Adobe Earnings Preview: Can a Legacy Creative Giant Recode Its AI Story?

Adobe reports after the bell with sentiment near cycle lows and a familiar critique: rivals grabbed early generative-AI mindshare while Adobe’s monetization has lagged the hype. The strategic question isn’t whether Adobe can ship AI—Firefly, Acrobat AI Assistant and Express are already embedded across a 700M+ monthly active user footprint—but whether the company can re-price, re-bundle and re-accelerate ARR fast enough to offset low-end disruption and cheaper alternatives. Add softer web traffic, copyright/legal overhangs, and pickier enterprise budgets, and you get a category leader trading at multi-year discount multiples despite elite margins—enough to frustrate bulls and embolden bears.

Consensus for fiscal Q3 (reported tonight) is clustered around $5.91 billion of revenue and $5.17 in non-GAAP EPS, or roughly 9% and 11% year-over-year growth, respectively. Those sit inside management’s prior guide from the last call: total revenue of $5.875–$5.925 billion; Digital Media of $4.37–$4.40 billion; Digital Experience of $1.45–$1.47 billion (with DX subscription at $1.35–$1.36 billion); and non-GAAP EPS of $5.15–$5.20. For the full year FY25, Adobe last guided to $23.50–$23.60 billion of revenue, Digital Media ending ARR growth of ~11% year-over-year, Digital Experience revenue of $5.80–$5.90 billion (subscription $5.375–$5.425 billion), and non-GAAP EPS of $20.50–$20.70.

The single most important print-night tell remains net new Digital Media ARR. Street triangulation ranges from roughly $440 million (Barclays) to upside scenarios of $480–$490 million, with Jefferies at $469 million. Clearing $500 million would be a narrative win that suggests pricing, packaging and AI attach are working; a number in the low-$400 millions risks another round of “AI isn’t moving the needle yet.” Tiered pricing went live this quarter and could add an incremental $50–$80 million, so how much of that shows up in ARR—and how sustainably—is a key subplot.

Investors are uneasy for three reasons. First, the generative-AI slope keeps getting steeper, and fast-improving tools threaten parts of the creative workflow and stock content. Even friendly analysts concede that a material AI revenue contribution is more a 2026–2027 event than a 2025 savior. Second, the usage-vs-monetization gap persists: adoption looks healthy, but paid uplift from Firefly credits, Express inside Acrobat, and Creative Cloud Pro upgrades is still early. Third, near-term signals are mixed—checks point to solid large-deal activity on the enterprise side even as web traffic trends have been uneven. The good news for the valuation camp: with the stock trading around mid-teens on CY26 free cash flow by some estimates, the bar is low and beatable.

Against that caution, Adobe does have levers. Pricing and packaging create a tailwind if elasticity holds. Digital Experience (Experience Cloud) continues to diversify the model with steadier subscription growth and enterprise stickiness. And Adobe’s “commercially safe” AI stance—training provenance and rights management built in—remains a differentiator for large customers who prefer compliance over chaos.

For quick context going into tonight, last quarter Adobe delivered $5.87 billion of revenue (+11% y/y) and $5.06 of non-GAAP EPS (+13%). Digital Media revenue was $4.35 billion (+12%) with ending DM ARR at $18.09 billion (+12.1% y/y). Digital Experience posted $1.46 billion of revenue, including $1.33 billion of subscription (+11%). Cash flow from operations was a record $2.19 billion, remaining performance obligations stood at $19.69 billion (+10%), and Adobe executed a $3.5 billion accelerated repurchase (with $10.9 billion buyback capacity remaining). On AI traction, management cited a global Firefly rollout, first-time subscribers up 30% quarter-over-quarter, 35,000+ new businesses added, and Express onboarding ~8,000 businesses (about 6x year-over-year). Notably, the “AI book of business” was said to be ahead of the FY25 $250 million ending ARR target.

What to watch in the release and guide: whether net new Digital Media ARR lands closer to the high-$400 millions or clears $500 million; explicit metrics on AI attach (Firefly credit consumption, Express usage inside Acrobat, upgrades to Creative Cloud Pro); Digital Experience pipeline quality and subscription growth; any color on license optimization, SMB churn or discounting; and how much confidence management shows by nudging FY25 ARR or EPS higher versus simply reaffirming. Even a modest raise could stabilize sentiment ahead of Adobe MAX in October, where deeper product and monetization updates typically land.

The Street is split between “washed-out value” and “structural erosion.” Several banks trimmed price targets but kept Buy/Outperform on attractive relative valuation and achievable FY25 ARR; others moved to Sell, arguing that AI will compress moats and free-cash-flow growth into the next decade. The market doesn’t need fireworks tonight. A clean ARR print in line to slightly above the high end, steady Digital Experience momentum, and tangible evidence that AI features are converting from curiosity to cash would likely be enough to reset the narrative from “falling behind” to “catching up on monetization.” Miss the ARR bar or punt on specifics, and the AI-gap storyline lingers. In other words: Adobe doesn’t have to win the race this quarter—it just has to stop losing ground.