Adobe stock has underperformed the market in 2025 due to fears that AI is going to disrupt its business model. Currently, it’s trading near $3401 - more than 20% below the level it started the year at. Fourth quarter earnings2 for fiscal 2025, however, showed that the company is having success with its own AI tools and that its revenue continues to grow. Here’s a look at some highlights from the Q4 report.
Record Revenue in Q4
For the fourth quarter, Adobe posted record revenue of $6.19 billion, 10% higher than the figure a year earlier. Non-GAAP diluted earnings per share came in at $5.50, up from $4.81 a year earlier and ahead of the consensus forecast of $5.403.
Breaking the company’s top line down, its Digital Media segment - which offers tools for creative professionals to produce content - generated revenue of $4.62 billion, up 11% year on year. Meanwhile, the Digital Experience segment - which offers digital marketing tools - posted revenue of $1.52 billion, up 9% year over year.
Better-Than-Expected Guidance
Looking ahead, the company said that it expects revenue of $25.90 billion to $26.10 billion for the current fiscal year, above the $25.87 billion consensus forecast4. Adjusted earnings per share are projected to be between $23.30 and $23.50, above the estimate of $23.34 at the midpoint.
In its outlook, the company said that it is targeting annualized recurring revenue (ARR) growth of 10.2% this year. It believes this will be possible by advancing its generative and agentic platforms and expanding its customer base.
Adobe’s AI Tools Are Gaining Momentum
On the earnings call3, management said that Adobe’s AI-powered Firefly application - which provides creators with a rich set of generative AI capabilities - is gaining traction. “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,” commented David Wadhwani, President of Digital Media.
Wadhwani pointed out that the company saw accelerating adoption of Firefly services within enterprises in Q4 with over 100 new deals signed. He also noted that the company saw 2x quarter-over-quarter growth in first-time subscriptions of Firefly in Q4.
On the call, CFO Dan Burn noted that total new AI-influenced ARR now exceeds one-third of Adobe’s overall book of business. Looking to the future, the company’s strategy is to drive the entire book of business with AI-influenced solutions.
Wall Street Sees Upside Potential
While Adobe’s Q4 earnings were better than expected, the stock didn’t move much immediately after the report. So, it remains well off its highs and is trading at a low valuation (its forward-looking P/E ratio is currently around 155).
Analysts continue to see upside potential, however. At present, the average analyst price target6 is $444 - roughly 30% above the current share price.
Footnotes:
1Google Finance, as of November 11, 2025
2Abode, Adobe Reports Record Q4 and FY2025 Revenue, as of December 10, 2025
3Investing.com, Earnings call transcript: Adobe beats Q4 2025 expectations, stock dips, as of December 10, 2025
4MSN.com, Adobe shares slip despite strong AI-driven forecast and record metrics, as of December 11, 2025
5Investing.com, Adobe Systems Incorporated (ADBE), as of December 11, 2025
6LSEG, as of November 11, 2025
