ADOBE INC. Q4 2025 earnings call

Good afternoon, and thank you for joining us. With me on the call today are Shantanu Narayen, Adobe's Chair and CEO, David Wadhwani, President of Digital Media, Anil Chakravarthy, President of Digital Experience, and Dan Durn, Executive Vice President and CFO. On this call, which is being recorded, we will discuss Adobe's fourth quarter and fiscal year 2025 financial results. You can find our press release, as well as PDFs, of our prepared remarks and financial results on Adobe's Investor Relations website. The information discussed on this call, including our financial targets and product plans, is as of today, December 10, and contains forward-looking statements that involve risk, uncertainty, and assumptions. Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today's earnings release and Adobe's SEC filings. On this call, we will discuss GAAP and Non-GAAP financial measures.

Our reported results include GAAP growth rates and non-GAAP growth rates, including constant currency rates. During this presentation, Adobe's executives will refer to constant currency growth rates unless otherwise stated. Non-GAAP reconciliations are available in our earnings release and on Adobe's Investor Relations website. I will now turn the call over to Shantanu.

Thanks, Doug. Good afternoon, everyone, and thank you for joining us. In fiscal 2025, Adobe delivered significant AI-influenced and AI-first ending ARR, which accelerated through the year. We achieved record revenue of $23.77 billion and non-GAAP EPS of $20.94, which represents outstanding financial performance. We're leveraging AI to accelerate innovation, to anticipate and serve the needs of large and expanding audiences: business professionals and consumers, creators and creative professionals, and marketing professionals. Our vision for business professionals and consumers is to deliver AI-driven, quick, and easy applications that enable them to be creative and productive, consuming or generating content across multiple media types and channels. We do this by delivering new conversational and agentic interfaces in Adobe Reader, Acrobat, and Express to provide a freemium integrated experience for billions of users.

For creators and creative pros, our vision is to deliver the most comprehensive, powerful, and precise applications, from ideation and creation to production and delivery. We've done an outstanding job of both creating our own commercially safe Firefly models, as well as seamlessly integrating third-party partner models across Creative Cloud flagship applications like Photoshop, Illustrator, and Premiere. With the Firefly application, we're giving creators a rich set of generative AI capabilities that allow users to generate with Adobe and partner models, ideate with Firefly Boards, and create and edit videos and images through conversational experiences blended with direct manipulation. Along with the Firefly app, we've introduced new products like Premiere Mobile with YouTube integration and Photoshop Mobile to further serve creators anywhere they create. We're transforming the enterprise content supply chain by integrating creative applications, workflow management, asset management, Firefly Services, and custom models with Firefly Foundry.

We have the most comprehensive vision for marketing professionals, whether they are freelancers or working at an agency or within an enterprise, to create a brand or address the expanding needs of the content supply chain in the era of AI to deliver customer experience orchestration solutions. Adobe Experience Platform and apps power customer engagement and loyalty. Adobe Experience Manager and agentic web solutions, including LLM Optimizer, Sites Optimizer, and Brand Concierge, deliver brand visibility and discovery, and Adobe GenStudio enables enterprises to optimize their full content supply chain to realize true personalization at scale. FY25 accomplishments and highlights include establishing ourselves within leading AI ecosystems with partnerships and integrations across AWS, Azure, Google Gemini, Humane, Microsoft Copilot, OpenAI, and others, offering unprecedented access, choice, and flexibility to customers.

Leading the way in AI innovation around conversational and agentic interfaces, including products like LLM Optimizer and Acrobat AI Assistant, creating custom models through Firefly Services, Firefly Foundry, and GenStudio, as well as infusing AI within our applications, including Photoshop, Lightroom, Express, and Premiere. We continue to leverage inorganic strategies to deliver more value to customers and are pleased with our recently announced intent to acquire Semrush to help brands enhance their visibility and expand audience reach, driving significant new user acquisition across individuals and enterprises with products including Acrobat, Creative Cloud, Express, and Firefly, achieving total MAU growth of greater than 15% year-over-year. Accelerating adoption of our AI functionality by enterprise customers further highlights our leadership and their trust in Adobe's ability to deliver AI value seamlessly across workflows.

In Q4, globally, we drove record bookings of deals greater than $1 million and achieved over 25% year-over-year growth in the number of customers with $10 million plus in ARR. Our customer group strategy, large market opportunity, and product innovation drove strong FY25 results. This is the foundation for our FY26 total Adobe ARR growth target of over 10%, and we're focused on accelerating this momentum beyond FY26. I'll now turn it over to David.

Thanks, Shantanu. Hello, everyone. Digital media had a record Q4 driven by user acquisition and expanded customer value across business professionals and consumers and creators and creative professionals, underpinned by two big areas of innovation: generative AI models and agentic experiences. Digital media achieved revenue of $4.62 billion in Q4 and full-year revenue of $17.65 billion, both of which grew 11% year-over-year. We exited the quarter with $19.2 billion of digital media ARR, growing ending ARR 11.5% year-over-year. As it relates to generative AI models, we have continued to develop our own commercially safe Firefly models while dramatically expanding our ecosystem of GenAI model partnerships. The new Firefly Image 5 model is performing incredibly well with generation quality, native 4-megapixel resolution, and industry-leading prompt-based editing capabilities.

At Adobe MAX in October, we significantly expanded Firefly to become the only app with our own commercially safe models and over 25 leading partner models, including Google, OpenAI, Black Forest Labs, Luma, Runway, Topaz Labs, and ElevenLabs. These models are now integrated into our Firefly, Express, and Creative Cloud applications. We also announced advanced model capabilities, including custom model support for Firefly and Creative Cloud customers. Usage and monetization of new Adobe and third-party models is measured and charged through generative credits. Different models-Firefly, Gemini, or Flux, for example-and different media types-video and high-resolution images, for example-consume different quantities of generative credits. Generative credits are a great indicator of high-value usage, and credit consumption increased 3X quarter-over-quarter. As subscribers consume more generative credits, they have the choice of moving to higher-value Creative Cloud offerings or acquiring Firefly credit add-ons.

We also took a huge step forward in Q4 as we showcased the work we've been doing to atomize Photoshop, Express, and Acrobat capabilities as Model Context Protocol endpoints at Adobe MAX. In addition to delivering applications, we are providing imaging, video, and productivity functionality in ChatGPT, Copilot, and other conversational platforms in order to deliver and monetize creative and PDF functionality in new surfaces. Users will be able to work conversationally while still benefiting from the power and precision of Adobe's industry-leading features and direct manipulation tools, making it easier than ever to go from intent to outcome, whether editing a PDF, refining an image, or generating a design. The advances in generative models and agentic capabilities position Adobe well to take advantage of the long-term opportunities servicing business professionals and consumers and creator and creative professional audiences.

Our vision for business professionals and consumers is to deliver AI-driven, quick, and easy applications that enable users to be creative and productive, whether consuming or generating content across multiple media types and channels. The strategy is showing real traction, and we are driving strong business momentum. We revolutionized how users consume and comprehend documents by introducing Acrobat AI Assistant in FY24 and recently added

PDF Spaces, allowing individuals and teams to create knowledge hubs to collaborate across multiple documents. Users package multiple documents, not just PDFs, but other file types and web links into a single workspace they can share with others, enabling a collaborative conversational experience. Usage of these AI features inside Acrobat and Reader has grown more than 4x year-over-year as users increasingly turn to Acrobat to help them discover insights, synthesize new ideas, and share knowledge.

Adobe Express made significant advances in Q4 with the introduction of an AI assistant capable of generative content creation and complex editing. Express now supports generative presentations and designs, moving the industry into a post-template world. Express AI Assistant is capable of conversationally editing images, flyers, presentations, infographics, and more. Innovations like these have contributed to significant Express MAU growth. Adobe Acrobat Studio brings together the conversational consumption and comprehension capabilities of AI Assistant and PDF Spaces with the generative creation power of Express, alongside the PDF tools people know and rely on into a unified offering. Customer reception of Acrobat Studio has been strong, with nearly 50% of Acrobat commercial ETLAs renewed in Q4 already upgrading to this offering, reflecting user enthusiasm for unified document comprehension and content generation.

FY25 business professional and consumer accomplishments and highlights include continued growth of Acrobat Web, which saw MAU increase over 30% year-over-year, strong adoption of Express in education with over 70% year-over-year growth of students with access to Express Premium, over 45 new partners added to the Express ecosystem in Q4, including Bynder, Hootsuite, and Sprout Social, over 25,000 businesses purchased Express or Studio for the first time in Q4 alone, accelerating quarter-over-quarter, and key enterprise customer wins include Allianz, American Automobile Association, Bundeswehr von Deutschland, Nippon Life, PwC, Sony, and the U.S. Navy. Turning to creators and creative professionals, our vision is to deliver the most comprehensive power and precision applications from ideation and creation to production and delivery.

We continue to succeed in our goal to attract the next generation of content creators, provide creative professionals with game-changing generative AI capabilities, and automate content production at scale in enterprises. We are attracting new creators to Adobe through the Firefly application, which can be purchased through our Firefly Standard, Pro, and Premium subscription plans. Firefly has a rich set of generative AI capabilities that allow users to generate with Adobe and partner models, ideate with Firefly Boards, and create and edit videos and images. Simply put, Firefly is a one-stop shop for accessing industry-leading models integrated into rich creative workflows at an affordable price. In addition, we're seeing strong adoption of Firefly from Creative Cloud customers as they embrace the growing breadth of AI models and tools seamlessly integrated into creative workflows. We drove 2x quarter-over-quarter growth in first-time subscriptions of Firefly.

The release of Premiere Mobile in Q4 marks an important milestone in next-generation AI video editing. In partnership with Google and YouTube, we are introducing AI-driven audio and video tools to streamline how creators remix YouTube Shorts, which receive 200 billion daily views. Creative Cloud delivered massive new value at Adobe MAX, including the release of new models for Generative Fill, upscaling, and prompt editing in Photoshop, reflection removal in Lightroom, Turntable in Illustrator, and smart masking in Premiere. We also announced the general availability of Firefly Boards, a new ideation surface that brings together everything creative professionals need to explore visual and design concepts with stakeholders using industry-leading models from Adobe and our partners. Use of AI in these applications continues to accelerate, underscoring the impact AI is having on what creative professionals can produce.

As part of the overall content supply chain solution for marketing use cases, we continue to advance automated content production with Firefly Services that include video resizing, video reframing, image composition, image harmonization, digital twin generation, and more. We also announced Adobe Firefly Foundry at MAX, which delivers enterprises with proprietary foundation models trained on their own content, data, and brand catalogs. Interest in Firefly Foundry has been strong from enterprise marketing teams and media and entertainment companies, where there is increasing desire to produce content faster and more cost-effectively. FY25 creator and creative professional accomplishments and highlights include hosting Adobe MAX, the world's largest creativity event with over 10,000 members of the creative community in attendance, with millions more online. The tremendous innovations we showcased earned over 2,000 articles and garnered 820 million video views.

Growing our base of creative users across Firefly, Express, Premiere Mobile, and other freemium offerings, MAU for these offerings surpassed 70 million in Q4, growing over 35% year-over-year. Accelerating adoption of Firefly services within enterprises with over 100 new deals signed in Q4. Accelerating generative credit consumption in Creative Cloud, Firefly, and Express by individuals and enterprises, which grew approximately 3X quarter-over-quarter. Strength across all routes to market and geographies, with particular strength in SMB, enterprise, and emerging markets. And key enterprise wins include Coca-Cola, Domain, IKEA, JPMorgan Chase, Lowe's, Nintendo, and Sony. Over the last few years, we have extended our lineup to anticipate and serve the diverse needs of creative users. The continued strength of Creative Cloud, generative credits, and Firefly automation underscores the success of this strategy with creative professionals across both individuals and enterprises.

The accelerated growth in creative freemium MAU demonstrates success with offerings that target creators, consumers, and business professionals and is already starting to have an impact, as evident in our Q4 results and FY26 targets. Overall, we delivered strong business results and record digital media net new ARR in Q4 and are excited about the opportunity in FY26. I'll now turn it over to Anil.

Thanks, David. Hello, everyone. Our success serving creative and marketing professionals in the enterprise has been driven by having the most comprehensive vision for customer experience orchestration, enabling enterprises around the world to deliver personalized experiences at scale in the era of AI. Digital Experience had a strong close to the year, achieving revenue of $1.52 billion for the quarter and a record $5.86 billion in revenue in FY25. Subscription revenue in the quarter was $1.41 billion, representing 11% year-over-year growth. Adobe delivers a unified AI-powered platform for customer experience orchestration, spanning brand visibility, content supply chain, and customer engagement. Adobe Experience Platform is a leading customer data platform that serves as the foundation in enterprises for digital customer engagement and brings together new AI-powered apps and agents to drive engagement and loyalty as well as to reduce costs.

Our platform operates at scale with over 35 trillion segment evaluations and more than 70 billion profile activations per day. We released six new AI agents powered by AEP Agent Orchestrator to transform how businesses build, deliver, and optimize marketing campaigns and customer experiences. Subscription revenue for AEP and native apps grew over 40% year-over-year, demonstrating our continued leadership. We have the best pulse on digital conversations across search, social media, and LLMs and enable marketers to get a unified view of where online traffic is originating, how to create and promote brands, and drive engagement and commerce. In fact, our most recent Adobe Digital Index data, which is based on online transactions across more than 1 trillion visits to U.S. retail sites, shows that generative AI traffic is up 760% thus far in the 2025 holiday season.

Our data shows that AI-powered traffic from LLMs and agentic browsers is rising and requires different approaches to conversion, underscoring the growing importance of the agentic web and our opportunity to provide insights and automation to marketers. Brand visibility is critical to success in this new agentic web, and Adobe solves customer needs through solutions like Adobe Experience Manager, Adobe Analytics, and the newly available Adobe LLM Optimizer. The pending acquisition of Semrush, which we announced a few weeks ago, brings complementary assets to help us address marketers' growing need for sustained brand relevance in AI search. Over the past decade, Semrush's data-driven search engine optimization and generative engine optimization solutions have earned the trust of industry leaders like Amazon, JPMorgan Chase, and TikTok.

Together, Adobe and Semrush will deliver a comprehensive solution to enable marketers to shape how their brands appear across own channels, LLMs, traditional search, and the wider web. We anticipate the transaction to close in the first half of 2026, subject to regulatory approvals and other closing conditions. Adobe Brand Concierge, which was launched in Q4, is an AI-first application enabling businesses to configure and manage AI agents that guide consumers from exploration to purchase decisions using immersive and conversational experiences. By uniting data, content, and agentic AI in a single experience, Brand Concierge gives businesses ownership of the critical discovery and consideration phase. We are pleased with the significant customer interest and the wins we had for Brand Concierge in Q4. The third pillar of customer experience orchestration is the content supply chain. GenStudio is our comprehensive offering spanning content ideation, creation, production, and activation.

At MAX, we introduce new scaled content production capabilities through Firefly Services, enhanced model customization with Adobe Firefly Foundry, and integration with a growing ecosystem of ad networks. Ending ARR for the Adobe GenStudio solution grew over 25% year-over-year as the world's leading brands increasingly turn to Adobe to power their content supply chain. FY25 marketing professional accomplishments and business highlights include strong customer demand for our newly introduced agentic web offerings with over 50 customers in Q4 for Adobe LLM Optimizer, Sites Optimizer, and Brand Concierge, growing international momentum resulting in a record quarter for our enterprise business in our Europe, Middle East, Africa, and Asia regions, and expanded ad network partnerships with Amazon, Google, LinkedIn, Microsoft, Snap, and TikTok.

Q4 industry analyst recognition, including being named a leader in the Forrester Wave for digital experience platforms and three Gartner Magic Quadrants, including Multichannel Marketing Hubs, Digital Asset Management, and key global customer wins for the quarter include AstraZeneca, AT&T, Citigroup, Comcast, Costco, CVS Health, Ernst & Young, General Motors, IKEA, JPMorgan Chase, Lowe's, NatWest Group, PwC, Sony, Walgreens, Wells Fargo, and Woolworths Group. Customer experience orchestration continues to be a critical area of investment for companies of all sizes. We are helping brands across the world turn the promise of AI into tangible marketing ROI. As a leader, we're well-positioned to grow our business and help our customers drive customer loyalty, revenue growth, and profitability. I'll now pass it to Dan.

Thanks, Anil. Today, I'll start by summarizing Adobe's performance in Q4 and FY25, highlighting growth drivers, and I'll finish with our targets. In FY25, Adobe delivered record revenue of $23.77 billion, growing 11% year-over-year as reported and in constant currency. GAAP EPS for the year was $16.70, and non-GAAP EPS was $20.94, growing 35% and 14% year-over-year, respectively. We delivered over $10 billion in operating cash flows while investing in AI product innovation. We executed record-share repurchases totaling nearly $12 billion, reducing our shares outstanding by over six% during the year, underscoring our confidence in the company's long-term opportunity. FY25 business and financial highlights included digital media revenue of $17.65 billion, growing 11% year-over-year as reported and in constant currency. Digital experience segment revenue was $5.86 billion, growing 9% year-over-year as reported and in constant currency.

Digital Experience subscription revenue was $5.41 billion, growing 11% year-over-year as reported and in constant currency. Digital Media ending ARR was $19.2 billion, growing 11.5% year-over-year, exceeding our prior target of 11.3%. Over 75% of Digital Media net new ARR was driven by continued growth in subscriptions and cross-sell and upsell, with the remainder from value-based pricing reflecting the success of our customer acquisition strategy. Total Adobe ending ARR across business professionals and consumers and creative and marketing professionals of $25.2 billion, growing 11.5% year-over-year. Cash flows from operations of $10.03 billion, an ending cash and short-term investment position of $6.6 billion. RPO of $22.52 billion exiting the year, growing 13% year-over-year or 12% in constant currency, and CRPO growing 11% as reported or 10% in constant currency.

And repurchasing approximately 30.8 million shares of our stock during the year, we currently have $5.9 billion remaining of our $25 billion authorization granted in March 2024. In Q4, Adobe achieved revenue of $6.19 billion, growing 10% year-over-year as reported and in constant currency. GAAP EPS in Q4 was $4.45, and non-GAAP EPS was $5.50, increasing 17% and 14% year-over-year, respectively. Q4 business and financial highlights included digital media revenue of $4.62 billion, growing 11% year-over-year as reported and in constant currency. Digital experience segment revenue was $1.52 billion, growing 9% year-over-year or 8% in constant currency. Digital experience subscription revenue was $1.41 billion, growing 11% year-over-year as reported and in constant currency.

Total new AI-influenced ARR now exceeds one-third of our overall book of business as we integrate AI deeply into our solutions and continue to launch new AI-first offerings, which are now included as part of the AI-influenced metric. As we've shared over the past year, our strategy is to drive the entire book of business with AI-influenced solutions. Record net new digital media ARR growth re-accelerated year-over-year, driven by strong demand for AI-influenced offerings, including Creative Cloud Pro, Acrobat, and Express, as well as AI-first products, including Firefly. When combined with the strong net new digital experience ARR in Q4, we delivered record net new total Adobe ARR in the quarter. Record cash flows from operations of $3.16 billion, adding a record $2.08 billion to RPO in the quarter. For business professionals and consumers group, subscription revenue was $1.72 billion, increasing 15% year-over-year as reported or 14% in constant currency.

Q4 growth drivers for business professionals and consumers included double-digit ending ARR growth with strength across digital, SMB, and enterprise, and across all geographies. Mobile ending ARR grew greater than 30% year-over-year. Monthly active users of Acrobat and Express surpassed 750 million, growing 20% year-over-year, and strong customer reception of Acrobat Studio, with nearly 50% of Acrobat commercial ETLAs renewed in Q4, already upgrading to this offering. For the creative and marketing professionals group, subscription revenue was $4.25 billion, increasing 11% year-over-year or 10% in constant currency. Q4 growth drivers for creative and marketing professionals included growth in Creative Cloud driven by CC Pro, growth in single apps driven by strength in Photoshop and Lightroom. Consumption of generative credits in Creative Cloud, Firefly, and Express increased 3X quarter-over-quarter.

Significant web and mobile user acquisition across Firefly, Express, Premiere, and our other freemium offerings, growing over 35% year-over-year to greater than 70 million monthly active users. AEP and apps ending ARR grew over 30% year-over-year. Demand for content automation offerings like Firefly Services and Firefly Foundry, with ending ARR more than doubling year-over-year. GenStudio solution ending ARR grew over 25% year-over-year and continued success in the enterprise, adding a record number of customers to the group with ARR exceeding 10 million. Total customers with ARR over 10 million grew 25% year-over-year to over 150. On November 19th, we announced the intent to acquire Semrush Holdings for an equity value of approximately $1.9 billion in an all-cash transaction. We expect the transaction to close in the first half of FY26, subject to regulatory approvals and other customary closing conditions.

We expect the non-GAAP EPS impact of the acquisition to be negligible in the first year post-close and accretive thereafter. Let me now turn to our financial targets, which assume current macroeconomic conditions. Our targets do not include any contribution from Semrush. As is customary, we revalued ending ARR at the end of FY25, which resulted in a $460 million increase to total Adobe ARR from $25.2 billion to $25.66 billion entering FY26, primarily from FX rate changes. We've now provided historical information on total Adobe ARR going back to FY23 in our investor data sheet.

For FY26, we're targeting total Adobe revenue of $25.9-$26.1 billion, business professionals and consumer subscription revenue of $7.35-$7.4 billion, creative and marketing professional subscription revenue of $17.75-$17.9 billion, total Adobe ending ARR book of business growth of 10.2% year-over-year, GAAP EPS of $17.90-$18.10, and non-GAAP EPS of $23.30-$23.50. This total Adobe ARR book of business growth target of 10.2% translates to approximately $2.6 billion of growth, which would be our highest beginning-of-year guide for total net new ARR. This target is based on the strength exiting FY25 and continued momentum across all three audiences: business professionals and consumers, creators and creative professionals, and marketing professionals. Our FY26 targets anticipate non-GAAP operating margin of approximately 45.0%, a GAAP tax rate of approximately 20.5%, and a non-GAAP tax rate of approximately 18%.

This non-GAAP tax rate is based on a three-year projection and may be adjusted for changes in the future. For Q1, FY26, we're targeting total Adobe revenue of $6.25-$6.3 billion, business professional and consumer subscription revenue of $1.74-$1.76 billion, creative and marketing professional subscription revenue of $4.3-$4.33 billion, GAAP EPS of $4.55-$4.60, and non-GAAP EPS of $5.85-$5.90. For Q1, we expect non-GAAP operating margin of approximately 47.0%, a GAAP tax rate of approximately 21.5%, and a non-GAAP tax rate of approximately 18%. In summary, Adobe delivered another outstanding year, fueled by strong global demand for our AI solutions across business professionals and consumer and creative and marketing professional customer groups. Our disciplined execution and strategic investments position us to extend our leadership as we deliver an ecosystem of AI models, conversational interfaces, and agentic experiences.

Looking ahead to FY26, we're confident in our ability to deliver industry-leading innovation, double-digit ARR growth, and world-class profitability. Shantanu, back to you.

Thanks, Dan. Our success is fueled by the incredible ingenuity of our global employees, who are passionate about delivering innovation with relentless execution in service of our expanding customer base. Adobe is well-positioned to seize the immense market opportunities that we are creating, driving continued growth and shaping the industry in 2026 and beyond. Thank you, and we will now take your questions. Operator.