It has been about a month since the last earnings report for Adobe Systems (ADBE). Shares have lost about 3.3% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Adobe due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent drivers for Adobe Inc. before we dive into how investors and analysts have reacted as of late.
Adobe Q4 Earnings Beat Estimates, Revenues Up Y/Y
Adobe reported fourth-quarter fiscal 2025 non-GAAP earnings of $5.50 per share, beating the Zacks Consensus Estimate by 2.04% and increasing 14.3% year over year.
Total revenues were $6.194 billion, which beat the consensus mark by 1.5% and increased 10.5% year over year both on a reported and constant-currency (cc) basis. Annualized recurring revenues (ARR) at the end of the fourth quarter of fiscal 2025 were $25.66 billion, indicating 11.5% growth from the year-ago same period. Total new AI-influenced ARR now exceeds one-third of ADBE’s overall book of business. Total customers with ARR more than $10 million grew 25% year over year to over 150.
ADBE’s Top Line in Detail
Subscription revenues were $5.989 billion (which accounted for 96.7% of the total revenues), up 11.6% on a year-over-year basis. Product revenues totaled $74 million (1.2% of the total revenues), down 8.6% year over year. Services and other revenues were $131 million (2.1% of the total revenues), down 18.1% year over year.
The Digital Media segment’s revenues were $4.62 billion, up 11% year over year on a reported and cc basis. Digital Media’s ARR was $19.2 billion at the end of the fiscal fourth quarter of 2025, representing 11.5% year-over-year growth.
Digital Experience revenues of $1.52 billion increased 9% year over year, both on a reported and cc basis. Digital Experience subscription revenues of $1.41 billion increased 11% year over year, both on a reported and cc basis. Publishing and Advertising revenues of $60 million compared with $70 million in the year-ago quarter.
Customer Group subscription revenues were $5.96 billion, up 12% year-over-year and 11% at cc. Business Professionals and Consumers’ subscription revenues were $1.72 billion, which represents 15% year-over-year growth on a reported basis and 14% at cc. Creative and Marketing Professionals subscription revenues were $4.25 billion, up 11% year over year on a reported basis and 10% at cc.
ADBE Q4 Operating Details
Adobe reported fourth-quarter fiscal 2025 GAAP gross margin of 90.4%, which expanded 10 basis points (bps) on a year-over-year basis.
Operating expenses were $2.78 billion, up 12.6% year over year. As a percentage of total revenues, the figure increased 80 bps year over year to 44.8%.
The adjusted operating margin was 45.6%, which contracted 70 bps year over year.
ADBE’s Balance Sheet & Cash Flow
As of Nov. 28, 2025, the cash and short-term investment balance was $6.6 billion, up from $5.94 billion as of Aug. 29. Long-term debt, as of Nov. 28, was $6.2 billion, unchanged compared with the figure as of Aug. 29.
Cash generated from operations was $3.16 billion in the reported quarter compared with $2.2 billion in the previous quarter.
Adobe Offers Positive Q1 and FY26 Guidance
For the first quarter of fiscal 2026, Adobe expects total revenues between $6.25 billion and $6.30 billion. Adobe expects Business Professionals and Consumers’ subscription revenue between $1.74 billion and $1.76 billion. Creative and Marketing Professionals subscription revenues are expected between $4.30 billion and $4.33 billion.
Non-GAAP operating margin is expected to be 47%. Adobe expects fiscal first-quarter non-GAAP earnings between $5.85 and $5.90 per share.
For fiscal 2025, Adobe expects total revenues between $25.9 billion and $26.1 billion. Adobe expects Business Professionals and Consumers’ subscription revenue between $7.35 billion and $7.4 billion. Creative and Marketing Professionals subscription revenues are expected between $17.75 billion and $17.9 billion.
Non-GAAP operating margin is expected to be 45%. Adobe expects fiscal 2026 non-GAAP earnings between $23.30 and $23.50 per share.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a upward trend in fresh estimates.
VGM Scores
Currently, Adobe has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock has a grade of C on the value side, putting it in the middle 20% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Adobe has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Adobe Inc. (ADBE): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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