Adobe's AI Investments Pay Off: Q3 Earnings Beat Expectations, Stock Gains

Adobe's stock gains as its AI investments start bearing fruit - SiliconANGLE

Adobe's stock gains as its AI investments start bearing fruit Adobe Inc.'s shares were making gains in late-trading today after the Photoshop maker delivered third-quarter financial results that surpassed Wall Street's expectations and offered a strong outlook for the current quarter, indicating that its investments in artificial intelligence are paying off. The company reported third-quarter earnings before certain costs such as stock compensation of $5.31 per share, easily beating the Street's target of $5.18 per share, while revenue for the period rose 11% to $5.99 billion, ahead of the $5.91 billion analyst target. Profitability was boosted too, with Adobe's net income rising to $1.77 billion in the quarter, up from $1.68 billion in the year-ago period. Looking to the fourth quarter, Adobe said it sees total sales in a range of between $6.08 billion and $6.13 billion. Wall Street analysts are looking for revenue of just $6.09 billion. In terms of earnings, the company is targeting a profit of $5.35 to $5.40 per share, ahead of the analyst consensus estimate of $5.34 per share. Founded back in 1982, Adobe is an iconic name in the technology industry, best known for its creative software products like Photoshop, Acrobat and Premiere Pro, which are widely used by visual and video artists. The company has invested heavily into building AI tools, many based on its own generative AI model Firefly, which aims to help enhance the creativity of its users. For instance, Firefly powers the generative AI fill feature in Photoshop, which makes it easier to edit images. Today's results and the strong guidance suggest that the company's investments in AI are helping to drive fresh growth. In a statement, Adobe Chief Executive Shantanu Narayen (pictured) said annual recurring revenue derived from AI products has grown to more than $5 billion, while "AI-first" ARR has surpassed the company's target of $250 million by the end of the year. "Adobe is the leader in the AI creative applications category," Narayen insisted. "Given our customer strategy, AI product innovation and strong go-to-market execution, we're pleased to once again raise our FY25 total revenue and EPS targets." Prior to today's report, some analysts had expressed anxiety about Adobe's AI investments. In a note to clients, Oppenheimer analyst Brian Schwartz said investors want to see greater monetization from its AI initiatives. This year, Wall Street has gone sour on application software makers like Adobe, as they face increased competition from AI-native startups. In the case of Adobe, its competitors include startups such as Canva Inc. and Figma Inc. - which it notably tried but failed to buy a couple of years earlier. Still, the results show that Adobe is holding its own, at the very least. The company's digital media segment, which encompasses both its creative tools and its document-processing software, delivered revenue of $4.46 billion in the quarter, up 12% from a year earlier, while ARR in that segment reached $18.6 billion. Adobe said it now expects digital media ARR to increase 11.3% in fiscal 2025, up from its earlier forecast of 11% growth. It's forecasting revenue for the current quarter of between $4.53 billion and $4.56 billion, ahead of the Street's $4.51 billion estimate. The digital experience segment, which sells tools for marketing professionals, delivered $1.48 billion in sales, up 9% from the year-ago quarter. AI is also making its mark there, with Adobe launching its first set of AI agents earlier this week, aimed at automating customer journeys and audience segmentation. For the current quarter, Adobe expects digital experience revenue to land between $1.395 billion to $1.410 billion, which is also just ahead of the analyst target. Analyst Angelo Zino of Craft & Capital said in a note that Adobe's AI monetization appears to be progressing ahead of expectations. "We think it is supporting greater platform usage," he said. "We view the results and guidance as highly encouraging, especially given the revenue acceleration and Adobe's historically conservative approach to forward guidance." The momentum meant Adobe was also able to raise its full-year revenue forecast from a range of $23.50 billion to $23.60 billion to a new estimate of $23.65 billion to $23.70 billion. That's a strong forecast, with analysts modeling just $20.58 billion in annual sales. Adobe's shares gained more than 3% in extended trading, but there is still a long way to go, as the stock has declined 21% in the year to date.

Adobe Beats Expectations As Analysts Weigh Strong AI Growth Against Market Risks - Adobe (NASDAQ:ADBE)

As technology companies navigate the rapidly evolving landscape of artificial intelligence, industry giants are increasingly under pressure to demonstrate robust financial performance and strategic innovation. This backdrop of heightened competition and technological advancement sets the stage for Adobe Inc.'s ADBE latest financial results, which have captured the attention of analysts and investors alike. Shares of Adobe were trading higher on Friday, after the company reported upbeat fiscal third-quarter results on Thursday. Here are some takeaways from analysts who attended. Piper Sandler analyst Brent Bracelin reiterated an Overweight rating, while reducing the price target from $500 to $470. RBC Capital Markets analyst Matthew Swanson maintained an Outperform rating and price target of $430. Stifel analyst Parker Lane reaffirmed a Buy rating and price target of $480. DA Davidson analyst Gil Luria reiterated a Buy rating and price target of $500. Citizens JMP Securities analyst Patrick Walravens maintained a Market Outperform rating on the stock. Check out other analyst stock ratings. Piper Sandler: Adobe reported total revenues of $6.0 billion, delivering a "solid" beat of $88 million, versus an average beat of $68 million over the prior four quarters, Bracelin said in a note. Subscription growth accelerated to 12% year-on-year, from 11% in the previous quarter, he added. "We are encouraged to see the combination of new product tailwinds and tight cost controls can sustain double-digit EPS growth even as overall top-line growth moderates below 10%," the analyst wrote. He expressed concern, however, that the company's model is still at a nascent stage, with a transition to an AI-influenced product suite, while there is uncertainty in the AI space. RBC Capital Markets: Adobe delivered a "clean" beat and reached $250 million in AI-direct annual recurring revenues (ARR) a quarter ahead of schedule, Swanson said. The company reached its first $125 million in AI-direct ARR in around 5 quarters, while the next $125 million was achieved in only two, the analyst stated. "While questions around GenAI monetization and competition remain in focus, it feels like sentiment may have started to turn a corner," he further wrote. Stifel: Adobe recorded RPO (remaining performance obligations) of $20.44 billion exiting the fiscal third quarter, up 13% year-on-year, Lane said. AI-first ARR surpassed the company's year-end target of $250 million a quarter early, he added. AI-first ARR includes contributions from Acrobat AI Assistant, Firefly App, Firefly Services, and GenStudio, the analyst stated. "AI proliferation and pricing benefits set the company up for continued subscription growth in the near double-digits exiting the year and into 2026," he further wrote. DA Davidson: Adobe's revenue beat was driven by 11.6% growth in digital media revenues to $4.46 billion, which surpassed the consensus of $4.39 billion, Luria said. The company benefited from strong adoption of its Firefly app by individuals and Firefly services by enterprises, which helped it surpass $250 million in AI-first ARR, he added. Adobe's non-GAAP operating margins came in at 46.3%, beating the consensus of 45.2%, "driven by top line outperformance and disciplined expense management," the analyst wrote. Non-GAAP earnings grew 14% year-on-year to $5.31 per share, topping consensus by 14 cents per share, he further wrote. Citizens JMP Securities: Adobe's revenue growth of 11% year-on-year came in flat versus the fiscal second quarter, Walravens said. While Digital Media revenue growth accelerated to 12%, from 11% in the previous quarter, Digital Experience revenue growth of 9% marked a sequential slowdown from 10%, he added. Management guided to fiscal fourth-quarter revenues of $6.075-$6.125 billion and non-GAAP earnings of $5.35-$5.40 per share, broadly in line with consensus estimates, the analyst stated. "Adobe is in a race to cement its leadership position in the AI era against high-growth challengers," like Canva and Figma Inc FIG, he further wrote. ADBE Price Action: Adobe shares were up 0.43% at $352.05 at the time of publication on Friday. The stock is trading near its 52-week low of $330.04, according to Benzinga Pro data. Read Next: Adobe's CEO Calls AI Its 'Biggest Opportunity' In Decades As Segment Revenues Surpass $5 Billion: 'We Want AI Infused In Every Dollar of Revenue' Photo: Shutterstock ADBEAdobe Inc$349.94-0.17%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum11.48Growth62.61Quality34.48Value17.98Price TrendShortMediumLongOverviewFIGFigma Inc$53.88-3.71%Market News and Data brought to you by Benzinga APIs

Adobe Reports Record Q3 Revenue | The Motley Fool

Adobe(ADBE 0.24%) reported third-quarter 2025 earnings on September 11, 2025, achieving record revenue of $5.99 billion, up 10% year over year (YoY), and non-GAAP EPS of $5.31, up 14% YoY (non-GAAP). Artificial Intelligence (AI) products and integrations drove over $5 billion in AI-influenced annual recurring revenue (ARR), with AI-first product ARR surpassing the $250 million full-year target for fiscal year 2025 one quarter early. The following insights examine specific segments of growth, execution in enabling AI differentiation, and enterprise adoption driving long-term competitive positioning. AI-influenced ARR rose from over $3.5 billion at the close of fiscal year 2024 to surpassing $5 billion, with new AI-first offerings such as Firefly, Acrobat AI Assistant, and GenStudio for performance marketing exceeding the $250 million ARR target for fiscal year 2025 by the third quarter. Notably, GenStudio's key components now exceed $1 billion in ARR and are growing over 25% YoY in the third quarter of fiscal year 2025. Robust usage metrics include a total generative count of 29 billion and nearly 40% quarter-over-quarter growth in video generations. "Adobe is the leader in the AI creative application category. Our AI influenced ARR has now surpassed $5 billion up from over $3.5 billion exiting fiscal year 2024 and we've already surpassed our full year AI first ending ARR target. Given our customer focused growth strategy, product innovation, and strong go to market execution and the momentum in our business we're pleased to once again raise our FY 2025 revenue and EPS targets." -- Shantanu Narayen, Chair and CEO AI-first revenue and rapid adoption across product lines strengthen the growth trajectory and increase Adobe's ability to set higher guidance, signifying a durable pivot to scalable monetization from generative and automation capabilities. With harmonize features quickly becoming some of the most used in-app, Creative Cloud Pro, which integrates Adobe's Firefly and a growing roster of third-party models, is driving strong migration and retention. The strategy emphasizes interoperability, workflow depth, and commercial safety as product differentiation versus single-channel competitors. "the magic is clearly in our application. Because we can take all of the models that exist, and integrate that within our interface. And that's a a nontrivial task. Of what we have done to build. That was actually the rationale for building Firefly. Because we understand whether they're diffusion or transformer models. Better than I think anybody can in the creative application. So I wouldn't underestimate the amount of magic that we have to do to make it look as seamless as it has." -- Shantanu Narayen, Chair and CEO The integration of multi-model AI into core workflows cements Adobe's platform stickiness, protecting against competitive incursions from advertising platforms and enabling differentiated creative productivity for both individual and enterprise customers. AEP and apps ending ARR grew over 40% YoY within the Digital Experience segment, cross-cloud deals grew over 60% YoY in the third quarter of fiscal year 2025. More than 40% of Adobe's top 50 enterprise accounts have doubled their ARR spend since the start of fiscal year 2023, demonstrating deepening customer reliance across creative, marketing, and data platforms. New products such as the LLM (large language model) optimizer are being adopted internally and released for broader enterprise use. "We launched the first phase of AEP agent orchestrator Q3. Empowering businesses to build, manage, orchestrate AI agents from Adobe and third parties. These capabilities power the data insights agent and product support agent which are generally available now and add to our growing portfolio of agents. Our newest innovation is Adobe LLM optimizer, available in early access. As customers and prospects increasingly turn to generative AIs search and assistance for brand discovery, LLM optimizer help shape how brands show up in results which is driving influence, visibility, and qualified traffic." -- Anil Chakravarthy, President of Digital Experience Deep agentic integrations and LLM-driven product launches expand Adobe's ability to serve enterprise-scale content, advertising, and customer experience orchestration needs, creating high switching costs and stickier, multi-product relationships. Management raised full-year revenue guidance to $23.65 billion-$23.7 billion and non-GAAP EPS to $20.8-$20.85, increasing the Digital Media ARR growth target to 11.3% YoY. For the fourth quarter, Adobe projects total revenue of $6.075 billion-$6.125 billion and a non-GAAP operating margin of approximately 45.5%. The company emphasized continued innovation at the upcoming Adobe MAX event, providing no specific targets beyond fiscal year 2025.

Adobe raises FY25 revenue and EPS guidance as AI-influenced ARR surpasses $5B (NASDAQ:ADBE)

Shantanu Narayen, Chairman & CEO, highlighted a strong quarter with record revenue of $5.99 billion and double-digit top line growth, stating "AI represents a tectonic technology shift and presents the biggest opportunity for Adobe in decades." He emphasized Seeking Alpha's Disclaimer: The earnings call insights are compilations of earnings call transcripts and other content available on the Seeking Alpha website. The insights are generated by an AI tool and have not been curated or reviewed by editors. Due to inherent limitations in using AI-based tools, the accuracy, completeness, or timeliness of the earnings call insights cannot be guaranteed. Please see full earnings call transcripts here. The earnings call insights are intended for informational purposes only. Seeking Alpha does not take account of your objectives or your financial situation and does not offer any personalized investment advice. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank.