Summary
Adobe is set to release its new quarterly earnings report on December 10, 2025 (after the market close). The market is focused on the impact of AI products on revenue and profit, as well as the resilience of the subscription model.
Market Expectations
The market consensus predicts total revenue for this quarter to be between $6.108 billion to $6.108 billion, a year-over-year increase of 10.26%. Adjusted earnings per share (EPS) are expected to be around $5.39, up 15.71% year-over-year, with EBIT of approximately $2.78 billion, a year-over-year increase of 10.11%. In the previous quarter's earnings report, the company also guided for this quarter's revenue to be between $6.08 billion to $6.13 billion and adjusted EPS to be between $5.35 to $5.40. The main highlight for the company is that over 90% of its revenue comes from subscription fees, with economies of scale and AI functionality adding value to support renewals and price increases. The most promising existing business segment is the digital media segment, which posted $4.46 billion in revenue in the previous quarter, up 12.00% year-over-year, with annual recurring revenue reaching $18.6 billion. AI-related products have already exceeded $5.00 billion in annual recurring revenue.
Last Quarter Review
In the last quarter, Adobe reported revenue of $5.988 billion, up 10.73% year-over-year, with a gross margin of 89.28%. Net income attributable to the parent company was $1.772 billion with a net margin of 29.59%, and adjusted EPS was $5.31, up 14.19% year-over-year. The company mentioned that the implementation of AI features and the upgrade of product matrices facilitated the simultaneous expansion of the digital media and document businesses. Revenues from subscriptions were at $5.791 billion, accounting for 96.71% of total revenue, showing steady growth year-over-year; services and other revenues were $0.129 billion, accounting for 2.15%; product revenue was $0.068 billion, accounting for 1.14%.
This Quarter's Outlook
Digital Media Products' AI Added Value and Subscription Resilience
Based on information from the last quarter, the digital media segment generated $4.46 billion in revenue with a 12.00% year-over-year growth, and AI-affected products' annual recurring revenue surpassed $5.00 billion. This implies that generative AI and workflow automation have entered the commercial stage for major product lines. As core products such as Photoshop, Illustrator, and Premiere Pro continue to enhance AI features, value-added packages and credit point models will boost ARPU for individual users. This quarter, we may observe a positive shift in revenue structure, coupled with seasonal promotions and an increase in educational and individual creator users, driving stable net additions and renewals. If the company continues to optimize inference costs and integrates cloud-side workflows, the gross margin could remain high, thereby supporting EBIT. However, ongoing competition from native AI tools and new design platforms poses pricing flexibility and user retention challenges. The key for this quarter is whether functional differentiation can translate into higher usage frequency and additional purchases.
Synergy Enhancement in Document and Enterprise Workflow
Beyond digital media, document and enterprise workflow products are strengthening scenario penetration through AI efficiency improvements in approvals, contracts, forms, and PDF processing. These high-frequency applications enhance the stickiness of the cross-product suite, aiding in deeper penetration of team and enterprise versions. Combined with the company's revenue and adjusted EPS guidance range for this quarter, stable subscription renewals and upgrades at the enterprise level are expected to provide certainty for revenue and contribute to net margin stability under a high gross margin structure. The market's current focus on enterprise demand includes increased macro IT spending and compliance and security requirements. By embedding AI and automation tools, Adobe is upgrading single-point functions to process-level capabilities, expected to support seat expansions and upgrade packages for large clients. This quarter's observation indicators include the proportion of cross-product subscription bundles among enterprise clients and incremental dynamics related to e-signatures.
AI Commercialization Path and Profit Margin Management
Over the past few quarters, the company has emphasized AI-driven recurring revenue and subscription value enhancements. Last quarter's data showed AI-related annual recurring revenue exceeded $5.00 billion, providing a quantitative dimension for assessing AI commercialization progress. This quarter, if the efficiency of invoking generative and editorial models continues to improve, optimizing inference costs will help maintain the gross margin in a high range, combined with a projected 10.11% year-over-year EBIT growth, reflecting operational leverage on the profit side. Meanwhile, R&D investment and AI computing power costs still need careful balance. If the company introduces more refined credit point and value-added package designs at the product level, it will help offset costs and enhance per-user contribution. The market is also observing pricing strategies and promotional intensity amid competitive dynamics. The key to profit margin management lies in achieving growth through enhanced product value perception rather than pure price incentives.
Analyst Views
Recently, many institutions have taken a constructive view on Adobe. Institutional opinions emphasize, "The annual recurring revenue of products affected by AI has exceeded $5.00 billion. Adobe's AI implementation and commercialization in creative applications are gradually converting into revenue and profits." They also cite the company's guidance of $6.08 billion to $6.13 billion in revenue and adjusted EPS of $5.35 to $5.40 for the quarter ending November 2025, demonstrating management's confidence in AI and the subscription model. Additionally, some views note prior market concerns about competition from new AI tools. However, as traditional product lines' AI capabilities continue to strengthen and enterprise-level workflow integration deepens, revenue and profit stability have improved. On the whole, bullish opinions dominate, citing the stability of subscription revenue, the ARPU boost from AI features, high gross margins, sustained EBIT growth, and quarterly guidance ranges supporting market consensus expectations.
Comments