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 fiscal 2025, Digital Media revenues reached $17.65 billion, up 11% year over year on a reported and a constant currency basis. The segment accounted for 74% of revenues in the fiscal year, while annualized recurring revenue (ARR) totaled $19.20 billion, up 11.5% year over year. 

Growth has been driven by the continued adoption of its 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. In fiscal 2025, Acrobat, Creative Cloud, Express and Firefly achieved total MAU growth of greater than 15% year over year. Adobe now targets ARR growth of 10.2% for fiscal 2026, driven by an innovative AI-powered portfolio, the expanding adoption of enterprises and a large market opportunity.

Adobe is infusing AI innovations into Acrobat, including new AI chat experiences to PDFs with simple, natural-language prompts. The company is combining Acrobat and Express to transform productivity and creativity together, making it fast and easy to generate presentations and podcasts from documents in minutes with AI. The new features are available in Acrobat Studio, which includes advanced PDF tools, AI Assistant and PDF Spaces from Acrobat and Express Premium capabilities in one AI-powered home for productivity.

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. This is expected to drive top-line growth in fiscal 2026.

Adobe Faces Tough Competition in the AI Domain

ADBE’s AI business is minuscule compared with Microsoft MSFT and Alphabet GOOGL. Microsoft’s Intelligent Cloud revenues are benefiting from growth in Azure AI services and a rise in the AI Copilot business. The company's substantial investment in OpenAI provides exclusive access to leading-edge language models, creating a significant competitive moat in enterprise AI adoption. Microsoft monetizes AI through existing customer relationships, reducing customer acquisition costs while expanding revenue per user.

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. AI Overviews and AI Mode are driving overall queries and commercial queries, thereby driving monetization opportunities. The addition of shopping capabilities in AI Mode is now helping people shop conversationally in Search. Google has added new AI features in Search that help users build travel plans.

ADBE’s Share Price Performance, Valuation & Estimates

Adobe shares have lost 32.6% in a year, underperforming the broader Zacks Computer and Technology sector’s return of 19%.

Adobe Stock Lags Sector in a Year

ADBE stock is trading at a discount, as suggested by a Value Score of B.

In terms of forward price/sales, Adobe shares are trading at a higher multiple of 4.58 compared with the broader sector’s 7.18.

ADBE Stock is Cheap

The Zacks Consensus Estimate for first-quarter fiscal 2026 earnings is pegged at $5.88 per share, up a couple of cents over the past 30 days, suggesting 15.8% 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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