Creative software giant Adobe (NASDAQ: ADBE) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 10.7% year on year to $5.99 billion. The company expects next quarter’s revenue to be around $6.1 billion, close to analysts’ estimates. Its non-GAAP profit of $5.31 per share was 2.5% above analysts’ consensus estimates.
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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
- Free Cash Flow Margin: 35.5%, down from 36.5% in the previous quarter
- Annual Recurring Revenue: $18.59 billion
- Billings: $6.19 billion at quarter end, up 10% year on year
- Market Capitalization: $148.5 billion
Company Overview
Originally named after Adobe Creek that ran behind co-founder John Warnock's house, Adobe (NASDAQ: ADBE) develops software products used for digital content creation, document management, and marketing solutions across desktop, mobile, and cloud platforms.
Revenue Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last three years, Adobe grew its sales at a 10.5% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Adobe.
This quarter, Adobe reported year-on-year revenue growth of 10.7%, and its $5.99 billion of revenue exceeded Wall Street’s estimates by 1.4%. Company management is currently guiding for a 8.8% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 8.6% over the next 12 months, a slight deceleration versus the last three years. This projection is underwhelming and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Adobe’s billings punched in at $6.19 billion in Q3, and over the last four quarters, its growth slightly outpaced the sector as it averaged 11.6% year-on-year increases. This performance aligned with its total sales growth and shows the company is successfully converting sales into cash. Its growth also enhances liquidity and provides a solid foundation for future investments. 
Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
Adobe is efficient at acquiring new customers, and its CAC payback period checked in at 37.8 months this quarter. The company’s relatively fast recovery of its customer acquisition costs gives it the option to accelerate growth by increasing its sales and marketing investments. 
Key Takeaways from Adobe’s Q3 Results
It was encouraging to see Adobe beat analysts’ billings expectations this quarter. We were also glad its full-year EPS guidance slightly exceeded Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 2.3% to $359 immediately after reporting.
Adobe may have had a good quarter, but does that mean you should invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
