Adobe Inc. (ADBE) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
Adobe's earnings report shows strong financial performance with record revenue and cash flows, driven by AI-influenced offerings. The Q&A section revealed positive analyst sentiment towards Adobe's strategic initiatives, like the Firefly Foundry and Semrush acquisition, despite some concerns about ARR growth stabilization. The raised guidance and innovative product developments further bolster the outlook, suggesting a positive stock price movement over the next two weeks.
Key Financial Performance
Revenue Adobe achieved record revenue of $23.77 billion in FY '25, growing 11% year-over-year as reported and in constant currency. This growth was driven by strong demand for AI-influenced offerings and new AI-first products.
Non-GAAP EPS Non-GAAP EPS was $20.94 in FY '25, growing 14% year-over-year. This reflects strong financial performance and operational efficiency.
Operating Cash Flows Adobe delivered over $10 billion in operating cash flows in FY '25, showcasing strong cash generation while investing in AI product innovation.
Share Repurchases Adobe executed record share repurchases totaling nearly $12 billion in FY '25, reducing shares outstanding by over 6%, demonstrating confidence in the company's long-term opportunity.
Digital Media Revenue Digital Media revenue was $17.65 billion in FY '25, growing 11% year-over-year as reported and in constant currency. Growth was driven by user acquisition and expanded customer value.
Digital Experience Revenue Digital Experience segment revenue was $5.86 billion in FY '25, growing 9% year-over-year as reported and in constant currency. Subscription revenue within this segment grew 11% year-over-year.
Digital Media ARR Digital Media ending ARR was $19.20 billion in FY '25, growing 11.5% year-over-year, exceeding the prior target of 11.3%. This growth was driven by subscriptions, cross-sell, up-sell, and value-based pricing.
Total Adobe ARR Total Adobe ending ARR was $25.20 billion in FY '25, growing 11.5% year-over-year. This reflects strong demand across all customer groups and geographies.
RPO (Remaining Performance Obligation) RPO was $22.52 billion exiting FY '25, growing 13% year-over-year, or 12% in constant currency. This indicates strong future revenue commitments.
Q4 Revenue Adobe achieved revenue of $6.19 billion in Q4 FY '25, growing 10% year-over-year as reported and in constant currency. This growth was driven by strong demand for AI-influenced offerings.
Q4 Digital Media Revenue Digital Media revenue in Q4 FY '25 was $4.62 billion, growing 11% year-over-year as reported and in constant currency. Growth was driven by AI-influenced offerings and user acquisition.
Q4 Digital Experience Revenue Digital Experience segment revenue in Q4 FY '25 was $1.52 billion, growing 9% year-over-year as reported, or 8% in constant currency. Subscription revenue within this segment grew 11% year-over-year.
Q4 Operating Cash Flows Record cash flows from operations of $3.16 billion in Q4 FY '25, reflecting strong cash generation and operational efficiency.
Generative Credit Consumption Consumption of Generative Credits in Creative Cloud, Firefly, and Express increased 3x quarter-over-quarter in Q4 FY '25, indicating strong adoption of AI capabilities.
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Operating Highlights
Firefly application: Introduced rich generative AI capabilities for creators, including ideation, video, and image editing. New subscription plans (Standard, Pro, Premium) launched.
Premiere Mobile: Launched with YouTube integration, introducing AI-driven audio and video tools for creators.
Acrobat Studio: Unified offering combining AI Assistant, PDF Spaces, and Express tools. Strong customer reception with nearly 50% of Acrobat commercial ETLAs upgraded.
Adobe GenStudio: Enhanced content supply chain capabilities with Firefly Services and Firefly Foundry for enterprises.
Semrush acquisition: Announced intent to acquire Semrush for $1.9 billion to enhance brand visibility and audience reach.
Partnerships: Expanded partnerships with AWS, Azure, Google Gemini, Microsoft Copilot, OpenAI, and others to strengthen AI ecosystem.
Enterprise customer wins: Secured deals with major enterprises like Coca Cola, IKEA, JPMorganChase, Sony, and U.S. Navy.
AI integration: AI now influences over 1/3 of Adobe's overall book of business, driving strong demand for AI-first products like Firefly and Creative Cloud Pro.
Generative credits: Usage increased 3x quarter-over-quarter, reflecting high-value AI adoption.
Revenue growth: Achieved record revenue of $23.77 billion in FY '25, growing 11% year-over-year.
AI-first strategy: Focused on integrating AI deeply into solutions, launching new AI-first offerings, and driving ARR growth.
Freemium model expansion: Increased adoption of freemium offerings like Firefly and Express, growing MAU by over 35% year-over-year.
Content supply chain transformation: Integrated creative applications, workflow management, and AI services to optimize enterprise content production.
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Risk or Challenges
Regulatory Approvals for Semrush Acquisition: The acquisition of Semrush is subject to regulatory approvals and other customary closing conditions, which could delay or prevent the transaction from closing as planned.
Macroeconomic Conditions: The financial targets assume current macroeconomic conditions, which, if they change, could impact Adobe's revenue and profitability.
AI Integration and Adoption: Adobe's strategy heavily relies on AI integration and adoption across its product lines. Any delays or challenges in AI development or customer adoption could impact growth.
Competitive Pressures: Adobe faces competition from other AI and creative software providers, which could impact its market share and pricing power.
Generative Credit Consumption: The monetization of generative credits is a key revenue driver. Lower-than-expected consumption could impact financial performance.
Supply Chain and Content Automation: Challenges in scaling content automation and supply chain solutions like Firefly Services and GenStudio could affect enterprise adoption and revenue.
Currency Exchange Rates: Changes in foreign exchange rates could impact Adobe's ARR and revenue growth, as seen in the revaluation of ARR due to FX rate changes.
Customer Retention and Upselling: Adobe's growth strategy depends on customer retention and upselling, particularly for products like Acrobat Studio and Creative Cloud. Failure to achieve these could impact ARR growth.
Regulatory and Compliance Risks: Adobe operates in multiple jurisdictions, and changes in regulations or compliance requirements could impact operations and financials.
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Guidance & Outlook
FY '26 Total Adobe ARR growth target: Over 10% growth, with a focus on accelerating momentum beyond FY '26.
FY '26 Total Adobe revenue: Targeting $25.9 to $26.1 billion.
FY '26 Business Professionals and Consumers Subscription revenue: Targeting $7.35 billion to $7.4 billion.
FY '26 Creative and Marketing Professionals Subscription revenue: Targeting $17.75 billion to $17.9 billion.
FY '26 Total Adobe ARR book of business growth: Targeting 10.2% year-over-year growth, translating to approximately $2.6 billion of growth.
FY '26 GAAP EPS: Targeting $17.90 to $18.10.
FY '26 non-GAAP EPS: Targeting $23.30 to $23.50.
FY '26 non-GAAP operating margin: Anticipated to be approximately 45.0%.
Q1 FY '26 Total Adobe revenue: Targeting $6.25 billion to $6.3 billion.
Q1 FY '26 Business Professionals and Consumers Subscription revenue: Targeting $1.74 billion to $1.76 billion.
Q1 FY '26 Creative and Marketing Professionals Subscription revenue: Targeting $4.3 billion to $4.33 billion.
Q1 FY '26 GAAP EPS: Targeting $4.55 to $4.60.
Q1 FY '26 non-GAAP EPS: Targeting $5.85 to $5.90.
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Shareholder Return Plan
Share Repurchase Program: Adobe executed record share repurchases totaling nearly $12 billion in FY '25, reducing shares outstanding by over 6% during the year. The company currently has $5.90 billion remaining of its $25 billion authorization granted in March 2024.
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Key Q&A
Q:Can you speak to how customers are starting to use Firefly Foundry in the early stages and its economic potential?
A:Shantanu Narayen and David Wadhwani explained that Firefly Foundry allows enterprises to customize content production, including creating custom models and automating workflows. They highlighted a media and entertainment company that increased its spending from $10 million to $17 million annually by adopting Firefly services and Foundry, leading to increased efficiency and new revenue opportunities.
Q:Could you talk about the ROI focus on justifying the value creation of new productivity enhancements in Creative Cloud and Experience Cloud?
A:Shantanu Narayen and Anil Chakravarthy emphasized that Adobe's solutions help businesses personalize content, reduce production costs, and create content more efficiently. They highlighted the ability to track content performance and optimize marketing ROI, with 10-20% of marketing budgets typically spent on content creation.
Q:What was the strategic rationale behind the Semrush acquisition, and what synergies should we expect?
A:Anil Chakravarthy explained that the acquisition enhances Adobe's ability to offer comprehensive solutions for brand visibility across owned and earned media, including search engines and LLMs. Shantanu Narayen added that this integration allows Adobe to provide unified analytics and marketing solutions.
Q:When can we see Adobe's ARR growth stabilize or accelerate, and what are the leading indicators?
A:Shantanu Narayen stated that Q4 showed strong performance and leading indicators like increased monthly active users (up 15%) and 3x growth in model usage. He highlighted Adobe's focus on AI, higher-value products, and enterprise solutions as drivers for ARR growth.
Q:What is driving the difference between this year's Adobe NA ARR growth and next year's guidance?
A:Shantanu Narayen explained that the guidance reflects confidence across all customer groups and momentum in offerings like Express, Acrobat, Firefly, and enterprise solutions. He emphasized the progress in AI integration and new acquisitions like Semrush.
Q:How is Adobe planning to monetize its integration with ChatGPT and other LLMs?
A:David Wadhwani explained that LLMs serve as a top-of-funnel opportunity to reach new users and convert them into paid plans. He highlighted the importance of model context protocols (MCPs) that allow LLMs to work with Adobe's APIs, driving freemium user growth and conversions.
Q:What are Adobe's plans for monetizing generative AI and credit consumption?
A:David Wadhwani detailed Adobe's generative credit system, which includes base credits in plans and add-on packs. He highlighted 3x growth in credit consumption due to expanded app capabilities, media types, use cases, and model improvements. He noted increasing user upgrades and credit pack purchases.
Q:How is Adobe addressing competition and pricing in FY '26?
A:David Wadhwani stated that Adobe is focused on user acquisition through freemium offers and higher-value plans. He emphasized strong seat growth, pricing opportunities, and automation as key drivers for growth. He also highlighted the value of creative professionals and enterprise solutions.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing when ARR growth would stabilize or accelerate, providing general statements about leading indicators and confidence in their strategy without specific timelines or metrics.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Assistant
AI application
AI model
AI solution
AI traffic
ARR FY
ARR GenStudio
ARR demand
ARR record
ARR strength
Boards
Brand Concierge
Cloud
Consumers Creators
Express Premiere
Foundry
Generative
JPMorganChase
LLMs
MAU
MAX
Photoshop
Professional
Sony
accomplishment highlight
brand visibility
credit
customer engagement
ecosystem
editing
experience orchestration
foundation
freemium
ideation creation
individual enterprise
industry
leader
loyalty
partner model
rate tax
search
transaction
type
user acquisition
ADBE Transcript
Adobe Inc. (ADBE) Q4 2025 Earnings Call Transcript
Positive12-10
Adobe's earnings report shows strong financial performance with record revenue and cash flows, driven by AI-influenced offerings. The Q&A section revealed positive analyst sentiment towards Adobe's strategic initiatives, like the Firefly Foundry and Semrush acquisition, despite some concerns about ARR growth stabilization. The raised guidance and innovative product developments further bolster the outlook, suggesting a positive stock price movement over the next two weeks.
Adobe Inc. (ADBE) Presents at Adobe MAX - The Creativity Conference Transcript
Neutral10-29
Adobe Inc. (ADBE) Q3 2025 Earnings Call Transcript
Positive9-11
The earnings call highlights strong growth in AI-driven products, robust financial guidance, and successful new user acquisition. The Q&A section underscores confidence in Adobe's strategy, with management addressing potential risks effectively. Despite some vagueness in responses, the overall sentiment remains positive due to record ARR growth, optimistic revenue guidance, and strong enterprise adoption. These factors indicate a likely positive stock price movement over the next two weeks.
Adobe Inc. (ADBE) Q2 2025 Earnings Call Transcript
Positive6-12
Adobe's earnings call highlights strong financial performance with 11% revenue growth, strategic AI integration, and a substantial share repurchase plan. While competitive and regulatory risks exist, the company demonstrates resilience through innovation and robust cash flows. The Q&A session reveals positive sentiment towards AI adoption and product integration, despite some unclear responses on pricing impacts. With optimistic guidance and a bullish stance on AI-driven growth, Adobe's stock is likely to experience a positive movement in the short term.
ADBE Slides
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