Summary
Adobe reported record third-quarter fiscal 2025 revenue of $5.99 billion, up 10.7% from the prior-year quarter. Gross profit was $5.35 billion, up 10.1%. Operating income was $2.17 billion, up 9.1%. Net income was $1.77 billion, up 5.2%. Diluted earnings per share was $4.18, up 11.2%. Gross margin was 89.3%, down 0.5 percentage points from the prior-year quarter. Operating margin was 36.3%, down 0.5 percentage points. On a non-GAAP basis, operating income was $2.77 billion, net income was $2.25 billion, and diluted earnings per share was $5.31. The quarter showed steady top-line growth but some margin compression. The company pointed to increases in hosting services and data center costs as a factor in cost of revenue. The gap between GAAP and non-GAAP results reflects stock-based compensation, amortization of intangibles, and other adjustments.
Cash generation remained solid. Operating cash flow was $2.20 billion in the quarter, up 8.8%. Capital expenditures were $72.0 million, up 26.3%. Deferred revenue was $6.53 billion, up 10.5%. Remaining performance obligations were $20.44 billion, up 12.7%, and current remaining performance obligations were 67 percent. Digital Media annualized recurring revenue reached $18.59 billion, up 11.7% year over year. Adobe said AI-influenced ARR surpassed $5 billion and AI-first ARR already exceeded its $250 million year-end target. The company repurchased approximately 8.0 million shares during the quarter. For the nine months ended August 29, 2025, revenue was $17.58 billion, up 10.5%; net income was $5.27 billion, up 36.0%; diluted earnings per share was $12.26, up 42.9%; and operating cash flow was $6.87 billion, up 33.8%. The company's subscription model continues to drive recurring revenue, and deferred revenue and RPO both grew at a double-digit pace. Capital expenditures rose 26.3% in the quarter, reflecting ongoing infrastructure investment.
Adobe raised its fiscal 2025 targets for Digital Media ARR growth, total revenue, and earnings per share. For the fourth quarter of fiscal 2025, the company guided non-GAAP earnings per share to $5.35 to $5.40. The fourth-quarter target assumes a non-GAAP operating margin of 45.5%, a non-GAAP tax rate of 18.5%, and a diluted share count of 418 million. For the full fiscal year 2025, Adobe guided non-GAAP earnings per share to $20.80 to $20.85. The full-year target assumes a non-GAAP operating margin of 46%, a non-GAAP tax rate of 18.5%, and a diluted share count of 427 million. The company also targets Digital Media ending ARR growth of 11.3% year over year for fiscal 2025. Management said the targets assume current macroeconomic conditions. The guidance implies continued confidence in subscription revenue growth and AI adoption.
Risks remain broad. Adobe flagged failure to innovate effectively, issues relating to development and use of AI, competition, damage to reputation or brands, service interruptions, security incidents, and failure to maintain critical third-party relationships. The company also cited adverse macroeconomic conditions, foreign currency fluctuations, complex sales cycles, litigation and regulatory inquiries, changes in tax regulations, and fluctuations in its stock price. The MD&A added inflationary pressures, interest rates, potential economic slowdowns or recessions, geopolitical pressures, and trade regulations as uncertainties. Adobe ended the quarter with $8.40 billion remaining under its March 2024 stock repurchase authority. The prior-year nine-month period included an acquisition termination fee that affected year-over-year comparisons. The company continues to face a competitive landscape in AI creative applications, and execution on AI product innovation remains a key swing factor.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $5.99B | $5.87B | +2.0% | $5.41B | +10.7% |
| Gross profit | $5.35B | $5.24B | +2.1% | $4.85B | +10.1% |
| Gross margin | 89.3% | 89.1% | +0.1 pp | 89.8% | -0.5 pp |
| Sales & marketing | $1.64B | $1.63B | +0.8% | $1.43B | +14.5% |
| General & administrative | $408.0M | $377.0M | +8.2% | $366.0M | +11.5% |
| Total operating expenses | $3.17B | $3.13B | +1.5% | $2.86B | +10.9% |
| Operating income (loss) | $2.17B | $2.11B | +3.0% | $1.99B | +9.1% |
| Operating margin | 36.3% | 35.9% | +0.4 pp | 36.8% | -0.5 pp |
| Net income (loss) | $1.77B | $1.69B | +4.8% | $1.68B | +5.2% |
| Net margin | 29.6% | 28.8% | +0.8 pp | 31.1% | -1.6 pp |
| Diluted EPS | $4.18 | $3.94 | +$0.24 | $3.76 | +$0.42 |
Risks
Adobe faces intensifying competition from companies offering generative AI text-to-image, text-to-video and multi-modal offerings that compete directly with its creative offerings. The filing warns competitors may incorporate AI into their offerings more successfully and efficiently, which could impair Adobe's ability to compete and reduce sales.
The filing states AI development, third-party model access, datasets, hardware, and inferencing costs may increase the cost of Adobe's offerings and adversely impact margins as it scales AI. MD&A attributes higher cost of subscription revenue primarily to hosting services, data center costs, and AI inferencing costs, and reported gross margin for the current quarter was down 0.5 pp versus the prior-year quarter.
New AI regulations, including the EU AI Act adopted in 2024 and phased through 2030, may increase Adobe's compliance, governance, and R&D costs and conflict with its responsible AI approach. Adobe says these rules could delay or halt AI development, require costly changes to AI offerings, and affect monetization or indemnity protections.
Enterprise offerings such as Adobe Experience Cloud and Enterprise Term License Agreements face extended and complex sales cycles. Adobe says cross-cloud and generative AI capabilities increase technical or contractual assurance requirements, and trade disputes and tariffs have caused and may continue to cause spend scrutiny and delays in enterprise purchasing decisions.
Adobe operates globally and is exposed to inflation, interest rates, foreign currency fluctuations, potential economic slowdowns or recessions, and geopolitical pressures including current and future trade regulations. MD&A says the broader implications of these macroeconomic events on Adobe's business remain uncertain.
Competition for personnel with AI and cybersecurity backgrounds is substantial and continuous, and Adobe's hybrid work model may create operational, security, and culture challenges. Adobe may incur higher compensation costs to retain senior management and highly skilled employees.
Adobe relies on third-party distributors, sales partners, platform providers, cloud infrastructure, data center, encryption, authentication, and generative AI providers. Termination of partner agreements, adverse platform policy changes, or service interruptions could increase expenses, reduce sales, and cause customer attrition.
Adobe's products and systems collect and process customer data and have been subject to cyberattacks. The filing says risks are elevated by geopolitical tensions including the Russia-Ukraine war and Middle East conflict, and fraudulent activities through Adobe products have impacted revenue and may continue to do so.
Adobe says it may be harder to protect generative AI innovations with patents and that if it uses generative AI in creating source code, it may not be able to rely on copyright to protect that intellectual property. Unauthorized source code disclosure could lose trade secret protection and make it easier for competitors to copy functionality.
As of August 29, 2025, Adobe had $6.15 billion in senior unsecured notes outstanding and a $3 billion commercial paper program with no amounts outstanding, plus a $1.5 billion undrawn revolving credit agreement. Debt service, covenants, and potential credit rating downgrades could reduce cash available for other purposes and increase financing costs.
SaaS KPIs
All quarters →Digital Media ARR
Current Remaining Performance Obligations (cRPO)
Remaining Performance Obligations
Summary, forecast, risks and KPIs are extracted from ADOBE INC.'s SEC filings for Q3 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.