Company Reports

Adobe delivered a strong fiscal third quarter, with total revenue growing 12% in constant currency. Gross and operating margins were stable at 89% and 35%, respectively. Monthly active users across creativity and productivity solutions crossed 1 billion.

Adobe has come to dominate content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. Over the years, the firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The 2021 launch of Adobe Express broadened the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should maintain the competitiveness of Adobe’s creativity platform. We think Adobe is properly focusing on product-led user growth, and we believe that upselling these users will become more important over time.

Adobe has come to dominate content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. Over the years, the firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The 2021 launch of Adobe Express broadened the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should maintain the competitiveness of Adobe’s creativity platform. We think Adobe is properly focusing on product-led user growth, and we believe that upselling these users will become more important over time.

Adobe has come to dominate content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. Over the years, the firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The 2021 launch of Adobe Express broadens the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users and help extend the competitive position of the platform. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.

Adobe's second-quarter revenue grew by 12.7% year over year as reported to $6.62 billion, while non-GAAP operating margin was 44.5%. Revenue was better than expected, while non-GAAP operating margin was in line with guidance. The annual outlook was generally increased, with some offsets.

Adobe hosted an investor session at its Summit event that focused on innovation and artificial intelligence and featured a variety of new product customer experience announcements. The primary financial announcement was a $25 billion repurchase authorization that expires in April 2030.

Adobe has come to dominate content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. Over the years, the firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The 2021 launch of Adobe Express broadens the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users and help extend the competitive position of the platform. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.

Adobe's fiscal first-quarter revenue grew by 12.0% year over year as reported to $6.40 billion, while non-GAAP operating margin was 47.4%, both of which topped guidance.

The pace of change in the software industry has accelerated in recent months, leading to heightened uncertainty and prompting us to reassess our moat ratings.

Adobe has come to dominate content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. Over the years, the firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The 2021 launch of Adobe Express broadens the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users and help extend the competitive position of the platform. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.

Adobe has come to dominate in content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. Over the years, the firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The December 2021 launch of Adobe Express helps further broaden the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users and help extend the competitive position of the platform. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.

Adobe's fourth-quarter revenue grew by 10.5% year over year, reaching $6.19 billion, while non-GAAP operating margin was 45.6%, both of which topped guidance. The initial 2026 outlook was slightly ahead of FactSet consensus on revenue but slightly light on profitability.

Adobe hosted its annual Max user conference highlighting recent product innovations, and hosted a brief investor session where the company reaffirmed previously issued fourth-quarter guidance.

Adobe's third-quarter fiscal 2025 revenue grew by 10% year over year in constant currency to $5.99 billion, while non-GAAP operating margin was 46.3%, both of which topped guidance. Fourth-quarter guidance was slightly ahead of expectations on the top and bottom lines.

Adobe has come to dominate in content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. The firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The December 2021 launch of Adobe Express helps further broaden the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.

Adobe's second-quarter revenue grew by 11% year over year in constant currency to $5.87 billion, while non-GAAP operating margin was 45.5%, both of which topped guidance. Adobe also raised its full-year guidance on both the top and bottom lines.

Wide-moat Adobe's upbeat investor session focused mainly on artificial intelligence innovation and monetization, along with its new customer-focused strategy. Management stopped short of declaring concrete long-term financial targets, but did provide some details consistent with our model for the next five years. Thus, we hold our model steady and keep our fair value estimate of $590 per share. Shares remain attractive, in our view. We continue to view Adobe as the clear leader in software solutions for the creative industry and believe the company is well-positioned to capitalize on the ongoing shift toward generative AI. Adobe Summit 2025 reinforced this thesis, in our view.

We maintain our fair value estimate of $590 per share after wide-moat Adobe reported good first-quarter results, provided second-quarter guidance that was in line with our expectations, and reaffirmed its previously issued outlook for fiscal 2025. We left our model largely unchanged after this quarterly update. We are encouraged by recent product introductions throughout the portfolio and think Firefly leaves Adobe well-positioned in artificial intelligence. We also see monetization in the early stages. Along those lines, Adobe disclosed that AI is generating $125 million in annual recurring revenue, or ARR, which it expects to double by the end of the year. We continue to think recent price increases, product launches, and rapid generative AI adoption should help drive growth in 2025. We observe a growing disconnect between our fair value estimate and current trading levels that makes little sense with stable fundamentals and the bear case of AI obviating the need for Creative Cloud not materializing once again.

Adobe has come to dominate in content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. The firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The December 2021 launch of Adobe Express helps further broaden the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.

We are lowering our fair estimate to $590 per share, from $635, after wide-moat Adobe reported good fourth-quarter results and an outlook for fiscal 2025 that we believe is mildly disappointing. Based on guidance, we lowered our 2025 estimates, which also drove a smoothing over several years. While we do not see a meaningful change to our long-term thinking, we see some nicks in the firm’s armor. Given another selloff, we observe a clear disconnect between management’s excitement and the internal signs of success that they see relative to what investors are seeing. We are encouraged by recent product introductions throughout the portfolio and think Firefly leaves Adobe well-positioned in artificial intelligence. We are also encouraged by the firm’s decision to use pricing as a lever within a coming tiered pricing structure tied largely to AI for core applications. We think recent price increases, product launches, and rapid generative AI adoption should help drive growth in 2025. Considering our fair value cut and the stock selloff, we still see shares as undervalued.