Technology Newsround – OpenAI & Adobe

OpenAI – Price cuts will be catastrophic

• If a price war ensues, the big losers will be SoftBank and Microsoft, as Anthropic appears to be in a much better position to compete, meaning that it would be the last man standing as opposed to OpenAI.
• The WSJ (see here) is claiming that OpenAI is considering significant price cuts for compute tokens in order to win enterprise customers from Anthropic, who at the moment is running away with the enterprise game.
• This is a substantially negative signal for OpenAI as:
  • First, inferior product: Being forced into cutting prices is a sign that OpenAI’s product for enterprise is inferior to Anthropic’s, especially in the field of coding.
  • For general research use, I do not find this to be the case, but as coding is the white-hot area of AI usage at the moment, Anthropic is the only company that gets mentioned when code generation is being discussed.
  • In the short-term this is negative for OpenAI, but I don’t think this will always be the case, as it is far more competitive when one looks at other functions like research or agentic capability.
  • Second, inferior economics: which is where the real problems lie.
  • The last available data indicates that OpenAI generates about $10bn per GW of compute capacity while Anthropic may already be pushing $20bn.
  • Given that costs per GW are pretty consistent between companies, this means that Anthropic is in much better financial shape than OpenAI.
  • Hence, Anthropic is in a better position to fight a price war but given its superiority in coding, it may not have to.
  • This would lead to OpenAI cutting prices and not gaining any market share, which would be catastrophic for the company and its valuation.
• The one thing that is rapidly becoming clear is that economics are becoming much more important, which in turn means that the unlimited use subscription business model is coming to an end.
• Usage limits and pay-per-token are rapidly becoming the norm, which is essential if this industry is going to generate a return for its investors.
• A price war will also greatly imperil both companies’ IPOs as investors will rightly question how much cash these businesses will ultimately be able to generate.
• This makes me increasingly nervous about the financial outlook for OpenAI and its IPO in particular

Adobe FQ26 – Unnecessary uncertainty pt. II

• Another beat and raise from Adobe was spoiled by further management uncertainty as CFO Dan Durn is moving to Marvell, leaving both positions at the top of Adobe open.
• FQ2 26 revenues / EPS were $6.62bn (up 13% YoY) / $5.96 (up 18% YoY), which was ahead of estimates of $6.45bn / $5.82.
• Adobe also raised revenue guidance for the full year from $25.90bn – $26.10bn to $26.5bn – $26.6bn an increase of 2%.
• This is a very small increase, but with the shares having declined by 38% this year on fears of an AI-driven SaaSpocalypse, this increase is very good news.
• Adj-EPS forecasts have also been lifted from $23.30 – $23.50 to $24.35 – $24.45, a 4% increase but also good news.
• Consequently, there is no sign whatsoever of any destruction of Adobe’s business by AI.
• Instead, the opposite seems to be true as all of the underlying metrics continue to go in the right direction.
• However, Adobe is investing some of its growth in customer acquisition by moving to a freemium model for consumers, which made analysts on the call skittish.
• This is a business I have assumed goes to zero eventually due to the free offerings from other AI players as consumers care much less about accuracy and copyright risks.
• Even with this business going to zero, I can still get to over $400 per share on a discounted cash flow basis.
• This uncertainty was added to by the departure of the CFO, which, when the CEO position is already open, is not a good look for the company.
• This is why the shares are down 5.5% in after-hours trading, which, if repeated when trading opens, will put the shares on 8.4x FY2026 PER and 7.7x FY2027 PER.
• I am looking to add to my position in Adobe.