Jim Cramer Flagged Another Risk For Adobe Inc. (NASDAQ:ADBE)

Jim Cramer highlighted another risk for Adobe Inc. (NASDAQ:ADBE) as Alphabet Inc. (NASDAQ:GOOGL) released its Pics AI image editing tool. The new product could pose a challenge to Adobe's core business of productivity software, as AI capabilities enable customers to create their own solutions. Alphabet's financial performance in Q2 was marked by a negative $5.9 billion in free cash flow for the first time since its IPO, while its Google Cloud business saw an 82% annual growth and Services business grew by 15%.

Adobe, meanwhile, is preparing for its third-quarter earnings report on September 10th and the focus is on its ability to monetize AI. In Q2, Adobe reported a $500 million AI-first annual recurring revenue (ARR) figure, but the growth of Firefly adoption and GenStudio enterprise platform was tempered by the impact of its Freemium Firefly plans.

Consequently, Adobe cut its full-year ARR guide by $500 million and deferred platform optimization. Despite trading at a lower forward P/E ratio compared to Alphabet, 5% of Adobe's shares are held in short positions compared to 1% for Alphabet. Hedge funds also hold shares in both companies, with 81 holding Adobe Inc. (NASDAQ:ADBE) and 275 holding Alphabet Inc. (NASDAQ:GOOGL) as of Q2.