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.
See our %%CTA_TEXT%% report – free today!
7 Best Stocks for the Next 30 DaysAmphenol Corporation (APH) : Free Stock Analysis Report
Adobe Inc. (ADBE) : Free Stock Analysis Report
Reddit Inc. (RDDT) : Free Stock Analysis Report
Astera Labs, Inc. (ALAB) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
