Earnings Call Insights: Adobe Inc. (ADBE) Q2 2025
Management View
- Shantanu Narayen, Chairman & CEO, highlighted that “Adobe delivered another strong quarter, achieving record revenue of $5.87 billion, representing 11% year-over-year growth. GAAP earnings per share for the quarter was $3.94 and non-GAAP earnings per share was $5.06, representing 13% year-over-year growth.” Narayen emphasized the company’s strategy to leverage AI as an accelerant for creative content, with innovations like Acrobat AI Assistant and Adobe Express integrating productivity and creativity for a broad audience. He also noted that “Adobe’s monthly active users across these categories now exceed over 700 million users.”
- Narayen detailed the global rollout of the Firefly App, which he described as “attracting new users to the Adobe franchise with first-time subscribers growing 30% quarter-over-quarter.” He stated the AI book of business from AI-first products is “tracking ahead of the $250 million ending ARR target by the end of fiscal 2025.”
- David Wadhwani, President of Digital Media, reported that “Digital Media achieved revenue of $4.35 billion, which grew 12% year-over-year,” and highlighted “over 35,000 new businesses added in Q2” with Express alone onboarding “around 8,000 new businesses this quarter, approximately 6x growth year-over-year.”
- Anil S. Chakravarthy, President of Digital Experience, stated “Experience Cloud had a strong Q2, achieving revenue of $1.46 billion for the quarter. Subscription revenue in the quarter was $1.33 billion, representing 11% year-over-year growth and making us the largest provider in our category.”
- Daniel J. Durn, CFO, commented, “In Q2, Adobe achieved revenue of $5.87 billion, which represents 11% year-over-year growth as reported and in constant currency. GAAP diluted earnings per share in Q2 was $3.94 and non-GAAP diluted earnings per share was $5.06 and representing 13% year-over-year growth.”
Outlook
- Durn announced updated targets: “For Q3 FY ’25, we’re targeting: total Adobe revenue of $5.875 billion to $5.925 billion, Digital Media segment revenue of $4.37 billion to $4.40 billion, Digital Experience segment revenue of $1.45 billion to $1.47 billion, Digital Experience subscription revenue of $1.35 billion to $1.36 billion, GAAP earnings per share of $4 to $4.05, and non-GAAP earnings per share of $5.15 to $5.20.”
- For the full year, Durn stated, “For FY ’25, we are now targeting total Adobe revenue of $23.50 billion to $23.60 billion, Digital Media segment revenue of $17.45 billion to $17.50 billion, Digital Media ending ARR book of business growth of 11.0% year-over-year, Digital Experience segment revenue of $5.80 billion to $5.90 billion, Digital Experience subscription revenue of $5.375 to $5.425 billion, GAAP earnings per share of $16.30 to $16.50, and non-GAAP earnings per share of $20.50 to $20.70.”
Financial Results
- Adobe reported “Digital Media ending ARR of $18.09 billion, growing ending ARR 12.1% year-over-year.”
- Cash flows from operations were reported as “$2.19 billion, which is a record for Q2.”
- Remaining performance obligations were stated at “$19.69 billion, growing 10% year-over-year.”
- Within Digital Experience, AEP and Apps subscription revenue grew “over 40% year-over-year” and GenStudio for performance marketing saw “growth of over 45% quarter-over-quarter.”
- Durn noted Adobe entered a share repurchase agreement totaling “$3.50 billion, and we currently have $10.90 billion remaining of our $25 billion authorization granted in March 2024.”
Q&A
- Saket Kalia, Barclays: Asked about the integration and pricing of Acrobat and Express. David Wadhwani responded that “if you are using Acrobat, you are able to get access to all of the capabilities of Express and what you get as part of freemium there. But what you will expect to see is more and more deeper integration of the 2 going forward, and we have a lot of exciting things to share in the back half of this year around that.”
- Mark Ronald Murphy, JPMorgan: Inquired about the surge in video content and the impact of copyright litigation. David Wadhwani explained, “the right transparent and really the only commercially safe way to build these models is to do it on a set of content that — where the contributors are themselves excited and willing participants in the process.”
- Kirk Materne, Evercore ISI: Asked about Creative Cloud Pro changes and revenue impact. Wadhwani noted “the initial feedback has been good, but it’s early as it relates to the rollout. So that just speaks to the organic strength.”
- Tyler Maverick Radke, Citi: Questioned GenAI usage versus monetization. Shantanu Narayen replied, “it’s very early in terms of the AI monetization, but we’re very advanced in terms of how much innovation we’ve delivered.”
- Aleksandr J. Zukin, Wolfe Research: Asked about competition for Express. Wadhwani responded that “Express adoption within businesses” is growing with “8,000 new businesses in the quarter.”
- Keith Weiss, Morgan Stanley: Sought details on pricing mix and FX assumptions. Narayen said, “we want CC Pro to be the sweet spot for where the majority of users will go.”
- Brent John Thill, Jefferies: Asked about AI-driven growth. Narayen stated, “the opportunity is there. We want to make sure that we invest in AI to enable more people to use the platform.”
- Jay Vleeschhouwer, Griffin Securities: Asked about hiring focus. Narayen explained, “the real increase this quarter, I think, had to do more with interns.”
- Kasthuri Gopalan Rangan, Goldman Sachs: Inquired about the impact of AI on core business adoption. Narayen highlighted “the new book of business that’s going from $0 to $250 million… those are pretty good.”
Sentiment Analysis
- Analysts pressed for details on monetization, competitive positioning, and pricing strategies, revealing a slightly positive to neutral sentiment, with recurring curiosity about the impact of AI and product integration.
- Management maintained a confident and optimistic tone, using phrases like “we’re confident in our ability to deliver value to existing customers and attract new users” and “we remain confident in our ability to deliver strong shareholder value.” During Q&A, leadership continued to emphasize momentum and innovation, with Narayen stating, “the immense opportunity is all ahead of us.”
- Compared to the previous quarter, both analysts and management demonstrated consistent optimism, but with more pointed questions about AI monetization and business model transitions this quarter.
Quarter-over-Quarter Comparison
- Guidance for FY25 was raised for total revenue, Digital Media segment revenue, and EPS, while reaffirming Digital Experience targets. In Q1, guidance was reaffirmed but not raised.
- Creative Cloud Pro and Firefly App launches are gaining traction, with first-time subscribers and paid subscriptions showing strong quarter-over-quarter growth.
- Analysts’ questions this quarter increasingly focused on AI monetization, competition, and integration, reflecting a growing interest in how new offerings translate into revenue.
- Management’s confidence in AI as a growth lever and the continued expansion of user base and ARR marked a step-up from the previous quarter’s focus on product launches and market penetration.
Risks and Concerns
- Management identified the early stage of AI monetization as a challenge, with Narayen stating, “it’s very early in terms of the AI monetization, but we’re very advanced in terms of how much innovation we’ve delivered.”
- Analysts probed on competitive threats in the lower-end market and the pace of adoption for Creative Cloud Pro, as well as the impact of copyright litigation in the industry.
- Management discussed the need to carefully balance pricing, rollout timing, and product integration to ensure continued growth.
Final Takeaway
Adobe’s Q2 2025 earnings call underscored strong growth in revenue and user base, driven by accelerated adoption of AI-powered solutions across its portfolio. Management raised full-year guidance for revenue and EPS, highlighting robust momentum in Digital Media and Digital Experience segments. The company’s expanding AI book of business, new product launches, and deepening product integrations were cited as key drivers, with leadership expressing confidence in capturing future growth opportunities while addressing challenges related to monetization pace and competitive dynamics.