Adobe’s third quarter was marked by double-digit revenue growth and a positive market reaction, driven by strong adoption of AI-infused products and rising demand across its core creative and digital experience segments. Management attributed the performance to rapid integration of generative AI into flagship offerings such as Photoshop, Illustrator, and Acrobat, as well as successful launches like Acrobat Studio and Firefly. CEO Shantanu Narayen highlighted that “AI represents a tectonic technology shift and presents the biggest opportunity for Adobe in decades,” pointing to accelerating product usage and adoption from both creative professionals and business users.
Is now the time to buy ADBE? Find out in our full research report (it’s free).
Adobe (ADBE) Q3 CY2025 Highlights:
- Revenue: $5.99 billion vs analyst estimates of $5.90 billion (10.7% year-on-year growth, 1.4% beat)
- Adjusted EPS: $5.31 vs analyst estimates of $5.18 (2.5% beat)
- Adjusted Operating Income: $2.77 billion vs analyst estimates of $2.69 billion (46.3% margin, 2.9% beat)
- Revenue Guidance for Q4 CY2025 is $6.1 billion at the midpoint, roughly in line with what analysts were expecting
- Management raised its full-year Adjusted EPS guidance to $20.83 at the midpoint, a 1.1% increase
- Operating Margin: 36.3%, in line with the same quarter last year
- Annual Recurring Revenue: $18.59 billion
- Billings: $6.19 billion at quarter end, up 10% year on year
- Market Capitalization: $153.6 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Adobe’s Q3 Earnings Call
- Keith Weiss (Morgan Stanley) asked about Adobe’s differentiation in AI model integration and potential risks from ad platforms building their own AI. President David Wadhwani explained the strategy of offering choice and integration, while CEO Shantanu Narayen emphasized Adobe’s ability to blend multiple AI models within its applications.
- Bradley Sills (Bank of America) inquired about which AI-first products drove upside in annual recurring revenue. Narayen pointed to broad momentum across Firefly, Acrobat AI Assistant, and GenStudio, noting that the company quickly exceeded its $250 million AI-first ARR target.
- Tyler Radke (Citi) raised questions about the impact of pricing and migration to Creative Cloud Pro. Narayen responded that migration was strong and broad-based, with strength across all creative segments rather than just from price changes.
- Mark Moerdler (Bernstein Research) questioned whether AI adoption would shift Creative Cloud revenue from seat-based to consumption-based models. Narayen and Wadhwani said both seat expansion and automation are growth drivers, with AI being monetized through integrated software and value-based pricing.
- Michael Turrin (Wells Fargo Securities) asked about margin sustainability given increased AI adoption. CFO Daniel Durn described ongoing productivity initiatives in AI infrastructure and margin management, highlighting the company’s focus on cost optimization and operational efficiency.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be closely monitoring (1) the adoption rate and monetization of new AI-powered product tiers, particularly the LLM Optimizer and expanded Firefly offerings; (2) the impact of Creative Cloud Pro and Acrobat Studio rollouts on subscription upgrades and customer retention; and (3) continued enterprise uptake of GenStudio and Firefly Services for content automation. Execution on these initiatives will be critical to sustaining growth.
Adobe currently trades at $363.55, up from $350.82 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).
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