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FTC Probes AI Chatbots from Alphabet, Meta, OpenAI and Others

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The U.S. Federal Trade Commission (FTC) announced on Thursday that it has launched an inquiry into major providers of AI-powered consumer chatbots, including Alphabet (Google), Meta Platforms, OpenAI, Character.AI, Snap, and xAI.

Focus of the Inquiry

The FTC is demanding details on:

  • How chatbots are tested, measured, and monitored for potential negative impacts.

  • Monetization strategies, including how companies profit from user engagement.

  • Processing of user inputs and the generation of responses.

  • Use of conversation data, and whether it is exploited for advertising, training, or other commercial purposes.

Rising Scrutiny

Generative AI tools have recently drawn criticism following safety scandals:

  • Reuters revealed internal Meta policies that allowed chatbots to engage in romantic conversations with children.

  • OpenAI is facing a lawsuit alleging ChatGPT contributed to a teenager’s suicide.

  • Character.AI is under a separate lawsuit tied to another teen death.

Company Responses

  • Character.AI: said it will cooperate, highlighting new safety features rolled out over the past year.

  • Snap: welcomed the FTC’s focus, saying it supports policies that balance innovation with community protection.

  • Meta: declined to comment.

  • Alphabet, OpenAI, xAI: did not immediately respond.

Bigger Picture

The inquiry reflects Washington’s growing concern over AI risks, especially for children and vulnerable users. Regulators are looking to balance innovation with consumer protection, while lawsuits and scandals raise urgency for stricter oversight.

Adobe Lifts 2025 Revenue and Profit Outlook on AI and Design Software Demand

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Adobe (ADBE.O) raised its fiscal 2025 revenue and profit forecasts on Thursday, underscoring resilient demand for its creative software suite and growing monetization of its AI offerings. Shares rose about 3% in extended trading.

Forecast Upgrades

  • Revenue: Now expected at $23.65–$23.70 billion, up from $23.50–$23.60 billion.

  • Adjusted EPS: Raised to $20.80–$20.85, compared with prior guidance of $20.50–$20.70.

  • Q4 Guidance: Revenue of $6.08–$6.13 billion (in line with estimates) and EPS of $5.35–$5.40 (slightly above consensus $5.34).

Drivers of Growth

  • Adobe’s core products — Photoshop, Illustrator, InDesign, Acrobat — remain staples for enterprises, students, and creatives.

  • New user subscriptions continue to drive momentum, CFO Dan Durn told Reuters.

  • The company is leaning on its AI tool Firefly, which allows text-to-video and text-to-image generation, integrated into Adobe’s design platforms.

Challenges Ahead

  • Despite progress, Adobe’s shares are down 21% year-to-date, reflecting investor caution.

  • Analysts, including Jefferies, remain cautious about Firefly adoption, suggesting near-term revenue acceleration may be limited.

  • Competition from smaller, agile rivals like Figma is intensifying in the design collaboration space.

Recent Performance

  • Q3 revenue came in at $5.99 billion, topping estimates of $5.91 billion.

  • Adobe is under pressure to show returns on heavy AI investments, with investors watching closely how effectively Firefly translates into recurring revenue.

Adobe Shares Drop 7% as Investors Question Timeline for AI Revenue Gains

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Adobe’s shares fell 7% in early trading on Friday amid investor concerns that the integration of AI into its software products may take longer than expected to generate significant financial returns. This skepticism overshadowed the company’s raised full-year revenue forecast.

Senior equity analyst Angelo Zino from CFRA Research noted growing worries about competitive pressures and a longer timeline to meaningful AI monetization. Adobe, known for creative software like Photoshop and Premiere Pro, announced in April plans to incorporate AI models from OpenAI and Google into its generative AI tool, Firefly.

Firefly enables users to create and edit images and videos for commercial use using simple text prompts, without copyright complications. However, RBC analysts expressed caution, suggesting that although demand remains positive, it will take more time for Adobe’s AI initiatives to prove their value and alleviate competitive concerns.

Adobe now projects 2025 revenue between $23.50 billion and $23.60 billion, up from prior guidance of $23.30 billion to $23.55 billion. Despite this, at least five brokerages lowered their price targets after Adobe’s second-quarter results.

Year-to-date, Adobe’s stock has declined around 13%, and its 12-month forward price-to-earnings ratio is 18.88, notably lower than competitor Autodesk’s 29.16.