Adobe(ADBE) - 2025 Q1 - Quarterly Results

Adobe Q1 FY2025 Performance Overview Adobe reported record Q1 FY2025 revenue and strong growth across Digital Media and Digital Experience segments Financial Highlights Adobe reported record Q1 revenue of $5.71 billion, a 10% year-over-year increase, driven by strong performance across its business segments. The company achieved significant growth in earnings per share and generated record operating cash flows of $2.48 billion, while also reaffirming its full-year 2025 financial targets | Financial Metric | Q1 FY2025 | YoY Growth | Constant Currency Growth | | :--- | :--- | :--- | :--- | | Total Revenue | $5.71 billion | 10% | 11% | | GAAP Diluted EPS | $4.14 | - | - | | Non-GAAP Diluted EPS | $5.08 | - | - | | GAAP Operating Income | $2.16 billion | - | - | | Non-GAAP Operating Income | $2.72 billion | - | - | | Operating Cash Flows | $2.48 billion | - | - | - The company repurchased approximately 7.0 million shares during the first quarter[6] - Remaining Performance Obligations (RPO) reached $19.69 billion by the end of the quarter[6] Business Segment & Customer Group Highlights Both the Digital Media and Digital Experience segments posted double-digit year-over-year growth. Digital Media revenue grew 11% to $4.23 billion, while Digital Experience revenue increased 10% to $1.41 billion. A new disclosure for customer groups revealed that the Business Professionals and Consumers group subscription revenue grew by 15% YoY | Segment | Q1 FY2025 Revenue | YoY Growth | Constant Currency Growth | | :--- | :--- | :--- | :--- | | Digital Media | $4.23 billion | 11% | 12% | | Digital Experience | $1.41 billion | 10% | 10% | | Customer Group | Q1 FY2025 Subscription Revenue | YoY Growth | | :--- | :--- | :--- | | Business Professionals and Consumers | $1.53 billion | 15% | | Creative and Marketing Professionals | $3.92 billion | 10% | - Digital Media Annualized Recurring Revenue (ARR) grew to $17.63 billion, representing a 12.6% year-over-year increase[6] - New AI-first standalone and add-on innovations exited the quarter with over $125 million in ending ARR[2] Financial Outlook Adobe provided Q2 and reaffirmed full-year FY2025 financial targets, projecting continued revenue growth and strong EPS Q2 Fiscal Year 2025 Targets Adobe projects total revenue for the second quarter of fiscal year 2025 to be between $5.77 billion and $5.82 billion, with targeted GAAP EPS of $3.80 to $3.85 and non-GAAP EPS of $4.95 to $5.00 | Q2 FY2025 Target | Range | | :--- | :--- | | Total Revenue | $5.77B - $5.82B | | Digital Media Segment Revenue | $4.27B - $4.30B | | Digital Experience Segment Revenue | $1.43B - $1.45B | | GAAP EPS | $3.80 - $3.85 | | Non-GAAP EPS | $4.95 - $5.00 | Full Fiscal Year 2025 Targets The company reaffirmed its full-year 2025 targets, anticipating total revenue in the range of $23.30 billion to $23.55 billion. Full-year GAAP EPS is expected to be between $15.80 and $16.10, with non-GAAP EPS projected at $20.20 to $20.50 | Full FY2025 Target | Range / Growth | | :--- | :--- | | Total Revenue | $23.30B - $23.55B | | Digital Media Segment Revenue | $17.25B - $17.40B | | Digital Media ending ARR growth | 11.0% YoY | | Digital Experience Segment Revenue | $5.80B - $5.90B | | GAAP EPS | $15.80 - $16.10 | | Non-GAAP EPS | $20.20 - $20.50 | Corporate Updates Adobe introduced new customer group disclosures and announced upcoming investor communications, including an Investor Meeting New Customer Group Disclosure To provide additional insight, Adobe has begun disclosing subscription revenue by two new customer groups: "Business Professionals and Consumers" and "Creative and Marketing Professionals". This new segmentation aims to offer greater clarity on revenue sources - The "Business Professionals and Consumers Group" includes subscription revenue from Document Cloud, Acrobat subscriptions in Creative Cloud, and Adobe Express subscriptions in Creative Cloud[7] - The "Creative and Marketing Professionals Group" comprises all subscription revenue from Digital Experience and the remaining subscription revenue from Creative Cloud[7] Investor Communications Adobe announced it will host its Q1 FY2025 earnings conference call and will also hold an Investor Meeting at the Adobe Summit 2025 in Las Vegas to provide updates on its strategy, innovation, and financials - The company will webcast its Q1 FY2025 earnings conference call on March 12, 2025[9] - An Investor Meeting with financial analysts and investors is scheduled for March 18, 2025, at the Adobe Summit in Las Vegas[10] Condensed Consolidated Financial Statements (Unaudited) Unaudited condensed consolidated financial statements detail Adobe's Q1 FY2025 income, balance sheet, and cash flow performance Statements of Income For the three months ended February 28, 2025, Adobe's total revenue increased to $5.71 billion from $5.18 billion in the prior-year period. Net income saw a substantial rise to $1.81 billion, compared to $620 million in the same quarter last year, which included a $1 billion acquisition termination fee | (In millions) | Three Months Ended Feb 28, 2025 | Three Months Ended Mar 1, 2024 | | :--- | :--- | :--- | | Total revenue | $5,714 | $5,182 | | Gross profit | $5,092 | $4,592 | | Operating income | $2,163 | $907 | | Net income | $1,811 | $620 | Balance Sheets As of February 28, 2025, Adobe's total assets were $29.96 billion, a slight decrease from $30.23 billion at the end of fiscal 2024. Total liabilities increased to $16.86 billion, while total stockholders' equity decreased to $13.10 billion, primarily due to treasury stock repurchases | (In millions) | February 28, 2025 | November 29, 2024 | | :--- | :--- | :--- | | Total current assets | $10,855 | $11,232 | | Total assets | $29,955 | $30,230 | | Total current liabilities | $9,163 | $10,521 | | Total liabilities | $16,860 | $16,125 | | Total stockholders' equity | $13,095 | $14,105 | Statements of Cash Flows The company generated $2.48 billion in net cash from operating activities during the first quarter, a significant increase from $1.17 billion in the prior-year period. Cash used for financing activities was $2.84 billion, largely due to $3.25 billion in common stock repurchases | (In millions) | Three Months Ended Feb 28, 2025 | Three Months Ended Mar 1, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,482 | $1,174 | | Net cash provided by (used for) investing activities | $(484) | $66 | | Net cash used for financing activities | $(2,841) | $(2,128) | | Net change in cash and cash equivalents | $(855) | $(887) | Reconciliation of GAAP to Non-GAAP Financial Measures This section reconciles Q1 FY2025 results and future financial targets from GAAP to non-GAAP measures Q1 FY2025 Results Reconciliation Adobe provides a reconciliation of its Q1 GAAP results to non-GAAP figures, adjusting for items such as stock-based compensation and amortization of intangibles. Non-GAAP operating income was $2.72 billion compared to GAAP operating income of $2.16 billion, and non-GAAP net income was $2.22 billion versus GAAP net income of $1.81 billion | (In millions, except per share data) | Q1 FY2025 GAAP | Q1 FY2025 Non-GAAP | | :--- | :--- | :--- | | Operating income | $2,163 | $2,715 | | Net income | $1,811 | $2,224 | | Diluted net income per share | $4.14 | $5.08 | Financial Targets Reconciliation The report includes reconciliations for its Q2 and full-year 2025 financial targets from GAAP to non-GAAP. For the full year, the non-GAAP operating margin is targeted at approximately 46.0%, compared to a GAAP operating margin of 36.0%, with adjustments primarily for stock-based compensation and amortization | Q2 FY2025 Targets | GAAP | Non-GAAP | | :--- | :--- | :--- | | Diluted net income per share | $3.80 - $3.85 | $4.95 - $5.00 | | Operating margin | ~35.0% | ~45.0% | | Full FY2025 Targets | GAAP | Non-GAAP | | :--- | :--- | :--- | | Diluted net income per share | $15.80 - $16.10 | $20.20 - $20.50 | | Operating margin | ~36.0% | ~46.0% | Use of Non-GAAP Financial Information Adobe explains that it uses non-GAAP financial measures for internal planning, forecasting, and evaluating its ongoing operations. The company believes these measures provide investors with greater transparency and a better tool to evaluate operating results in the same manner as management - Management uses non-GAAP financial information to evaluate ongoing operations and for internal planning and forecasting[32] - Non-GAAP measures are presented to provide investors with an additional tool to evaluate Adobe's operating results, allowing for greater transparency with respect to key metrics used by management[32][33]