Adobe Cuts Slightly Despite Raising Full-Year Earnings Forecast Investors Still Unconvinced
Adobe just reported better-than-expected fiscal second-quarter results and raised its fiscal 2025 earnings forecast. However, the software giant’s shares fell slightly in premarket trading on Friday, reflecting investor caution.
While its core digital media business, which includes products like Photoshop and Illustrator, continues to benefit from a surge in artificial intelligence (AI) demand, some analysts say the growth outlook is not impressive enough to spark excitement.
Beat but Not Wall Street?
Adobe said it raised its full-year 2025 adjusted EPS forecast to $20.50–$20.70, up from $20.20–$20.50 previously. Full-year revenue was also revised to $23.50–$23.60 billion, up slightly from the previous range of $23.30–$23.55 billion.
The digital media segment, which is the largest contributor to revenue, is now expected to be $17.45–$17.50 billion, up from $17.25–$17.40 billion.
For the upcoming fiscal third quarter, Adobe expects adjusted EPS of $5.15–$5.20, on revenue of $5.875–$5.925 billion. Both figures are slightly higher than the average Wall Street estimate of $5.11 and $5.88 billion.
AI is accelerating but not yet a decisive factor
Adobe reported second-quarter revenue of $5.87 billion, slightly beating analysts' expectations of $5.8 billion. According to Jefferies, Adobe is “continuing to make progress” on its AI strategy, particularly with its goal of boosting annual recurring revenue (ARR) from AI tools to $250 million, a number that is likely to be surpassed.
However, Jefferies stressed that AI is not yet central to Adobe’s bottom line, and the double-digit growth outlook, while encouraging, is not strong enough to assuage bearish investors.
Compared to Oracle Adobe’s outlook is weaker?
Analysts at Vital Knowledge noted: “While Adobe’s results were positive, they were not as impressive as Oracle (NYSE: ORCL), which also reported earnings this week with a much stronger cloud outlook.”
This has led some investors to shift their attention to other growth stocks in the cloud computing space, reducing the buying interest in Adobe, at least in the short term.
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