024.

"Decelerating digital media (annualized recurring revenue) has driven outsized concern on (Adobe's) ability to prove GenAI net expansive to its total opportunity," the brokerage said.

The stock was down 3.7% in Wednesday trade, taking its year-to-date loss to nearly 22%.

AI-influenced ARR surpassed $5 billion and AI-first ARR exceeded Adobe's $250 million year-end target, Chief Executive Shantanu Narayen said earlier this month as the company announced its fiscal third-quarter results. The digital media segment's revenue rose 12% year-over-year to $4.46 billion in the quarter.

Morgan Stanley said the company's new pricing strategy may pose incremental near-term headwinds, "obfuscating the path to topline re-acceleration" for digital media.

The investment bank views Adobe's competitive positioning positively, but flagged "limited visibility into the size and magnitude of AI-displacement headwinds" with consumers, simple marketers, and business users.

The brokerage said Adobe management's "propensity to orient towards growth and sustain a heightened velocity of product innovation" tempers Morgan Stanley's expectations around operating margin expansion.

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