Adobe Q3 Earnings Beat Estimates, Revenues Up Y/Y, Shares Rise

Adobe ADBE reported third-quarter fiscal 2025 non-GAAP earnings of $5.31 per share, beating the Zacks Consensus Estimate by 2.71% and increasing 14.2% year over year.

Total revenues were $5.99 billion, which beat the consensus mark by 1.50% and increased 10.7% year over year on a reported basis and 10% on a constant-currency (cc) basis.

Adobe shares were up 3% at the time of writing this article. ADBE dropped 21.2% year to date, underperforming the Zacks Computer and Technology sector’s 18.2% and the Zacks Computer Software industry’s 19.3%.

ADBE’s Top Line in Detail

Subscription revenues were $5.79 billion (which accounted for 96.7% of the total revenues), up 11.8% on a year-over-year basis. Product revenues totaled $68 million (1.1% of the total revenues), down 17.1% year over year. Services and other revenues were $129 million (2.2% of the total revenues), down 11.6% year over year.
 

Adobe Inc. Price, Consensus and EPS Surprise

Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. Quote

The Digital Media segment’s revenues were $4.46 billion, up 12% year over year on a reported basis and 11% in cc basis. Digital Experience revenues of $1.48 billion increased 11% year over year, both on a reported and cc basis. Publishing and Advertising revenues of $50 million compared with $60 million in the year-ago quarter.

Business Professionals and Consumers’ subscription revenue was $1.65 billion, which represents 15% year-over-year growth on a reported basis and 14% at cc. Digital Media’s annualized recurring revenues (“ARR”) were $18.59 billion at the end of the fiscal third quarter of 2025, representing 11.7% year-over-year growth.

Creative and Marketing Professionals Group subscription revenues were $4.12 billion, which represents 11% year-over-year growth on a reported basis and 10% at cc.

Digital Experience Cloud subscription revenues were $1.37 billion, up 11% year over year, both on a reported and a cc basis.

ADBE Q3 Operating Details

Adobe reported third-quarter fiscal 2025 GAAP gross margin of 89.3%, which contracted 50 basis points (bps) on a year-over-year basis.

Operating expenses were $3.17 billion, up 10.9% year over year. As a percentage of total revenues, the figure increased 10 bps year over year to 53%.

The adjusted operating margin was 46.3%, which contracted 20 bps year over year.

ADBE’s Balance Sheet & Cash Flow

As of Aug. 29, 2025, the cash and short-term investment balance was $5.94 billion, up from $5.71 billion as of May 30. Long-term debt, as of Aug. 29, was $6.2 billion compared with $6.17 billion as of May 30.

Cash generated from operations was $2.2 billion in the reported quarter compared with $2.19 billion in the previous quarter. 

Remaining Performance Obligations were $20.44 billion, and Current Remaining Performance Obligations were 67%.

Adobe repurchased 8 million shares in the third quarter of fiscal 2025.

Adobe Offers Positive Q4 and FY25 Guidance

For the fourth quarter of fiscal 2025, Adobe expects total revenues between $6.075 billion and $6.125 billion. Adobe expects Digital Media revenues between $4.53 billion and $4.56 billion. The Digital Experience segment’s revenues are expected to be between $1.495 billion and $1.515 billion. Digital Experience Subscription revenues are expected to be in the $1.395-$1.41 billion range.

Non-GAAP operating margin is expected to be roughly 45.5%. Adobe expects fiscal fourth-quarter non-GAAP earnings between $5.35 and $5.40 per share. 

For fiscal 2025, Adobe expects total revenues between $23.65 billion and $23.70 billion. 

Adobe expects Digital Media revenues between $17.56 billion and $17.59 billion. Digital Media’s ending ARR growth rate is expected to be 11.3% year over year. The Digital Experience segment’s revenues are expected to be between $5.84 billion and $5.86 billion. Digital Experience Subscription revenues are expected to be in the $5.39-$5.41 billion range.

Non-GAAP operating margin is expected to be roughly 45.5%. Adobe expects fiscal 2025 non-GAAP earnings between $20.80 and $20.85 per share.

Zacks Rank & Stocks to Consider

Currently, ADBE carries a Zacks Rank #4 (Sell).

Astera Labs ALAB, Amphenol APH and Reddit RDDT are some better-ranked stocks that investors can consider in the broader sector. 

Astera Labs, Amphenol and Reddit each sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Astera Labs, Amphenol and Reddit is currently pegged at 47.8%, 20.6% and 34.9%, respectively.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research