Adobe’s Q3 fiscal 2025 performance demonstrated the company’s exceptional execution and market leadership, with record revenue of $5.99 billion representing 11% year-over-year growth. On a constant currency basis, revenue grew 10%, indicating strong underlying business momentum across all segments. The revenue growth was primarily driven by robust subscription revenue, which reached $5.79 billion, up 12% year-over-year, representing 97% of total revenue.

Operating profitability remained strong with GAAP operating income of $2.17 billion (36.3% margin) and non-GAAP operating income of $2.77 billion (46.3% margin). The year-over-year improvement in operating income of 9% on a GAAP basis and 10% on a non-GAAP basis demonstrates Adobe’s ability to scale efficiently while continuing to invest in innovation and AI capabilities.

Earnings performance exceeded expectations with GAAP diluted EPS of $4.18 and non-GAAP diluted EPS of $5.31, representing increases of 11% and 14% respectively compared to the prior year. The strong earnings growth was supported by operational leverage and effective capital allocation, including the repurchase of approximately 8.0 million shares during the quarter.

A key highlight was the achievement of Remaining Performance Obligations (RPO) of $20.44 billion, accelerating to 13% year-over-year growth. With Current RPO representing 67% of total RPO, this provides strong visibility into near-term revenue conversion and underscores the recurring nature of Adobe’s business model.

Cash flow generation remained robust with $2.20 billion in operating cash flow, providing Adobe with significant financial flexibility to continue investing in AI innovation, strategic acquisitions, and returning capital to shareholders. The company’s strong balance sheet and cash generation capabilities position it well for continued growth investments and market leadership expansion.

Digital Media segment delivered outstanding performance with revenue of $4.46 billion, representing 12% year-over-year growth (11% in constant currency). The segment’s strength was driven by Digital Media Annualized Recurring Revenue (ARR) of $18.59 billion, growing 11.7% year-over-year. This growth reflects continued customer adoption of Creative Cloud and Document Cloud offerings, enhanced by AI-powered features that are driving increased user engagement and pricing power.

Within Digital Media, both customer groups showed strong momentum. The Creative and Marketing Professionals Group generated subscription revenue of $4.12 billion, up 11% year-over-year (10% constant currency), while the Business Professionals and Consumers Group achieved $1.65 billion in subscription revenue, growing an impressive 15% year-over-year (14% constant currency). This demonstrates Adobe’s ability to serve diverse customer segments with differentiated value propositions.

Digital Experience segment maintained solid growth momentum with revenue of $1.48 billion, up 9% year-over-year both on a reported and constant currency basis. Digital Experience subscription revenue was particularly strong at $1.37 billion, representing 11% year-over-year growth. This performance reflects continued enterprise demand for Adobe’s comprehensive digital experience solutions and the platform’s growing importance in customer experience management.

The Digital Experience segment’s growth is being driven by organizations’ increasing focus on personalized digital experiences and the need for integrated customer data platforms. Adobe’s AI-powered analytics and personalization capabilities are becoming increasingly critical for enterprises looking to optimize customer engagement and drive business outcomes.

Publishing and Advertising revenue continued its strategic decline to $0.05 billion, down 22% year-over-year, as Adobe focuses resources on higher-growth, higher-margin businesses. This strategic portfolio optimization allows the company to concentrate on areas where it has the strongest competitive advantages and growth opportunities.

Adobe’s position as the leader in AI creative applications was further solidified in Q3 fiscal 2025, with several key achievements that underscore the company’s innovation momentum and market opportunity:

AI Performance Milestones

• AI-Influenced ARR: Surpassed $5 billion, demonstrating significant customer adoption of AI-enhanced features across Adobe’s portfolio
• AI-First ARR: Already exceeded the $250 million year-end target, indicating strong demand for native AI products and services
• Firefly Integration: Continued expansion of Adobe Firefly generative AI models across Creative Cloud applications, driving user engagement and retention
• Enterprise AI Adoption: Growing enterprise interest in AI-powered workflows and custom model development through Adobe’s AI platform

The strong AI performance reflects Adobe’s unique position in the creative AI market, where the company’s deep understanding of creative workflows, extensive content libraries, and proprietary models create significant competitive advantages. Adobe’s AI offerings are not just feature additions but fundamental enhancements that transform how customers create, collaborate, and deliver content.

Strategic AI Initiatives

Adobe’s AI strategy encompasses both enhancing existing applications with AI capabilities and developing entirely new AI-first products and services. Key focus areas include:

• Expanding Firefly model capabilities across text, image, and video generation
• Integrating AI features deeper into existing Creative Cloud and Experience Cloud workflows
• Developing enterprise-grade AI solutions with proper content licensing and governance
• Building AI-powered personalization and analytics capabilities for digital experience optimization

The company’s AI innovation is supported by significant R&D investments, with research and development expenses of $1.09 billion in Q3, representing 18% of revenue. This investment level demonstrates Adobe’s commitment to maintaining technological leadership and continuously expanding its AI capabilities.

Adobe’s AI success is also supported by its unique approach to commercially safe AI, ensuring that generated content is appropriate for commercial use and respects intellectual property rights. This approach has been particularly important for enterprise customers who require legal clarity and risk mitigation in their AI adoption.

Adobe’s success across diverse customer segments demonstrates the broad appeal and applicability of its creative and digital experience solutions:

Creative and Marketing Professionals Group

The Creative and Marketing Professionals Group generated subscription revenue of $4.12 billion, representing 11% year-over-year growth (10% in constant currency). This segment includes professional creators, agencies, and marketing teams who rely on Adobe’s most advanced creative tools. The growth was driven by:

• Continued adoption of AI-enhanced creative workflows that increase productivity and creative possibilities
• Strong demand for video and motion graphics capabilities as content consumption shifts toward video formats
• Growing use of collaborative features that enable distributed creative teams to work efficiently
• Expansion of Adobe’s 3D and immersive content creation capabilities

Business Professionals and Consumers Group

The Business Professionals and Consumers Group delivered exceptional performance with subscription revenue of $1.65 billion, up 15% year-over-year (14% in constant currency). This strong growth reflects:

• Increased adoption of Acrobat and Document Cloud solutions for digital document workflows
• Growing demand for creative tools among non-professional users, including small businesses and individual creators
• Success of Adobe’s freemium and subscription models in converting users to paid services
• AI-powered features that make professional-grade tools more accessible to broader audiences

The outperformance of the Business Professionals and Consumers Group highlights Adobe’s successful expansion beyond traditional creative professional markets. The segment’s growth demonstrates the democratization of creative tools and the increasing importance of digital content creation across all types of organizations and individuals.

Both customer groups are benefiting from Adobe’s integrated ecosystem approach, where users can seamlessly move between different applications and services. This ecosystem stickiness drives higher customer lifetime value and reduces churn, contributing to Adobe’s strong recurring revenue model.

Adobe maintained strong profitability metrics while continuing to invest in growth and innovation initiatives:

Operating margin performance demonstrated Adobe’s operational excellence:

• GAAP Operating Margin: 36.3% in Q3 2025, compared to 36.8% in Q3 2024, showing maintained efficiency despite increased investments
• Non-GAAP Operating Margin: 46.3% in Q3 2025, compared to 46.5% in Q3 2024, demonstrating consistent operational leverage
• Gross Profit Margin: Strong gross margins of 89.3%, reflecting the scalable nature of Adobe’s software offerings

The slight margin compression reflects Adobe’s strategic investments in AI research and development, sales and marketing initiatives, and talent acquisition to support growth. R&D expenses were $1.09 billion (18% of revenue), while sales and marketing expenses were $1.64 billion (27% of revenue), both reflecting Adobe’s commitment to innovation and market expansion.

Stock-based compensation expense was $497 million in Q3 2025, compared to $474 million in Q3 2024, reflecting Adobe’s continued investment in talent acquisition and retention in competitive technology markets. This investment in human capital is critical for maintaining Adobe’s innovation leadership and competitive positioning.

Adobe’s tax efficiency remained strong with a non-GAAP effective tax rate of 18.5%, consistent with the company’s long-term tax planning and global operational structure. The company’s disciplined tax management contributes meaningfully to earnings growth and shareholder returns.

The combination of revenue growth and operational leverage resulted in non-GAAP net income of $2.25 billion, up 8% year-over-year, demonstrating Adobe’s ability to convert revenue growth into profitable outcomes for shareholders.

Adobe raised its fiscal year 2025 targets based on strong Q3 performance and confidence in continued execution:

Updated FY2025 Targets

• Total revenue: $23.65 billion to $23.70 billion (raised from previous guidance)
• Digital Media segment revenue: $17.56 billion to $17.59 billion
• Digital Media ending ARR growth: 11.3% year-over-year
• Digital Experience segment revenue: $5.84 billion to $5.86 billion
• Digital Experience subscription revenue: $5.39 billion to $5.41 billion
• Non-GAAP EPS: $20.80 to $20.85 (raised from previous guidance)

Q4 FY2025 Targets

• Total revenue: $6.075 billion to $6.125 billion
• Digital Media segment revenue: $4.53 billion to $4.56 billion
• Digital Experience segment revenue: $1.495 billion to $1.515 billion
• Non-GAAP EPS: $5.35 to $5.40

The raised guidance reflects Adobe’s confidence in several key factors:

• Continued strong demand for AI-enhanced creative and experience solutions
• Successful execution of pricing strategies and customer expansion initiatives
• Strong pipeline and conversion rates across both Digital Media and Digital Experience segments
• Effective management of operating expenses while maintaining investment in growth areas

Management’s outlook assumes current macroeconomic conditions and reflects the company’s ability to navigate market uncertainties while maintaining growth momentum. The guidance demonstrates Adobe’s confidence in its strategic positioning and execution capabilities.

Long-term, Adobe remains well-positioned to benefit from several secular trends including the continued digitization of business processes, growing importance of customer experience, democratization of content creation, and the transformative impact of AI on creative workflows.

Adobe maintained a strong balance sheet and continued disciplined capital allocation focused on shareholder returns and strategic investments:

Share Repurchase Program

Adobe repurchased approximately 8.0 million shares during Q3 2025 for $2.06 billion, demonstrating the company’s commitment to returning capital to shareholders. The significant share repurchase activity reflects:

• Confidence in long-term business prospects and cash generation capabilities
• Opportunistic capital allocation based on stock valuation and market conditions
• Balanced approach to capital allocation between growth investments and shareholder returns

Balance Sheet Strength

• Cash Position: $4.98 billion in cash and cash equivalents, plus $958 million in short-term investments
• Total Assets: $28.75 billion, reflecting Adobe’s substantial intangible assets and strong market position
• Debt Management: $6.20 billion in long-term debt, manageable given strong cash flow generation
• Stockholders’ Equity: $11.77 billion, providing financial stability and flexibility

Cash Flow Generation

Adobe’s cash flow generation remains exceptional with $2.20 billion in operating cash flow for Q3 2025. This strong cash generation supports:

• Continued investment in R&D and AI innovation
• Strategic acquisitions when appropriate opportunities arise
• Consistent shareholder returns through share repurchases
• Financial flexibility to navigate market uncertainties

The company’s capital allocation priorities remain focused on organic growth investments, strategic acquisitions that enhance capabilities or market reach, and returning excess capital to shareholders through share repurchases. This balanced approach supports both growth and shareholder value creation.