Adobe (ADBE, Financial) released its financial results for the first quarter of fiscal year 2025, reporting a 10% year-over-year revenue increase to $5.71 billion, surpassing analysts' expectations of $5.66 billion. However, its remaining performance obligations, a measure of future sales, were $19.7 billion, slightly below the anticipated $19.8 billion. The adjusted operating profit stood at $2.72 billion, and adjusted earnings per share (EPS) came in at $5.08, exceeding the forecasted $4.97.
Breaking down by business segments, Adobe's Digital Media division, which includes its flagship creative and document processing software, saw an 11% revenue increase to $4.23 billion. The Digital Experience segment, encompassing marketing and analytics software, experienced a 10% rise to $1.41 billion.
Adobe has been integrating its AI model, Firefly, into software like Photoshop and Premiere. Despite these advancements, investors are debating whether AI will enhance Adobe's profitability and indispensability or fuel competitors' growth. CEO Shantanu Narayen emphasized the company's future success will hinge on customer-centric innovation and new product offerings for creators, marketing professionals, business experts, and consumers. He noted that Adobe is well-positioned to capitalize on the AI-driven creative economy.
Looking ahead, Adobe forecasts second-quarter revenue between $5.77 billion and $5.82 billion, slightly below analysts' consensus of $5.80 billion. Adjusted EPS is projected to be between $4.95 and $5.00, aligning with analysts' expectations. For fiscal year 2025, Adobe reaffirmed its full-year revenue guidance of $23.3 billion to $23.55 billion, with adjusted EPS expected to be between $20.20 and $20.50.
Despite efforts to monetize its new AI features, Adobe's second-quarter revenue guidance disappointed investors, leading to a more than 4% drop in its stock price after hours. RBC Capital Markets analyst Matthew Swanson noted that investor sentiment is primarily influenced by perceptions of Adobe's AI strategy, which is increasingly linked to competitive concerns. Adobe plans to host an investor event next week to provide more long-term financial insights and details on its AI strategy.
