Adobe Q2 Earnings Beat Estimates, Revenue Up Y/Y, Shares Fall

Adobe ADBE reported second-quarter fiscal 2025 non-GAAP earnings of $5.06 per share, beating the Zacks Consensus Estimate by 2.02% and increasing 12.9% year over year.Total revenues were $5.87 billion, which beat the consensus mark by 1.50% and increased 11% year over year on a reported basis and a constant-currency (cc) basis.However, Adobe stock lost 1.79% in pre-market trading. This dip is attributed to investor concerns regarding the company’s pace in monetizing its artificial intelligence (AI) initiatives. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)ADBE’s Top Line in DetailSubscription revenues were $5.64 billion (which accounted for 96% of the total revenues), up 11.5% on a year-over-year basis. Product revenues totaled $88 million (1.5% of the total revenues), down 15.4% year over year. Services and other revenues were $144 million (2.5% of the total revenues), down 0.7% year over year.Adobe Inc. Price, Consensus and EPS Surprise Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. QuoteThe Digital Media segment generated revenues of $4.35 billion (which accounted for 74% of the total revenues), up 11% year over year on a reported basis and 12% in cc basis. The figure surpassed the Zacks Consensus Estimate by 1.77%. Digital Experience revenues of $1.46 billion (which accounted for 25% of the total revenues) increased 10% year over year, both on a reported and cc basis. The figure beat the consensus mark of 1.56%.Publishing and Advertising revenues of $70 million (which accounted for 1% of the total revenues) were in line on a year-over-year basis. The figure beat the consensus mark of 5.40%.Digital Media Top-Line DetailAdobe has adjusted its revenue reporting structure and disclosed subscription revenue by both “Business Professionals and Consumers” and “Creative and Marketing Professionals.Business Professionals and Consumers group consists of Document Cloud, Acrobat subscription revenue in Creative Cloud and Adobe Express subscription revenue in Creative Cloud, all of which are part of Digital Media.Business Professionals and Consumers' group subscription revenue was $1.60 billion, which represents 15% year-over-year growth.The Creative and Marketing Professionals group consists of all subscription revenue from Digital Experience and all the remaining subscription revenue from Creative Cloud in Digital Media.Creative and Marketing Professionals Group subscription revenues were $4.02 billion, which represents 10% year-over-year growth.Digital Media’s annualized recurring revenues (“ARR”) were $18.09 billion at the end of the fiscal second quarter of 2025, representing 12.1% year-over-year growth.Digital Experience Top-Line DetailExperience Cloud subscription revenues were $1.33 billion, up 11% year over year, both on a reported and a constant-currency (cc) basis.Digital Experience growth is driven by a strong demand for Customer Experience Orchestration solutions, which integrate content, data, and journeys, as well as AI-infused tiered offerings like Adobe Experience Platform and GenStudio for Performance Marketing.Operating Details of ADBEAdobe reported a second-quarter fiscal 2025 non-GAAP gross margin of 90%, which expanded 30 basis points (bps) on a year-over-year basis.Operating expenses were $2.63 billion, up 12.4% year over year. As a percentage of total revenues, the figure increased 70 bps year over year to 44.8%.The adjusted operating margin was 45.5%, which contracted 40 bps year over year.ADBE’s Balance Sheet & Cash FlowAs of May 30, 2025, the cash and short-term investment balance was $5.71 billion, down from $7.44 billion as of Feb. 28, 2025.Long-term debt, as of May 30, 2025, was $6.17 billion compared with $6.16 billion as of Feb. 28, 2025.Cash generated from operations was $2.19 billion in the reported quarter compared with $2.48 billion in the previous quarter. Adobe repurchased 8.6 million shares in the fiscal second quarter of 2025.Adobe Issues Q3 and Reaffirms FY25 GuidanceFor the third quarter of fiscal 2025, Adobe expects total revenues between $5.87 billion and $5.92 billion. Adobe expects Digital Media revenues between $4.37 billion and $4.40 billion. The Digital Experience segment’s revenues are expected to be between $1.45 billion and $1.47 billion. Experience Subscription revenues are expected to be in the $1.35-$1.36 billion range.Adobe expects fiscal third-quarter non-GAAP earnings between $5.15 and $5.20. For fiscal 2025, Adobe expects total revenues between $23.50 billion and $23.60 billion. Adobe expects Digital Media revenues between $17.45 billion and $17.50 billion. Digital Media ending ARR book of business growth is 11%, which increased year over year.The Digital Experience segment’s revenues are expected to be between $5.8 billion and $5.9 billion. Experience Subscription revenues are expected to be in the $5.375-$5.425 billion range.Adobe expects fiscal 2025 non-GAAP earnings between $20.50 and $20.70.Zacks Rank & Stocks to ConsiderCurrently, ADBE carries a Zacks Rank #4 (Sell).Amphenol APH, Juniper Networks JNPR and Upwork UPWK are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. APH, JNPR and UPWK sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.APH shares have gained 36.3% in the year-to-date period. The Zacks Consensus Estimate for APH’s full-year 2025 earnings is pegged at $2.66 per share, up by 1.5% over the past 30 days, suggesting growth of 40.74% from the year-ago quarter’s reported figure.JNPR shares have lost 4.1% in the year-to-date period. The Zacks Consensus Estimate for JNPR’s full-year fiscal 2025 earnings has decreased by a penny in the past 30 days to $2.08, suggesting year-over-year growth of 20.93%.UPWK shares have lost 11.5% in the year-to-date period. The Zacks Consensus Estimate for UPWK’s full-year 2025 earnings is pegged at $1.14 per share, implying a rise of 9.62% from the year-ago quarter’s levels.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amphenol Corporation (APH): Free Stock Analysis Report Juniper Networks, Inc. (JNPR): Free Stock Analysis Report Adobe Inc. (ADBE): Free Stock Analysis Report Upwork Inc. (UPWK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks