To The Moon

$Adobe(ADBE)$ is expected to release its fiscal Q1 2025 earnings report on 12 March 2025 after market close.

This upcoming earnings disclosure will be closely watched as market is expecting Adobe to report a consensus estimate for the revenue to grow by 9.11% to $5.65 billion as compared to same period one year ago.

Adobe is projected to report earnings of $4.97 per share, which would represent year-over-year growth of 10.94%. For the full year, the Zacks Consensus Estimates project earnings of $20.39 per share and a revenue of $23.45 billion, demonstrating changes of +10.69% and +9.04%, respectively, from the preceding year.

Adobe is strengthening its product portfolio by employing AI to empower filmmakers at all levels. On 28 January 2025, the company unveiled Adobe Premiere Pro, After Effects, and Frame.io, designed to streamline workflows and target common challenges for frequent software users.

Adobe also had a solid fiscal year 2024, reporting $21.51 billion in revenue, $8.06 billion in cash flows from operations, and $19.96 billion in RPO. It also reported revenue of $5.61 billion in fiscal Q4 2024, representing 11% year-over-year growth. Its strategy, AI innovation, and massive cross-cloud opportunity position it well for 2025 and beyond.

Adobe (ADBE) Last Neutral Earnings Call Saw Share Price Decline By 18.28%

We saw Adobe giving a neutral earnings call on 11 Dec 2024 which saw its share price decline by 18.28% since then.

Adobe demonstrated strong financial performance and innovative product development in FY 2024, achieving record revenues and expanding its AI capabilities.

Despite this, there were concerns about growth acceleration, particularly in the Creative Cloud segment, and anticipated revenue headwinds from FX and subscription transitions in FY 2025.

Adobe (ADBE) Guidance On Better RPO

During Adobe's Q4 2024 earnings call, the company provided robust guidance and highlighted significant achievements across its business segments. Adobe reported Q4 revenue of $5.61 billion, marking an 11% year-over-year growth, with the Digital Media segment contributing $4.15 billion and the Digital Experience segment $1.40 billion. The company achieved record net new Digital Media ARR of $578 million and a Digital Experience subscription revenue of $1.27 billion, representing 12% growth. For the fiscal year 2024, Adobe's revenue reached a record $21.51 billion, with GAAP and non-GAAP earnings per share at $12.36 and $18.42, respectively, showing 5% and 15% growth.

The company exited the year with $19.96 billion in RPO and $7.89 billion in cash and short-term investments. Looking ahead to FY 2025, Adobe targets revenue between $23.30 billion and $23.55 billion, with GAAP EPS of $15.80 to $16.10 and non-GAAP EPS of $20.20 to $20.50, focusing on expanding its AI innovation and integrated solutions like GenStudio to drive growth.

Key Drivers for Adobe’s Q1 2025 Earnings

Financial Expectations

Revenue: Consensus will likely forecast mid-single-digit YoY growth (consistent with Adobe’s 2024 trajectory). Adobe achieved record revenue of $21.51 billion in FY 2024, representing 11% year-over-year growth. GAAP EPS was $12.36 and non-GAAP EPS was $18.42, growing 5% and 15% year-over-year, respectively.

Key metrics:

• Creative Cloud: ~$3.2–3.4B (flat to slight growth).

• Document Cloud: ~$750M–800M (10–15% growth).

• Experience Cloud: ~$1.3–1.4B (modest growth).

In Q4, Adobe's Digital Media revenue was $4.15 billion, growing 12% year-over-year. Digital Experience revenue was $1.4 billion for the quarter, with subscription revenue growing 12% year-over-year.

Document Cloud revenue in Q4 was $843 million, growing 17% year-over-year, with a record net new ARR of $173 million.

Margins: Operating margins could improve slightly (≈35–37%) if AI tools reduce customer acquisition costs.

EPS: Likely 4.00–4.00–4.20 (depending on buybacks and cost controls).

Generative AI Adoption

Adobe has aggressively integrated generative AI into its Creative Cloud suite (e.g., Firefly, AI in Photoshop/Premiere Pro). If monetization of these tools (via tiered pricing or usage-based fees) gains traction, it could boost subscription revenue and average revenue per user (ARPU).

Adoption of AI-powered features in Experience Cloud (marketing analytics) and Document Cloud (Acrobat AI Assistant) may also drive enterprise upsells.

Adobe introduced new AI models and innovations, including the Firefly family and AI Assistant in Acrobat, which enhanced productivity and drove customer adoption.

Creative Cloud Resilience:

Despite market saturation in creative software, Adobe’s dominance in tools like Photoshop and Illustrator provides stable recurring revenue. Q1 performance will hinge on:

• Enterprise renewals: Large corporate contracts locked in during the quarter.

• SMB demand: Small-business spending could soften if macroeconomic conditions worsen.

Investors expressed concerns about the lack of acceleration in growth despite significant innovation, with Creative Cloud ARR growth being perceived as slower.

Document Cloud Growth:

Acrobat’s AI Assistant (launched in 2024) and PDF productivity tools are key growth areas. Increased adoption in regulated industries (e.g., healthcare, finance) could surprise positively.

Experience Cloud Momentum:

Adobe’s digital experience segment (marketing/data analytics tools) relies on enterprise IT budgets. A rebound in ad/marketing spend in 2025 could lift this division, though competition from Salesforce and HubSpot remains fierce.

Macroeconomic Factors:

FX headwinds: A strong U.S. dollar could dent international revenue (≈40% of Adobe’s sales). Adobe expects an approximate $200 million revenue headwind in FY 2025 due to foreign exchange effects and the continued transition from perpetual to subscription models.

Interest rates: Lower rates in 2025 might ease pressure on SMBs and boost software spending.

Tech budgets: Enterprises may prioritize AI/cloud tools, favoring Adobe’s offerings. In fiscal Q4 2024, Adobe secured key enterprise customers such as Abbott Laboratories, American Express, Coca-Cola, and the U.S. Department of Defense. But can this trend continue, especially when Elon mentioned that there have been some unused Adobe licenses in the U.S. government sector?

Figma Deal Fallout:

Adobe’s failed 20 billion acquisition of Figma (blocked by regulators in 2023) forced Adobe to pay 1 billion breakup fee. While this is a one-time cost, Adobe may face increased competition from Figma in UI/UX design tools, pressuring Creative Cloud’s growth narrative.

Adobe (ADBE) Price Target

Based on 28 Wall Street analysts offering 12 month price targets for Adobe in the last 3 months. The average price target is $569.06 with a high forecast of $703.00 and a low forecast of $420.00. The average price target represents a 26.63% change from the last price of $449.40.

If we looked at ADBE price overall, I believed this stock is undervalued, so this might be a good time to get a potential deal to take advantage of any price gap up after its earnings.

I will be monitoring closely on ADBE trading today (10 Mar) and 11 Mar, to see how the investors sentiment and momentum would be like, as market would continue to face correction.

Technical Analysis - Exponential Moving Average (EMA)

If we looked at the current ADBE shar price, it has been trading sideway despite the recent tech selloff and correction, and it is defending the 26-EMA, though still trading below the 50-day MA.

The RSI is showing sign of a momentum build up as RSI is crossing RSI MA above, which signal a bullish reversal potential, so I might take a small position in Adobe while looking at how investors would be pushing the buying volume for ADBE.

Here is how I would view the bull and bear case for ADBE.

Bull Case:

• Strong enterprise adoption of Firefly/Acrobat AI drives ARPU above expectations.

• Experience Cloud benefits from reaccelerating ad spend.

• Macro stability supports SMB subscriptions.

Bear Case:

• Figma competition intensifies, slowing Creative Cloud growth.

• AI features fail to convert free users to paid tiers.

• Recession triggers IT budget cuts.

Summary

Adobe’s Q1 2025 earnings will likely reflect steady-but-moderate growth, with AI innovation offsetting macroeconomic and competitive pressures. If Firefly and Document Cloud AI tools gain momentum, the stock could rally on raised guidance. However, I think investors may remain cautious until Adobe proves it can sustain double-digit growth in a maturing creative software market.

It is also important for us to look out for these factors that could affect how the share price will move post earnings call.

1. AI Metrics: Commentary on Firefly adoption, AI-driven upsells, and pricing strategy.

2. Guidance: Updates on full-year 2025 outlook, especially for Experience Cloud.

3. Figma Impact: Management’s plan to counter Figma’s growth in design tools.

4. Buybacks: Adobe’s aggressive share repurchases could buoy EPS even if revenue growth moderates.

Appreciate if you could share your thoughts in the comment section whether you think Adobe would be able to share strong momentum and show a close to double-digit growth in upcoming earnings.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.