Adobe's Q1 Earnings Beat Expectations, but AI Monetization Concerns Spark Stock Selloff

Adobe beats first-quarter revenue estimates

March 12 (Reuters) - Adobe (ADBE.O), opens new tab beat Wall Street expectations for first-quarter revenue on Wednesday, benefiting from strong spending on its portfolio of design products that boast artificial intelligence features. The company reported revenue of $5.71 billion, beating estimates of $5.66 billion, according to data compiled by LSEG. Adobe reaffirmed its annual revenue forecast and its CEO said the company is "well positioned to capitalize on the acceleration of the creative economy driven by AI." Analysts and investors are watching for when Adobe will be able to ramp the monetization of its generative AI products, as it invests heavily in distinguishing itself from rivals by infusing sharper AI editing tools into its vast portfolio. In an attempt to break ahead of an increasingly competitive market, Adobe has been aggressively integrating AI into its software to boost the appeal of products such as Photoshop, which is used by professionals across a variety of industries. The company forecast second-quarter revenue to be between $5.77 billion and $5.82 billion, in line with analysts' expectations. Reporting by Zaheer Kachwala in Bengaluru; Editing by Alan Barona Our Standards: The Thomson Reuters Trust Principles., opens new tab Suggested Topics:Artificial Intelligence

Adobe shares drop 13% as concerns about AI growth overshadow better-than-expected results

Shantanu Narayen, Chairman and CEO of Adobe Systems addresses the gathering on the first day of the three-day B20 Summit in New Delhi on August 25, 2023. Adobe shares dropped 13% following the company's quarterly earnings report, as investors fretted over lingering growth concerns and the software maker's artificial intelligence monetization strategy. The selloff came despite better-than-expected results, which included adjusted earnings of $5.08 per share and $5.71 billion in revenue. That surpassed analysts' estimates of $4.97 in earnings per share and $5.66 billion in revenue, according to LSEG. Adobe called for $4.95 to $5.00 in adjusted earnings per share for the current quarter on $5.77 billion to $5.82 billion in revenue. Analysts polled by LSEG had expected $5.00 per share on $5.80 billion in revenue. Worries have mounted in recent months that the company is falling behind some competitors and losing its advantage in generative AI. The company's annualized recurring revenue from AI contributed $125 million during the period and Adobe expects that to double by the end of the fiscal year. Bernstein's Mark Moerdler, who recommends buying on the stock, wrote in a report that to "believe that ADBE is an AI winner and that AI is not replacing existing revenue streams, investors need to be able to observe longer-term trends." Keith Weiss, an analyst at Morgan Stanley, wrote that "new disclosure of GenAI contribution is a step in the right direction," but that investors need to see a "clearer roadmap" at the company's investor meeting at its annual conference next week. Morgan Stanley has the equivalent of a buy rating on the stock. In an interview with CNBC's "Closing Bell: Overtime" on Wednesday, Adobe CEO Shantanu Narayen said that, "Not only are we infusing AI in our exiting products and delivering value, but it's clear that the innovation that we've delivered is creating new revenue streams." Total revenue increased 10% year over year in the quarter that ended on Feb. 28, according to a statement. Net income of $1.81 billion, or $4.14 per share, was up from $620 million, or $1.36 per share, in the same quarter a year earlier. Adjusted earnings per share exclude impact from stock-based compensation and income taxes. For the 2025 fiscal year, the company expects adjusted earnings per share of between $20.20 and $20.50, with $23.3 billion to $23.55 billion in revenue. That implies about 9% growth at the middle of the range. The LSEG consensus was for earnings of $20.40 per share, with $23.49 billion in revenue.

Adobe stock drops as AI monetization concerns weigh on investors - SiliconANGLE

Adobe stock drops as AI monetization concerns weigh on investors Shares in Adobe Inc. fell over 4% in late trading today on concerns about the creative, marketing and document management solutions company's efforts to monetize its artificial intelligence offerings, despite Adobe reporting otherwise solid fiscal 2025 first quarter results. For the quarter that ended on Feb. 28, Adobe reported adjusted earnings per share of $5.08, up from $4.48 in the same quarter of the previous fiscal year, on revenue of $5.714 billion, up 10% year-over-year. Both figures were beats, as analysts had been expecting $4.97 per share and revenue of $5.66 billion. Across Adobe's various segments, digital media saw revenue of $4.23 billion, up 10.7% year-over-year, digital experience revenue came in at $1.41 billion, up 9.3% year-over-year and print and advertising revenue was $70 million, down 12.5%. Adobe ended the quarter with $17.63 billion in digital media annual recurring revenue, up 12.6% year-over-year. Cash flow from operations through the quarter was $2.48 billion and remaining performance obligations as of Feb. 28 were $19.69 billion. Business highlights in the quarter included Adobe's launching its first commercially safe artificial intelligence video generation model on Feb. 12. Designed to meet the needs of creative professionals, the model, integrated into Adobe Firefly, allows users to generate high-quality video content with full commercial rights. At the same time, Adobe also introduced a suite of new AI-powered tools for its Creative Cloud applications designed to enhance productivity for designers and marketers. The updates included improvements to generative fill, text-to-image features and real-time collaboration capabilities across Adobe's flagship software. Later in February, Adobe expanded its mobile offerings with the launch of a dedicated Photoshop app for iOS, bringing advanced photo editing tools to a broader audience. Adobe also introduced several free features for Photoshop on iPad and iPhone, which lowered the barrier for entry to its professional-grade tools. As noted at the time, by offering more capabilities at no cost, Adobe is aiming to drive user adoption and expand its subscription base over time. "Our continued innovation and diversified go-to-market strategy drove a record Q1, with new AI-first standalone and add-on innovations exiting the quarter with over $125 million ending ARR book of business," said Dan Durn, executive vice president and chief financial officer of Adobe, in the company's earnings release. "Our customer-focused strategy, leading product portfolio and strong cash flow position us for sustainable long-term growth and increased market share." For its fiscal second quarter, Adobe expects adjusted earnings per share of $4.95 to $5 on revenue of $5.77 billion to $5.82 billion. Earnings were a miss at the midpoint as analysts had been expecting $5, while revenue was an ever so slight miss at the midpoint versus the $5.8 billion expected. For the full year, the company expects adjusted earnings per share of $20.20 to $20.50 on revenue of $23.3 billion to $23.55 billion; analysts had been expecting $20.39 and $23.51 billion. None of the outlook figures were fundamentally bad or huge misses, but they weren't exciting either. Reuters labeled the outlook as a "dull forecast" and noted that "analysts and investors are watching for when Adobe will be able to ramp the monetization of its generative AI products, as it invests heavily in distinguishing itself from rivals by infusing sharper AI editing tools into its vast portfolio." "I think guidance is rough and I think people are questioning, is the AI monetization quick enough?" Parker Snook, senior research analyst at M Science, told Reuters.

Adobe's AI Products Generate Over $125 Million Revenue in Q1 2025

The company reported a revenue of $5.71 billion in Q1 FY 2025, showcasing an 11% year-over-year growth. Adobe has reported its financial results for the first quarter of the fiscal year. The company reported a revenue of $5.71 billion in Q1 FY 2025, an 11% year-over-year growth. Adobe also said that the company's portfolio of AI-first standalone products, and add-on features generated more than $125 million exiting the quarter. "AI represents a generational opportunity to reimagine our technology platforms to serve an increasingly large and diverse customer universe," said Shantanu Narayen, CEO of Adobe. "We expect this AI book of business to double by the end of FY25," he added. The company highlighted the strong adoption of Firefly AI, which powers generative AI capabilities across Creative Cloud, Document Cloud, and Experience Cloud. Firefly models, which the company says are "commercially safe and designed for enterprise use" have been integrated into Photoshop, Express and Premiere Pro, enabling users to generate AI-assisted images, videos and designs. Adobe also has a dedicated web application for Firefly. Adobe also revealed that its Experience Cloud business, which includes AI-driven marketing and data analytics solutions, showed a subscription revenue growth of 11% year-over-year, reaching $1.3 billion in Q1 2025. The GenStudio platform, which helps enterprises streamline content creation with AI, has surpassed $1 billion in annual recurring revenue (ARR). Adobe also indicated a strong demand for Firefly Services and Custom Models as a part of the GenStudio solution, which has had over 1,400 custom models since launch. "We're now building on these advances and expanding AEP (Adobe Experience Platform) to enable intelligent orchestration of customer experiences with AI agents natively built in," said Anil Chakravarthy, president of digital experience business at Adobe. "We're empowering customers to make better use of their first-party data and to drive more relevant ad experiences based on direct customer relationships," he added. The company also reported a 50% year-on-year subscription revenue growth in Q1 from the Adobe Experience platform and native applications. Adobe also revealed a "strong partnership momentum" with GenStudio for marketing, and supporting ad creation for companies like Google, Meta, Microsoft Ads, Snap, TikTok and more. For the second quarter of FY25, Adobe forecasts revenue between $5.77 billion and $5.82 billion.

Adobe's Stock Plunged After Its Outlook Disappointed. Analysts Are Bullish on AI Growth.

More AI-related updates could come next week at the company's Adobe Summit event. Adobe (ADBE) shares tumbled Thursday after the company's outlook came in lower than expected, but analysts said they they're still bullish on the stock, pointing to its potential for AI-driven growth. Jefferies analysts said they were surprised by the stock's sharp decline after the results, which they felt were "positive enough to offset the negatives," and added that "AI adoption is trending well," with Adobe poised for AI-driven revenue gains. The analysts maintained a "buy" rating and $650 price target for the stock, suggesting over 70% upside from Thursday's intraday level. Bank of America analysts trimmed their price target to $528 from $605, but kept a "buy" rating, saying they expect Adobe is "on a path" to better AI monetization. The analysts highlighted that monthly active users of Photoshop and Lightroom generative AI both increased in the period. Adobe reported annualized recurring revenue from AI of $125 million at the end of the quarter, with CEO Shantanu Narayen saying he expects that to double by the end of fiscal 2025, according to a transcript of the company's earnings call provided by AlphaSense. More AI updates are expected at the company's Adobe Summit event next week, which one analyst previously said could be more informative than the quarterly results. Shares of Adobe dropped more than 13% intraday Thursday to $379.28. They've lost about a third of their value in the past 12 months.

Adobe's dull forecast raises AI monetisation doubts, shares fall

The company expects second-quarter revenue to be between $5.77 billion and $5.82 billion, in line with analysts' expectations, according to data compiled by LSEG.Adobe forecast second-quarter revenue in line with Wall Street expectations on Wednesday, as it grapples with slower monetization of its artificial intelligence offerings while facing tough competition from startups. Shares of the company fell more than 4% in extended trading. The company expects second-quarter revenue to be between $5.77 billion and $5.82 billion, in line with analysts' expectations, according to data compiled by LSEG. Adobe reaffirmed its annual revenue forecast and its CEO said the company is "well positioned to capitalize on the acceleration of the creative economy driven by AI." Analysts and investors are watching for when Adobe will be able to ramp the monetization of its generative AI products, as it invests heavily in distinguishing itself from rivals by infusing sharper AI editing tools into its vast portfolio. "I think guidance is rough and I think people are questioning, is the AI monetization quick enough?" said Parker Snook, senior research analyst at M Science. In an attempt to break ahead of an increasingly competitive market, Adobe has been aggressively integrating AI into its software to boost the appeal of products such as Photoshop, which is used by professionals across a variety of industries. Annual recurring revenue for Adobe's AI and add-on offerings was $125 million at the end of quarter. Adobe expects to double this ARR figure in the next three quarters as it exits fiscal 2025, its CFO Dan Durn told Reuters in an interview. "While investors are still concerned about the transition to AI, as Adobe continues to deliver new products we expect those concerns to be replaced by excitement over those products," said DA Davidson analyst Gil Luria. The company reported revenue of $5.71 billion, beating estimates of $5.66 billion. It reported digital media revenue of $4.23 billion for the first quarter, above analysts' estimates of $4.19 billion. On an adjusted basis, the company earned $5.08 per share, compared with estimates of $4.97 per share.

Adobe Analysts Highlight AI Growth, Demand Trends: 'Could Mark An Inflection' In Investor Perception - Adobe (NASDAQ:ADBE)

Find out which stock just plummeted to the bottom of the new Benzinga Rankings. Updated daily -- spot the biggest red flags before it's too late. Adobe Inc ADBE analysts highlight the company's AI opportunities and future growth after the company beat revenue and earnings per share estimates in the first quarter. The Adobe Analysts: Goldman Sachs analyst Kash Rangan reiterated a Buy rating on Adobe with a $640 price target. JPMorgan analyst Mark Murphy maintained an Overweight rating and lowered the price target from $580 to $540. Piper Sandler analyst Brent Bracelin maintained an Overweight rating with a $600 price target. Goldman Sachs on ADBE: Adobe's quarterly results showed a "slow but positive step" in showing the company's progress in AI, Rangan said in a new investor note. The analyst said AI products like Firefly App and Services and GenStudio for Performance Marketing are seeing momentum. "If this revenue momentum continues into next year and ADBE effectively monetizes its AI portfolio, this could mark an inflection in how investors will perceive the company and its growth durability over the next 3-4 years," Rangan said. He noted that Adobe is showing that AI can be a tailwind for the company. The analyst sees Gen AI as a $4 billion opportunity for Adobe. JPMorgan on ADBE: The new monetization plans for Adobe's AI products that was the highlight for Murphy in the earnings report. The analyst had a balanced view on the company ahead of earnings with a lack of guidance. "We welcome incremental AI-related disclosures provided by the company and maintain our positive view on valuation," Murphy said. The analyst highlighted Adobe AI products like Acrobat AI Assistant, Firefly App and Services and GenStudio for Performance Marketing hitting over $125 million in bookings in the first quarter. "In terms of the macro environment, Adobe appears to describe fairly stable demand trends overall, while in response to a tariff and trade-wars question, suggests that 'tariffs, et cetera, don't really impact Adobe the way they impact other businesses.'" Murphy sees Adobe's fundamentals as favorable with durable growth rates and the incremental AI monetization opportunities. Piper Sandler on ADBE: Bracelin called Adobe's first-quarter financial results a "solid start" to fiscal 2025 in a new investor note. "We are encouraged by the solid start to the new year evident by the 1% top-line beat and reaffirmation of the full-year 11% ARR guide for Digital Media," Bracelin said. The analyst said Adobe's disclosures on AI products hints at new monetization opportunities. ADBE Price Action: Adobe stock is down 11.2% to $389.32 on Thursday versus a 52-week trading range of $387.50 to $587.75. Adobe stock has fallen 11.7% year-to-date in 2025 and over 32% in the last year. Photo: Shutterstock ADBEAdobe Inc $387.62-11.6% Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full Score Edge Rankings Momentum19.42 Growth61.52 Quality36.72 Value14.38 Price Trend Short Medium Long Overview Market News and Data brought to you by Benzinga APIs

Adobe's AI-Fueled Growth Could Power A 38% Upside - Here's Why JPMorgan Is Bullish - Adobe (NASDAQ:ADBE)

Adobe Inc ADBE just gave investors a masterclass in AI-driven growth at its annual Summit and JPMorgan analyst Mark R. Murphy is taking note. With a fresh disclosure of over $3.5 billion in 'AI-influenced' annual recurring revenue (ARR) and an aggressive push into Agentic AI, Murphy remains firmly Overweight on the stock, eyeing a December 2025 price target of $540. That's a juicy 38% upside from the price of $391.37. AI-Influenced Revenue Gets A Big Reveal Adobe's AI ambitions aren't just flashy keynote material. The company revealed that AI is influencing over $3.5 billion in ARR as of FY24, spanning its suite of AI-powered tools like Firefly, Acrobat AI and premium Digital Experience offerings. Adobe has also set its sights on doubling its AI-first standalone and add-on products to $250 million by the end of FY25. Investors looking for hard numbers on AI monetization just got them. Read Also: Adobe Analysts Highlight AI Growth, Demand Trends: 'Could Mark An Inflection' In Investor Perception Agentic AI: Adobe's Next Big Move The big AI reveal didn't stop at revenue. Adobe's new AEP Agent Orchestrator takes center stage in its Agentic AI play, giving marketers a suite of specialized AI agents to optimize websites, run experiments and scale content. Partnerships with tech heavyweights like Amazon.com Inc's AMZN Amazon Web Services, Microsoft Corp MSFT and International Business Machines Corp IBM make this a strategic, ecosystem-driven bet. Meanwhile, Adobe's Brand Concierge AI-powered solution promises a seamless, conversational buying experience for consumers. Simply put, Adobe isn't just riding the AI wave - it's building the board. One Adobe: Where Creativity Meets Marketing Another key theme? The increasing convergence of creative and marketing workflows under Adobe's 'One Adobe' strategy. The company reported a 100%+ year-over-year surge in joint creative and marketing deals, signaling that its unified approach is paying off. With new integrations like GenStudio Foundation bringing content creation and marketing analytics under one roof, Adobe is positioning itself as the go-to enterprise AI and content platform. ADBE's AI Bet Is Gaining Traction With a rapid-fire pace of innovation and a clear AI monetization strategy, Adobe's stock is looking increasingly attractive. Murphy's 38% upside call is underpinned by the company's durable growth rates, expanding AI-driven revenue streams, and a best-in-class profitability structure. For investors looking for a stock riding the AI boom while maintaining solid fundamentals, Adobe just made a compelling case. Read Next: Speculators Trim 2025 Rate-Cut Bets Ahead Of March Fed Meeting As Inflation Risks Rise Photo: Shutterstock ADBEAdobe Inc $394.000.67% Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full Score Edge Rankings Momentum19.40 Growth61.13 Quality24.60 Value16.21 Price Trend Short Medium Long Overview AMZNAmazon.com Inc $193.800.51% IBMInternational Business Machines Corp $247.250.12% MSFTMicrosoft Corp $384.110.15% Market News and Data brought to you by Benzinga APIs

Adobe Stock Tumbled on Thursday Despite Record Revenue. Is the AI Growth Stock a Buy Now? | The Motley Fool

After tumbling 25.5% in 2024 despite a broader market rally, Adobe stock had been holding up well in 2025 and was even outperforming the tech sector. But the latest earnings report showed that Adobe is still a long way from delivering on investor expectations. Here's what's going well for Adobe, what needs to be improved, and if the growth stock is a buy now. Adobe delivered record revenue of $5.71 billion for the quarter, a 10% year-over-year increase. Diluted earnings per share (EPS) came in at $4.10 on a generally accepted accounting principles (GAAP) basis and $5.08 on a non-GAAP basis -- which was 13.4% higher than the first quarter of fiscal 2024. Both figures exceeded Adobe's quarterly guidance, which was for $5.63 billion to $5.68 billion in revenue and non-GAAP EPS of $4.95 to $5. Non-GAAP adjusts earnings for certain expenses, such as stock-based compensation (which Adobe pays a lot of). Non-GAAP numbers can provide a better reading of how the business is operating relative to past results, but GAAP is better for measuring true profit. Adobe did not change its fiscal 2025 guidance, which forecasts $23.3 billion to $23.55 billion in revenue, $15.80 to $16.10 in GAAP EPS, and $20.20 to $20.50 in non-GAAP EPS. Going off of the stock's premarket price of $416 at the time of this writing, Adobe would have a price-to-earnings (P/E) ratio of just 26.1 based on the midpoint of its GAAP earnings guidance and 20.4 based on the midpoint of its non-GAAP guidance. That's a dirt cheap price for what has historically been a high-growth cash cow with an industry-leading software suite for business, marketing, and creative professionals. Adobe's guidance marks a significant slowdown in the company's growth rate. It wasn't long ago that Adobe was growing revenue and earnings by over 20% per year, so the last few years of results and this year's guidance mark a noticeable slowdown. As a business matures, investors typically expect growth to come down a little because it's more challenging to grow a massive, established business than a nimble company making inroads in new markets. But Adobe's slowdown is significant enough that it seems investors are reassessing its valuation. One of the inherent qualities that separates growth stocks from dividend and value stocks is the premium placed on future results. Investors may be willing to pay a lofty price for shares in a company if it has a clear runway for rapid growth. In contrast, businesses growing slowly and lacking potential may fetch lower valuations. Adobe's valuation is down from historical averages because the business isn't growing as quickly -- which makes a ton of sense based on its recent results and near-term forecast. The optics of Adobe's slowdown are particularly bad in the age of artificial intelligence (AI). Adobe's stock price soared to near-record heights last year as investors expected Adobe to capitalize on AI. After all, if Adobe could use AI to make better products and help its users be more productive, it should theoretically help grow users and justify price increases. But that simply hasn't happened yet. And the longer Adobe goes without giving investors something to look forward to, the more likely it is that some investors may lose patience -- resulting in Adobe losing its growth stock premium. Adobe remains optimistic about AI's potential to transform its business. CEO Shantanu Narayen said the following on the earnings call: AI represents a generational opportunity to reimagine our technology platforms to serve an increasingly large and diverse customer universe. With creativity at the core, we have been evolving our offerings and routes to market to anticipate the distinct needs of creative professionals and next generation creators, marketing professionals, agencies and enterprises and the broader set of consumers and business professionals. We believe this will drive continued growth and profitability. Adobe has released several new products to help users leverage AI in marketing campaigns and content creation. These products are integrated across mobile and desktop and have tiered pricing that pairs with Adobe's software-as-a-service subscription model. On the earnings call, Adobe said that its AI-first stand-alone and add-on products contributed to a more than $125 million book of business exiting the recent quarter, which Adobe expects to double by the end of the fiscal year. While it's encouraging to see AI contribute to revenue growth, that figure isn't much in the grand scheme of the total business -- especially considering that Adobe has been ramping up AI investments, leading to higher expenses. Adobe's stock price and valuation will likely continue to languish until the company can demonstrate a better return on its AI investments and prove that AI is a real game changer for the business. Right now, AI seems more like a product upgrade than revolutionary technology. That said, patient investors who believe in Adobe's ability to monetize AI are getting the chance to buy the stock at a compelling valuation. Adobe's growth may be slowing, but it remains a cash cow business with an impeccable balance sheet. It's also worth mentioning that there are plenty of value stocks out there that aren't growing as quickly as Adobe, and yet are more expensive. So, if Adobe keeps selling off, it will eventually become too cheap to ignore. Add it all up, and Adobe is an excellent buy for investors looking for value in the tech sector. But it's also reasonable to keep Adobe on a watchlist until the company bridges the gap between AI expectations and reality.

Adobe Tops Q1 Estimates; Outlook Mixed | The Motley Fool

Adobe reported strong Q1 2025 earnings, surpassing both analyst and management expectations with record revenue and cash flow. Software giant Adobe (ADBE 1.14%) reported fiscal 2025 first-quarter earnings on Wednesday, March 12, that topped analysts' consensus expectations. Q1 revenue of $5.71 billion rose 10.2% year over year and bested the estimate of $5.66 billion. Adjusted earnings per share (EPS) in Q1 stood at $5.08, outpacing the anticipated $4.97. This quarter reflected robust growth, driven by strong performances in its core segments: Digital Media and Digital Experience. Management's forward guidance, however, was mixed. Source: Adobe. Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year. ARR = Annualized recurring revenue. Adobe leads the digital realm with its innovative solutions, predominantly in Digital Media and Digital Experience. Digital Media, with flagship products such as Creative Cloud and Document Cloud, serves individual creators and enterprises, driving Adobe's brand and revenue. The Digital Experience segment aids businesses in managing customer engagement through Adobe Experience Cloud, integral for personalized digital communications. In recent years, Adobe has emphasized artificial intelligence (AI) integration, personalizing digital experiences, and expanding its market reach. By nurturing these core segments and leveraging AI, Adobe strategically invests in product development to maintain its market leadership. The integration of AI, such as in the Firefly models, reflects Adobe's commitment to continuous innovation and market adaptation. Financial and Operational Achievements: Adobe's Q1 2025 reflected substantial growth across key financial metrics. Operating cash flows doubled year over year to $2.48 billion, underscoring Adobe's capacity to convert revenue into cash efficiently. This robust financial footing is complemented by 7 million shares repurchased, illustrating its commitment to returning value to shareholders. Strategic and Market Context: The Digital Media and Experience segments were key players, with revenues at $4.23 billion and $1.41 billion, respectively. The Digital Media segment saw a noteworthy 11% revenue rise, reflecting the enduring relevance of Adobe's creative solutions. The integration of AI has broadened the user base and enhanced product functionality, evident through innovations like the Firefly AI models and standalone AI services generating $125 million in ending annualized recurring revenue (ARR). Adobe's identified market opportunities lie in digital transformation trends. The company's efforts in research and development, especially concerning AI-driven services, promise sustained growth, even amid competitive pressures and currency fluctuations noted by management. Segment-Specific Outcomes and Challenges: ARR for Digital Media reached $17.63 billion, a 12.6% increase, highlighting stable growth and reliable revenue streams. The subscription model continues to expand its footprint, with digital experience subscription revenue growing 11% year over year. Management acknowledged some deceleration in Creative Cloud revenue growth and potential foreign exchange impacts on future earnings. Nevertheless, Adobe's strategic focus remains firmly on maintaining its competitive edge through innovative, customer-centric solutions. Looking ahead, Adobe reaffirmed its fiscal year 2025 revenue targets, anticipating $23.3 billion to $23.55 billion. This suggests expected consistent growth, albeit at a moderated pace compared to previous years. Q2 2025 revenue guidance is set between $5.77 billion and $5.82 billion, indicating optimism amid market uncertainties. The midpoint of the Q2 guidance range came in a bit below the consensus analyst estimates of $5.8 billion. Adjusted EPS for fiscal 2025 is projected between $20.20 and $20.50, further illustrating Adobe's confidence in sustaining its growth trajectory. With aspirations to further infuse AI across its platforms, the company remains poised to capitalize on digital transformation trends, positioning itself strategically for future success.

Adobe Earnings: A New Growth Strategy

Adobe beat analyst expectations in the first quarter, delivering 10% revenue growth and much improved operating cash-flow generation. With the creative software industry at risk of disruption from artificial intelligence (AI), Adobe laid out its two-part plan to drive sustainable long-term growth. First, Adobe is embracing AI across its product portfolio. The company has already generated more than $125 million in bookings from its AI-based stand-alone products and AI add-on products, which include its Firefly app and Acrobat AI Assistant. Users are embracing AI features within Adobe's existing product lineup, with about 35% of monthly active users of Photoshop using generative AI features. Adobe plans to roll out new Firefly web app subscriptions and support additional third-party AI models. Second, the company is splitting its customer base in two as it aims to deliver new tailored solutions. Adobe will now report subscription revenue for its "Business Professionals and Consumers" and "Creative and Marketing Professionals" customer groups separately. Here are the numbers for the first quarter: Adobe will disclose more about its new customer-focused strategy at its Investor meeting next week. Immediate Market Reaction Shares of Adobe were down about 3% in early after-hours trading soon after the company reported its first-quarter results. While Adobe's results were better than expected, its outlook fell slightly short of expectations. Adobe's report also comes at a volatile time for the stock market, and investors are no doubt concerned about the impact on demand for Adobe's products due to growing economic uncertainty. What to Watch For the second quarter, Adobe expects to produce revenue between $5.77 billion and $5.82 billion and adjusted earnings per share between $4.95 and $5. The midpoints of both guidance ranges were a bit below the consensus analyst estimates of $5.8 billion and $5, respectively. The guidance miss was minor, but investors may still be concerned about the disruptive potential of AI on Adobe's business. The new strategy of creating solutions tailored for different customer groups appears promising, but it will take time for those solutions to hit the market. Adobe will likely delve deeper into its long-term growth plan during its investor meeting next week.

Adobe: Generative Credits Capped And The Path To AI Monetization Finally Becomes Clear (NASDAQ:ADBE)

Recommend a dollar cost-averaging strategy due to short-term headwinds but strong long-term AI-driven growth prospects. Investment Thesis The last time I wrote about Adobe Inc (NASDAQ: NASDAQ:ADBE), in December 2024, I analyzed the company's fourth quarter earnings and examined the company's plans with respect to its Firefly Video Model and Associate Professor in Finance and Corporate Governance at Brunel University London. I am also a CFA charterholder. In addition, I hold a PhD in Finance from University of Durham, U.K. I have six years of investing experience in the Indian and US equities with a medium to long-term horizon. I also actively research on Behavioural Finance, Corporate Governance, Activist Hedge Funds, Cryptocurrencies and M&A and have published in top-ranked peer-reviewed journals. I also currently produce and host a weekly investing podcast, titled The Stock Doctor.' Analyst's Disclosure: I/we have a beneficial long position in the shares of ADBE either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Adobe Posts Higher Profit, Revenue in 1Q

Adobe more than doubled its profit and posted higher revenue in its fiscal first quarter, as operating expenses fell and customers bought new artificial intelligence-enabled products. The San Jose, Calif., software maker on Wednesday posted a profit of $1.81 billion, or $4.14 a share, for its three months ended Feb. 28, compared with $620 million, or $1.36 a share, a year earlier. Adjusted per-share earnings were $5.08, topping the $4.97 that analysts surveyed by FactSet expected. Revenue increased 10% to $5.71 billion. Analysts modeled $5.66 billion. The company's remaining performance obligations at the end of the quarter were $19.69 billion. The company's digital media segment notched sales of $4.23 billion, up 11% from last year. Its digital experience unit saw sales rise 10%, to $1.41 billion. Chief Executive Shantanu Narayen said the recent quarter benefited from continued innovation, including new artificial intelligence-enabled offerings, and the company's diversified go-to-market strategy. "Adobe is well-positioned to capitalize on the acceleration of the creative economy driven by AI," he said. For its fiscal second quarter, Adobe forecast adjusted per-share earnings of $4.95 to $5 on revenue of $5.77 billion to $5.82 billion. Analysts polled by FactSet are looking for adjusted earnings of $5 a share on revenue of $5.8 billion. The company backed its fiscal 2025 outlook, calling for adjusted earnings of $20.20 a share to $20.50 a share, as well as revenue of $23.3 billion and $23.55 billion. Analysts expect adjusted earnings of $20.39 a share and revenue of $23.49 billion.

Adobe: Justified or exaggerated?

The software and services giant that is focused on content creation and management, saw its shares plunge nearly 14% on Wall Street, following the publication of its Q1 figures for the year just ended. Is this gloomy reception justified? Note that Adobe shares are down 45% since their peaks at the end of 2021. Despite what one might think at first glance (and quite logically, given the share price trend), Adobe has published some rather good figures. The two main divisions reported comfortable growth. Digital Media, the division dedicated to creative software and Acrobat (three quarters of total sales), grew by 11%. Digital Experience, the online marketing solutions division, recorded growth of 9.3%. Overall, at constant exchange rates, revenues climbed by 11% to $5.71bn. This growth is in line with what we are used to seeing in Adobe's figures: regularity and control thanks to the SaaS (Software as a Service) subscription model. The solidity of the business is accompanied by a record operating margin, at 47.5%, even though marketing and R&D expenditure remained very high. The company's strategy of returning cash to shareholders continues, with just over $3.25bn allocated to share buybacks in Q1, representing around 2% of its capitalization. Note that Adobe does not pay dividends and devotes the vast majority of its free cash flow (if not all) to share buybacks. Quarterly growth in Adobe sales and operating margin Performance was also very robust by user type, with a good breakdown in growth between creative and marketing professionals and consumers of simpler software. Why did investors penalize the earnings report? For many months now, Adobe has been eagerly awaited on the subject of artificial intelligence. Pressure on the stock had been heightened by the failure of the Figma acquisition (which resulted in a $1bn penalty last year) and accusations of deceptive business practices. But shareholders' main fears are focused on AI. Adobe is facing increasingly fierce competition that is affecting all its business segments. There's Figma, of course, but also platforms that are gaining in popularity, such as Canva, and a host of new players offering advanced AI generation solutions. Adobe is, of course, present in this field with its Firefly creative services platform and AI tools integrated into its various software packages (Photoshop, Illustrator, InDesign, Acrobat). But not enough. In Q1, the inventor of the PDF file only reported $125m in bookings for AI products, a very small fraction of its annual sales (barely 1%). Adobe is optimistic that revenues from Firefly will double by the end of the year. But that's not enough. Even with a doubling, revenues from AI are struggling to take off sustainably. Next week, the company will be hosting the "Adobe Summit". This is a major conference on the digital experience, where new features for Firefly, advances in advertising (notably with Coca-Cola), price optimization and new products could be announced. Analysts believe that this event, if successful, could be a catalyst for the coming months. In the meantime, Adobe has reaffirmed its targets for this year and next. Sales should climb by $2bn year-on-year (as they have every year for the past decade, roughly speaking). Margins should remain close to current records (target operating margin of 46% in 2026). Adobe is currently one of the least valued software companies on the market: 23x earnings this year, 14x EBITDA to enterprise value (capitalization + debt), 17x FCF. Above all, shareholders are looking for reassurance about the group's ability to innovate in the field of AI. But they understand that this will take time. It is this weariness and uncertainty that explains yesterday's fall, and the fact that a growth company like Adobe is currently trading at multiples well below its historical averages.