Adobe Issues Cautious Fiscal 2025 Guidance

Image Source: Adobe

By Brian Nelson, CFA

Adobe (ADBE) reported better than expected fiscal fourth quarter 2024 results on December 11 that showed outperformance with respect to revenue and non-GAAP earnings per share. Revenue increased 11% in the quarter, while diluted earnings per share came in at $3.79 on a GAAP basis and $4.81 on a non-GAAP basis, exceeding the consensus forecast by $0.14. The company put up record fiscal fourth quarter operating cash flow of $2.92 billion, while it exited the quarter with remaining performance obligations of $19.96 billion. Free cash flow was $2.87 billion for the three months ended November 29.

Management was upbeat in the press release:

Adobe delivered record FY24 revenue, demonstrating strong demand and the mission-critical role Creative Cloud, Document Cloud and Experience Cloud play in fueling the AI economy. Our highly differentiated technology platforms, rapid pace of innovation, diversified go-to-market and the integration of our clouds position us for a great year ahead.

Adobe drove FY24 records of $21.51 billion in revenue, $8.06 billion in cash flows from operations and $19.96 billion in RPO. Adobe’s strategy, AI innovation and massive cross-cloud opportunity position us well for 2025 and beyond.

In the quarter, Adobe’s Digital Media segment’s revenue increased 12% year-over-year, Document Cloud revenue increased 17% year-over-year, Creative revenue grew 11% year-over-year in constant currency, while Digital Experience segment revenue expanded 10%. Net new Digital Media annualized recurring revenue (ARR) came in at $578 million, with the firm exiting the quarter with Digital Media ARR of $17.33 billion. Document Cloud ARR grew to $3.48 billion, while Creative ARR grew to $13.85 billion. 

Looking to fiscal 2025, Adobe expects total revenue in the range of $23.30-$23.55 billion, below the $23.8 billion consensus estimate. Digital Media segment revenue is targeted at $17.25-$17.4 billion, with ending ARR growth of 11% year-over-year, while Digital Experience segment revenue is expected to be between $5.8-$5.9 billion. Non-GAAP earnings per share is expected in the range of $20.20-$20.50 for the year, the midpoint below the consensus estimate of $20.52. Adobe ended the quarter with $7.9 billion in cash and short-term investments, while debt totaled $5.6 billion, good for a nice net cash position. We like Adobe, but its cautious outlook for 2025 keeps us on the sidelines.

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