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AI

ADOBE INC. (ADBE)·Q2 2025 Earnings Summary

Executive Summary

  • Record revenue of $5.87B (+11% YoY) with GAAP EPS $3.94 and non-GAAP EPS $5.06; results beat Wall Street consensus on revenue ($5.81B*) and EPS ($4.97*).
  • Raised FY25 total revenue target to $23.50–$23.60B and non-GAAP EPS to $20.50–$20.70; reaffirmed Digital Experience revenue and subscription targets.
  • Segment strength: Digital Media revenue $4.35B (+11% YoY) and Digital Media ARR $18.09B (+12.1% YoY); Digital Experience revenue $1.46B (+10% YoY) with subscription revenue $1.33B (+11% YoY).
  • Cash flow from operations was $2.19B; RPO $19.69B (cRPO 67%); Adobe repurchased ~8.6M shares in the quarter.

What Went Well and What Went Wrong

  • What Went Well

    • Beat-and-raise quarter: revenue and EPS exceeded consensus with FY25 revenue and EPS targets raised. “We are pleased to raise Adobe’s FY25 total revenue and EPS targets.” — CFO Dan Durn.
    • AI momentum accelerated: monthly active users across Acrobat/Express/Creative exceeded 700M; AI-first ARR tracking ahead of the $250M FY25 target. “Adobe’s AI innovation is transforming industries…” — CEO Shantanu Narayen.
    • Experience Cloud traction: AEP and apps subscription revenue grew >40% YoY; GenStudio adoption and DX subscription revenue +11% YoY.

  • What Went Wrong

    • EBITDA came in below consensus (Actual $2.32B* vs $2.81B*), despite strong operating income; investors may reassess profitability mix. [Q2 2025 GetEstimates]*
    • Interest expense increased YoY ($68M vs $41M), and non-operating income fell YoY (-$8M vs +$45M), modestly offsetting operating performance.
    • Cash and short-term investments declined sequentially ($5.71B at Q2 exit vs $7.44B at Q1 exit), largely reflecting the $3.5B repurchase ASR.

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Billions)$5.61 $5.71 $5.87
GAAP Diluted EPS ($)$3.79 $4.14 $3.94
Non-GAAP Diluted EPS ($)$4.81 $5.08 $5.06
YoY Revenue Growth (%)11% 10% 11%

Segment breakdown

Segment MetricQ1 2025Q2 2025
Digital Media Revenue ($USD Billions)$4.23 $4.35
Digital Media ARR ($USD Billions)$17.63 $18.09
Digital Experience Revenue ($USD Billions)$1.41 $1.46
Digital Experience Subscription Revenue ($USD Billions)$1.30 $1.33
Business Professionals & Consumers Subscription Revenue ($USD Billions)$1.53 $1.60
Creative & Marketing Professionals Subscription Revenue ($USD Billions)$3.92 $4.02

KPIs

KPIQ1 2025Q2 2025
Remaining Performance Obligations (RPO, $USD Billions)$19.69 $19.69
Current RPO (%)67% 67%
Cash from Operations ($USD Billions)$2.48 $2.19
Share Repurchases (Shares, Millions)7.0 8.6
Ending Cash + ST Investments ($USD Billions)$7.44 $5.71
GAAP Operating Income ($USD Billions)$2.16 $2.11

Estimates vs Actual (Q2 2025)

MetricConsensus EstimateActualBeat/Miss
Non-GAAP EPS ($)$4.975*$5.06 Beat +$0.085*
Revenue ($USD Billions)$5.806*$5.873 Beat +$0.067*
EBITDA ($USD Billions)$2.811*$2.318*Miss -$0.493*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($B)Q3 2025N/A$5.875–$5.925 New
Digital Media Revenue ($B)Q3 2025N/A$4.37–$4.40 New
Digital Experience Revenue ($B)Q3 2025N/A$1.45–$1.47 New
Digital Experience Subscription Revenue ($B)Q3 2025N/A$1.35–$1.36 New
GAAP EPS ($)Q3 2025N/A$4.00–$4.05 New
Non-GAAP EPS ($)Q3 2025N/A$5.15–$5.20 New
Non-GAAP Operating Margin (%)Q3 2025N/A~45.5% New
Non-GAAP Tax Rate (%)Q3 2025N/A~18.5% New
Total Revenue ($B)FY 2025$23.30–$23.55 $23.50–$23.60 Raised
Digital Media Revenue ($B)FY 2025$17.25–$17.40 $17.45–$17.50 Raised
Digital Media Ending ARR Growth (%)FY 202511.0 11.0 Maintained
Digital Experience Revenue ($B)FY 2025$5.80–$5.90 $5.80–$5.90 Maintained
Digital Experience Subscription Revenue ($B)FY 2025$5.375–$5.425 $5.375–$5.425 Maintained
GAAP EPS ($)FY 2025$15.80–$16.10 $16.30–$16.50 Raised
Non-GAAP EPS ($)FY 2025$20.20–$20.50 $20.50–$20.70 Raised
Non-GAAP Operating Margin (%)FY 2025~46.0 ~46.0 Maintained
Non-GAAP Tax Rate (%)FY 2025~18.5 ~18.5 Maintained
Diluted Share Count (Millions)FY 2025433 428 Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI monetization (AI-first ARR)AI-first ARR >$125M at Q1 exit; Firefly, Acrobat AI Assistant, GenStudio launched. Tracking ahead of $250M exit-FY25 target; AI a tailwind across Acrobat/Express/Creative/DX. Accelerating
Acrobat + Express integration, MAUsExpress embedded in Acrobat; Acrobat web MAU +~50% YoY; MAU growth across Reader/Acrobat. MAU >700M; Express adoption within Acrobat up ~11x YoY; business & consumer subs +15% YoY. Stronger
Firefly & third-party modelsFirefly models (image/vector/design/video) rolling out; early Firefly video model traction. Firefly app supports Google, OpenAI, Black Forest Labs models; first-time subscribers +30% QoQ. Broadening
Experience Cloud (AEP, GenStudio)AEP & apps book of business >$1B; GenStudio for performance marketing launched. AEP & apps subscription revenue >40% YoY; GenStudio ARR growth >25% YoY. Strengthening
Macro/FXHoliday season strength; reaffirmed FY25; tariffs/macro impact minimal for Adobe. FX buoyed DME revenue “maybe a third” of benefit; raised FY targets on H1 execution. Mixed tailwind
Pricing/tiering strategyIntroduced tiered Firefly plans; discussed value-based monetization and ARR growth algorithm. CC Pro rollout on renewals; premium tiers and “P×Q+V” framework reaffirmed. Ongoing rollout

Management Commentary

  • “Adobe achieved record revenue of $5.87 billion… and we are pleased to raise Adobe’s FY25 revenue target.” — Shantanu Narayen, CEO.
  • “We are pleased to raise Adobe’s FY25 total revenue and EPS targets.” — Dan Durn, CFO.
  • “Adobe’s monthly active users across these categories now exceed 700 million users.” — Shantanu Narayen.
  • “Our AI book of business… is tracking ahead of the $250 million ending ARR target by the end of fiscal 2025.” — Shantanu Narayen.
  • “AEP and app subscription revenue growing greater than 40% year-over-year.” — Anil Chakravarthy.

Q&A Highlights

  • Acrobat–Express integration and pricing: Express capabilities increasingly embedded in Acrobat; deeper integration to come; CC Pro targeted as “sweet spot” on renewals.
  • Commercially safe models as enterprise differentiator: Firefly trained on licensed content with contributor fund; enterprises choose Firefly for quality and IP safety.
  • Ad platform partnerships vs competition: GenStudio integrates with major platforms (Google, Meta, Microsoft Ads, Snap, TikTok) to optimize ROI; co-opetition framed as partnership.
  • FX assumptions in guidance: FX contributed “maybe a third” to DME revenue strength; FY25 raise driven primarily by ARR performance and conversion.
  • AI monetization path: AI-influenced revenue already in billions; tracking ahead of $250M AI-first ARR; gradual monetization via tiering and product integration.

Estimates Context

  • Q2 2025 beat on EPS ($5.06 vs $4.975*) and revenue ($5.873B vs $5.806B*); EBITDA missed ($2.318B* vs $2.811B*), suggesting stronger operating leverage with lower EBITDA vs expectations. [Q2 2025 GetEstimates]*
  • Forward: Q3 guidance (non-GAAP EPS $5.15–$5.20; revenue $5.875–$5.925B) was broadly consistent with consensus ($5.18* EPS; $5.91B* revenue) at the time. [Q3 2025 GetEstimates]*

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Beat-and-raise quarter anchored by record revenue $5.87B and non-GAAP EPS $5.06; FY25 revenue and EPS targets increased.
  • Digital Media momentum: revenue $4.35B (+11% YoY) and ARR $18.09B (+12.1% YoY).
  • Experience Cloud scaling: DX revenue $1.46B (+10% YoY), subscription $1.33B (+11% YoY), with AEP & apps subscription revenue >40% YoY.
  • AI adoption is broad-based: MAU >700M; Express usage in Acrobat up ~11x YoY; AI-first ARR tracking ahead of $250M target.
  • Strong cash generation ($2.19B CFO) and capital returns (~8.6M shares repurchased), while cash + ST investments decreased to $5.71B post-ASR.
  • Guidance assumptions: Q3 non-GAAP operating margin ~45.5% and tax rate ~18.5%; FY25 non-GAAP operating margin ~46% maintained.
  • Non-GAAP adjustments remain material (stock-based comp $482M; amortization $83M); reconcile to GAAP for valuation rigor.

Notes on Non-GAAP and Reconciliations

  • Non-GAAP excludes stock-based and deferred compensation, amortization of intangibles, investment gains/losses, income tax adjustments, and other items; full reconciliations provided in the release.