Adobe's Q4 2025 Earnings Call: Contradictions in AI Integration, Monetization, and Creative Cloud Pro Strategy

Date of Call: December 10, 2025

Financials Results

• Revenue: $23.77 billion (FY25), up 11% year-over-year; Q4 revenue $6.19 billion, up 10% YOY
• EPS: $20.94 non-GAAP EPS, up 14% YOY (GAAP EPS $16.70, up 35% YOY); Q4 non-GAAP EPS $5.50, up 14% YOY
• Operating Margin: Non-GAAP operating margin target ~45.0% for FY26; Q1 FY26 non-GAAP operating margin target ~47.0% (guidance)

Guidance:

• FY26 revenue target $25.9B–$26.1B.
• FY26 total Adobe ending ARR growth target ~10.2% YoY (~$2.6B net new ARR).
• Business professionals & consumer subscription revenue target $7.35B–$7.40B; creative & marketing professional subscription revenue target $17.75B–$17.9B.
• FY26 GAAP EPS $17.90–$18.10; non-GAAP EPS $23.30–$23.50.
• FY26 non-GAAP operating margin target ~45%; Q1 FY26 revenue $6.25B–$6.3B and non-GAAP EPS $5.85–$5.90.

Business Commentary:

• Revenue and AI Influence:
• Adobe reported record revenue of $23.77 billion for fiscal 2025, and non-GAAP EPS of $20.94.

• The growth was driven by AI-influenced and AI-first offerings, accelerating innovation and customer engagement.

• Digital Media Performance:

• Digital media revenue reached $17.65 billion in fiscal 2025, growing 11% year-over-year.
• Growth was fueled by user acquisition, expanded customer value, and innovation in generative AI models and agentic experiences.

• Creative Cloud and Freemium Growth:
• Adobe's monthly active users (MAU) across Freemium offerings surpassed 70 million in Q4, growing over 35% year-over-year.

• The increase is attributed to strong adoption of offerings like Adobe Express, Firefly, and Premiere Mobile, along with AI integrations.

• Content Supply Chain and Enterprise Solutions:

• Adobe's enterprise content supply chain solutions, such as Adobe Experience Platform and Adobe GenStudio, have seen over 25% year-over-year growth in ARR.
• The growth is driven by the integration of creative applications, workflow management, and AI services, enhancing enterprise efficiency.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management emphasized "record revenue of $23.77 billion" and "non-GAAP EPS of $20.94," cited record bookings and accelerating AI-driven ARR, and guided to FY26 revenue of $25.9–$26.1B and ARR growth target of 10.2%, signaling confident forward outlook and execution on AI monetization.

Q&A:

• Question from Mark Murphy (J.P. Morgan): Can you speak to how customers are starting to use Firefly Foundry in the early stages and what type of economic potential that might unleash for Adobe?
  Response: Foundry is a managed, custom-model service trained on customer content (brands/franchises) that can significantly expand spend and speed production — example: a media customer added ~$7M ARR from Firefly Services/Foundry on top of ~$10M core ARR, models trained in 2–3 months and driving efficiency and new revenue-bearing content.

• Question from Matt Swanson (RBC Capital Markets): As you expand the product portfolio and GTM motion mirroring Creative Cloud and Experience Cloud, can you talk about the ROI focus and why enterprises benefit from the new productivity enhancements?
  Response: Adobe offers an end-to-end content supply chain tying creation, delivery (ad networks), and analytics, reducing production costs, increasing content agility/volume, and enabling marketers to measure conversion and ROI more directly.

• Question from Alex Zukin (Wolf Research): Can you provide more color on the strategic rationale for the Semrush acquisition and how to think about strategies for next year?
  Response: Semrush adds search and generative-engine visibility/optimization to Adobe’s stack, enabling unified brand visibility across owned channels, LLMs and search engines; expected to close H1 FY26 and initially negligible non-GAAP EPS impact, accretive thereafter.

• Question from Keith Weiss (Morgan Stanley): Given proliferation-first then monetization strategy, when can we expect ARR growth to stabilize or accelerate year-over-year?
  Response: Q4 represented an inflection with leading indicators (MAU and credit consumption) improving; management expects that momentum to support FY26 targets (total ARR growth target ~10.2% / ~$2.6B net new ARR) contingent on continued execution.

• Question from Shelley Cohen (Bernstein): Total Adobe ARR was 11.5% this year and guided to 10.2% next year — what drives the difference?
  Response: The guide reflects a confident but forward-looking plan across all three customer groups (business pros/consumers, creators, marketers); it is based on exiting momentum and does not assume Semrush contribution until close.

• Question from Jake Roberge (William Blair): As you expand to services outside the Adobe ecosystem (e.g., LLMs), how do you think about monetization and converting that usage to your platform?
  Response: LLM integrations act as top-of-funnel distribution; MCP endpoints let Adobe expose API-driven capabilities in LLMs, driving freemium acquisition and subsequent conversion to higher-tier plans or credit add-ons.

• Question from Michael Turrin (Wells Fargo): Credit consumption is up 3x this quarter — what are you seeing on consumption, third-party models impact, and confidence in monetizing/forecasting consumption?
  Response: Generative credits growth (3x QoQ) is driven by more apps, media types (notably video), use cases (ideation, bulk), and partner models; credits come via plans or add-ons/upgrades, and rising consumption is already resulting in plan upgrades and credit-pack purchases.

• Question from Keith Bachman (BMO): How should we think about paid seat growth in FY26 and is pricing still a lever despite competition?
  Response: Adobe sees strong paid seat growth via freemium funnels (Express, Firefly, Acrobat Studio) and migration to higher-value Creative Cloud Pro; management expects continued seat expansion and believes pricing/upsell remains a viable lever, with automation (Firefly Services/Foundry) adding enterprise upside.

Contradiction Point 1

AI Integration Strategy

It reflects a change in Adobe's strategy regarding the integration of AI models from third-party providers, potentially impacting the company's competitive position and product offerings.

How does Adobe plan to monetize external usage and drive conversions? - Jake Roberge (William Blair)

2025Q4: The strategy involves integrating Adobe technology into LLMs, reaching new users, and converting them to paid plans. By offering model context protocols, Adobe can enhance monetization and conversion opportunities. - David Wadhwani

Can you clarify what portion of the Nano Banana demo is attributed to the diffusion engine versus Adobe’s infrastructure? How do you assess the risk of single-channel marketers using diffusion engines in ad platforms impacting Adobe? - Keith Weiss (Morgan Stanley)

2025Q3: Our strategy is to provide choice by integrating all third-party models in Creative Cloud Applications. Adobe blends the precision of Photoshop with generative capabilities, enhancing workflows. The integration enables seamless usage of models like Nano Banana, enhancing creativity. - David Wadhwani

Contradiction Point 2

AI-First Product Revenue

It involves changes in financial forecasts related to the adoption and revenue impact of AI-first products, which are strategic for Adobe's growth and competitive positioning.

How does Adobe justify the value creation from new productivity enhancements? - Matt Swanson (RBC Capital Markets)

2025Q4: The over $250 million AI-first product target has been achieved early due to strong adoption across Acrobat AI Assistant, Firefly, and GenStudio. - Shantanu Narayen

Which AI-first products are driving the upside to the full-year target of over $250 million ARR? - Bradley Sills (BofA Securities)

2025Q3: The AI influence revenue includes Creative Cloud and Acrobat, with strong adoption. The over $250 million AI-first product target has been achieved early due to strong adoption across Acrobat AI Assistant, Firefly, and GenStudio. - Shantanu Narayen

Contradiction Point 3

Creative Cloud Pro Channels and Growth Strategy

It involves differing perspectives on the growth strategy and the impact of Creative Cloud Pro on revenue, which are critical for Adobe's financial performance and strategic direction.

What is the strategic rationale for the Semrush acquisition and its expected impact? - Ivan (Wolf Research) on behalf of Alex Zukin

2025Q4: The introduction of Creative Cloud Pro is consistent with Adobe's strategy to meet demand for content creation. It offers increased value, including desktop AI features and Firefly App integration. This change is expected to enhance the growth strategy. - David Wadhwani

How will the Creative Cloud Pro guidance change affect revenue? Are there changes in FX assumptions? - Keith Weiss (Morgan Stanley)

2025Q2: Creative Cloud Pro is aimed at enhancing AI and creative capabilities, expected to be the primary route for AI features. The pricing strategy aims to align with increased value provided. The FX impact is minimal compared to ARR growth from business performance. - Shantanu Narayen

Contradiction Point 4

AI Monetization Strategy

It highlights differing approaches and expectations regarding AI monetization strategies, which are crucial for Adobe's revenue growth and competitive positioning.

How does Adobe plan to monetize usage outside the Adobe ecosystem and drive conversions? - Jake Roberge (William Blair)

2025Q4: The strategy involves integrating Adobe technology into LLMs, reaching new users, and converting them to paid plans. By offering model context protocols, Adobe can enhance monetization and conversion opportunities. - David Wadhwani

How are you monetizing AI in the quarter? - Tyler Maverick Radke (Citigroup Inc.)

2025Q2: We see strong usage and value, with significant ARR contributions from AI-influenced products. The strategy is to integrate AI across our offerings, creating a comprehensive Adobe ecosystem. - Shantanu Narayen