Adobe’s Outlook Falls Short of Expectations

Image Source: TradingView

By Brian Nelson, CFA

On March 12, Adobe (ADBE) reported better than expected first quarter fiscal 2025 results with both revenue and non-GAAP earnings per share coming in ahead of expectations. The company achieved record revenue in the fiscal first quarter, showcasing 10% year-over-year growth (11% in constant currency). Non-GAAP operating income and non-GAAP net income came in at $2.72 billion and $2.22 billion, respectively. In the quarter, the company reported record operating cash flows of $2.48 billion. Adobe repurchased approximately 7.0 million shares in the quarter.

Management had the following to say about the quarter:

Adobe’s success over the next decade will be driven by customer-focused innovation and new offerings for creators, marketing professionals, business professionals and consumers. Adobe is well-positioned to capitalize on the acceleration of the creative economy driven by AI and we are reaffirming our FY2025 financial targets.

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. Our customer-focused strategy, leading product portfolio and strong cash flow position us for sustainable long-term growth and increased market share.

Adobe’s Remaining Performance Obligations (RPO) were $19.69 billion exiting the fiscal first quarter, with current RPO at 67%. Looking to Adobe’s fiscal year 2025 targets, total revenue is expected to be between $23.3-$23.55 billion, the midpoint below the consensus forecast of $23.51 billion. Digital Media segment revenue is targeted to be between $17.25-$17.4 billion, while Digital Experience segment revenue is targeted at $5.8-$5.9 billion. On a non-GAAP basis, earnings per share is expected to be between $20.20-$20.50, the midpoint below the consensus forecast of $20.39.

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