Adobe’s slow revenue growth dampens investor interest in the company’s stock
On 12 March, Adobe, Inc. (NASDAQ: ADBE) reported a record revenue of 5.71 billion USD for Q1 of fiscal year 2025, reflecting a 10% year-on-year increase. Despite these strong results, the company’s stock fell by over 14% following the report’s release. Investors raised concerns about the company’s ability to effectively monetise its AI initiatives.
This article examines Adobe, Inc., breaks down its revenue sources, reviews Adobe’s performance results for Q2 fiscal 2025, and outlines expectations for 2025. Additionally, it provides a technical analysis of ADBE, forming the basis for the Adobe stock forecast 2025.
About Adobe, Inc.
Adobe was founded in December 1982 by John Warnock and Charles Geschke. The company specialises in software for businesses and individual users through the Adobe Acrobat, Illustrator, Photoshop, and Premiere Pro applications. It also provides digital marketing and document management solutions through the Creative Cloud and Experience Cloud platforms. The company went public on 20 August 1986, listing its shares on the NASDAQ under the ticker symbol ABDE.
Adobe, Inc.’s main revenue streams
Adobe’s revenue comes from the following sources:
- Digital Media: products and solutions that help create, edit, and distribute digital content. This segment enables users to work with graphics, video, animation, web design, and other digital media. It forms the core of Adobe’s business
- Digital Experience: business solutions that improve client interaction through digital channels. This includes Adobe Experience Cloud, which offers analytics, marketing campaign management, content personalisation, and client experience optimisation tools. It helps businesses analyse data, automate marketing processes, and create a seamless user experience across websites, apps, and other platforms
Since the Q1 of fiscal year 2025, Adobe has begun providing information on subscription revenue by creating two groups:
- Business Professionals and Consumers Group: this group includes revenues from Acrobat, Adobe Express, and Document Cloud subscriptions.
- Creative and Marketing Professionals Group: includes revenues from Digital Experience subscriptions and all other Creative Cloud subscriptions.
Adobe, Inc. Q1 FY 2025 report
On 12 March, Adobe, Inc. released its Q1 fiscal 2025 report, which covered the period ending on 28 February 2025. Below are its highlights:
- Revenue: 5.71 billion USD (+10%)
- Net income: 2.22 billion USD (+8%)
- Earnings per share: 5.08 USD (+13%)
- Operating income: 2.71 billion USD (+10%)
Revenue by segment:
- Digital Media: 4.23 billion USD (+11%)
- Digital Experience: 1.41 billion USD (+10%)
- Business Professionals and Consumers Group: 1.53 billion USD (+15%)
- Creative and Marketing Professionals Group: 3.92 billion USD (+10%)
Commenting on its record Q1 FY 2025 revenue, Adobe’s management emphasised the significant role of AI-based innovation. CEO Shantanu Narayen stated that Adobe’s AI achievements drive creative economic growth. In particular, he noted that AI-focused products (Acrobat AI Assistant, Firefly App, and GenStudio) generated over 125.00 million USD in revenue, which is expected to double by the end of the fiscal year 2025.
As part of its Q2 fiscal 2025 financial targets, Adobe expects total revenue between 5.77 and 5.82 billion USD and EPS to be between 4.95 and 5.00 USD. The company also anticipates an operating margin of approximately 45%. In the Digital Media segment, Adobe expects 4.27-4.30 billion USD in revenue. Overall, these forecasts align with analysts’ expectations. However, following their release, the company’s stock fell by over 14% as investors voiced concerns about the pace of monetising Adobe’s AI initiatives.
Expert forecasts for Adobe, Inc.’s stock
- Barchart: 21 out of 34 analysts rated Adobe stock as a Strong Buy, one as a Moderate Buy, 10 as a Hold, one as a Moderate Sell, and one as a Strong Sell. The highest price target is 703 USD, while the lowest is 420 USD
- MarketBeat: 17 out of 28 analysts assigned a Buy rating to the stock, 10 recommended Holding, and one rated it as a Sell. The highest price target is 650 USD, while the lowest is 390 USD
- TipRanks: 16 out of 26 respondents gave a Buy rating to the stock, nine recommended Holding, and one rated it as a Sell. The highest price target is 650 USD, while the lowest is 390 USD
- Stock Analysis: out of 26 experts, five rated the stock as a Strong Buy, 12 as a Buy, seven as a Hold, and two as a Sell. The highest price target is 650 USD, while the lowest is 390 USD
Adobe, Inc. stock price forecast for 2025
Adobe stock is trading within a descending channel on the weekly timeframe. The released report accelerated the stock price decline, pushing it to the lower boundary of the channel, which acts as a support level. Based on Adobe’s stock performance, the potential movements in 2025 are as follows:
The primary forecast for Adobe’s stock suggests a rebound from the 385 USD support level, followed by a rise to the 465 USD resistance level. A breakout above this level could act as a catalyst for further gains towards 580 USD. This forecast is supported by the company’s optimistic outlook for the next quarter, and if revenue exceeds expectations, the stock’s upward momentum may strengthen.
The alternative forecast for Adobe’s shares anticipates a breakout below the 385 USD support level. In this scenario, the stock could decline to 280 USD.
Adobe, Inc. stock analysis and forecast for 2025
Risks of investing in Adobe, Inc. stock
Investing in Adobe stock involves several risks that may negatively impact the company’s profitability, revenue, and investor returns:
- Macroeconomic factors: Adobe’s performance depends on the broader global economy. Economic downturns and geopolitical events may adversely affect the company’s financial position
- The monetisation of AI initiatives: Adobe faces challenges in capitalising on its AI investments. Despite significant achievements, the absence of clear profitability metrics for this business segment raises investor concerns about potential returns
- Competitive environment: the emergence of new competitors, including affordable AI models from startups such as DeepSeek, threatens Adobe’s market share. Intensified competition may exert pricing pressure and reduce profitability
- Market volatility: Adobe’s financial performance is subject to market fluctuations and other macroeconomic factors. Investors should consider portfolio diversification to mitigate the risks associated with investing in the company’s shares
Summary
Adobe’s Q1 fiscal 2025 results indicate that the company has a solid foundation, underpinned by its ability to leverage AI innovations and sustain strong demand in the Digital Media and Digital Experience segments. The integration of AI-powered tools, which has significantly boosted the company’s subscription revenue, reinforces Adobe’s strategic focus on creative and corporate software.
Despite some investor concerns about the company’s unchanged outlook and competitive pressures in the generative AI segment, stable cash flows and the consistent execution of strategic plans highlight Adobe’s resilience and potential for sustained growth.
Source: Roboforex
