Adobe (NASDAQ: ADBE) shares opened in red on Friday even after posting better-than-expected fiscal third-quarter results and an optimistic outlook, a rare post-earnings climb for the creative software company.
The stock fell 1.26% to $346.13, reversing premarket gains.
Adobe’s shares have historically fallen the day after earnings in 75% of the time in the last 5 years.
The positive reaction comes after a difficult year for Adobe.
Shares are down roughly 21% in 2025 while the S&P 500 has advanced 12%, weighed down by concerns about slower-than-expected growth in artificial intelligence and increasing competition from rivals such as OpenAI and Canva.
Strong quarterly results and guidance
For its fiscal third quarter, Adobe reported adjusted earnings of $5.31 a share on revenue of $5.99 billion, ahead of analysts’ expectations of $5.18 a share on $5.92 billion in revenue, according to FactSet.
Digital media annualized recurring revenue came in at $18.59 billion, surpassing Wall Street’s $18.55 billion estimate and marking an 11.7% increase from last year.
The company also highlighted progress in AI-influenced offerings, which reached more than $5 billion in annualized recurring revenue.
That milestone was achieved earlier than expected, rising from $3.5 billion at the end of fiscal 2024.
CEO Shantanu Narayen said in the earnings release that Adobe’s “customer strategy, AI product innovation and strong go-to-market execution” allowed the company to raise its full-year targets once again.
The company now expects fiscal 2025 adjusted earnings between $20.80 and $20.85 a share, up from prior guidance of $20.50 to $20.70.
Revenue is forecast at $23.65 billion to $23.70 billion, compared with earlier estimates of $23.50 billion to $23.60 billion.
Valuation and market position
Despite the earnings beat, Adobe remains under pressure. The stock’s decline this year reflects investor caution over the pace of its AI adoption compared with larger technology peers.
While $5 billion in AI-influenced revenue is notable, it remains relatively small for a company of Adobe’s size, especially when compared to the rapid AI monetization at firms like Google and OpenAI.
Yet, Adobe’s valuation may now appear compelling.
Trading around $360, the stock is priced at 18 times trailing adjusted earnings, roughly half of its five-year average price-to-earnings ratio of 36.
Analysts say much of the concern around slower AI growth may already be priced in.
KeyBanc analysts Jackson Ader and Jack Nichols noted that while the outlook has improved, it remains unclear whether Adobe can achieve a “material acceleration” in fiscal 2026.
Still, they emphasized Adobe’s central role in creative processes, maintaining a Sector Weight rating.
AI strategy gains traction with enterprises
Adobe continues to emphasize the commercial safety of its AI offerings, positioning itself as a strategic partner for enterprise clients.
The company reported that 99% of Fortune 100 companies have used AI features in their applications.
Additionally, over 40% of Adobe’s top 50 enterprise accounts doubled their annualized recurring revenue spend since the beginning of fiscal 2023.
Anil Chakravarthy, president of Adobe’s Digital Experience Business, told Barron’s that customers value Adobe’s protection of intellectual property, which makes it a “logical partner” as enterprises transform their marketing and customer experience strategies.
Mizuho Securities analyst Gregg Moskowitz echoed the positive view, noting that “the breadth of ADBE’s AI monetization is being underappreciated by the Street.”
The firm reiterated an Outperform rating and set a $460 price target.
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