Adobe's Digital Media Revenues Gain Traction: What's the Path Ahead?

Adobe’s ADBE Digital Media segment continues to anchor the company’s growth trajectory. In the third quarter of fiscal 2025, Digital Media revenues reached $4.46 billion, up 12% year over year on a reported basis and 11% on a constant currency basis. The segment accounted for 74.4% of revenues in the reported fiscal quarter, while annualized recurring revenue (ARR) totaled $18.59 billion, up 11.7% year over year. 

Growth was driven by the continued adoption of its new cloud-based platform, Acrobat and Express, supported by the integration of AI-powered capabilities such as Firefly and Acrobat AI Assistant. These tools are enabling faster content creation and document productivity, directly influencing subscription renewals and premium upgrades. Adobe’s AI-influenced ARR surpassed $5 billion, highlighting how embedded AI is translating into tangible financial gains.

Acrobat users are increasingly relying on Acrobat AI Assistant to consume content at a faster rate and are using Express to create richer PDFs, customized presentations and animated designs. ADBE is seeing increasing adoption of Express capabilities within Acrobat, driven by growing demand for creative functionality. Adobe is gaining traction among individuals, small and medium businesses and enterprises, thanks to Acrobat AI Assistant as well as Express premium plans. In the fiscal second quarter, Express alone added 8,000 new customers, including enterprises like Microsoft MSFT, ServiceNow, Workday and Intuit.

Looking ahead, sustaining this momentum will depend on expanding enterprise adoption, deepening AI integration and maintaining pricing discipline. The company faces rising competition from AI-native creative platforms like Figma FIG that appeal to new-generation creators with lower-cost offerings.

Adobe Faces Tough Competition in the AI Domain

ADBE’s AI business is minuscule compared with Microsoft and Alphabet GOOGL. Microsoft’s Intelligent Cloud revenues are benefiting from growth in Azure AI services and a rise in the AI Copilot business. AI assistants, including Microsoft 365 Copilot for commercial customers and the consumer Copilot in Windows, reached 100 million monthly active users in the fourth quarter of fiscal 2025.

Alphabet’s focus on leveraging AI to drive growth is a key catalyst. AI is infused heavily across its offerings, including Search and Google Cloud. Alphabet is leveraging AI to boost search dominance with the launch of Gemini 2.5. Search revenues are driven by improving engagement with features like AI Overview, which now has 2 billion users per month and is available in more than 40 languages across 200 countries.

Figma has rapidly become one of the most influential players in digital design, ending 2024 with around $749 million in revenues, growing nearly 50% year over year. The platform serves over 450,000 customers, including major enterprises. It boasts strong profitability with gross margins near 88% and net revenue retention above 130%, reflecting deep customer loyalty and steady expansion across global creative teams.

ADBE’s Share Price Performance, Valuation & Estimates

Adobe shares have lost 26% year to date, underperforming the broader Zacks Computer and Technology sector’s return of 23%.

Adobe Stock Lags Sector Year to Date

ADBE stock is trading at a premium, as suggested by a Value Score of C.

In terms of trailing price/book, Adobe shares are trading at a higher multiple of 11.71 compared with the broader sector’s 11.28.

ADBE Stock Is Overvalued

The Zacks Consensus Estimate for fourth-quarter fiscal 2025 earnings is pegged at $5.39 per share, which has inched up a penny over the past 30 days, suggesting 12.1% growth from the figure reported in the year-ago quarter. 
 

Adobe Inc. Price and Consensus

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

Adobe currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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