Adobe leans into AI as ARR and cash generation hit records

AI turns into a material revenue engine

Adobe closed fiscal 2025 with the clearest evidence yet that its AI push is moving from promise to P&L.

Revenue rose 11% year on year to a record $23.77 billion, with growth identical on a reported and constant-currency basis, underscoring demand resilience. Non‑GAAP EPS climbed to $20.94, up roughly 35%, aided by tight cost control and aggressive buybacks that cut the share count by over 6%.

Management highlighted that AI‑influenced and AI‑first ARR now exceeds one‑third of the entire book of business, a notable shift in mix for what had been a largely traditional subscription portfolio. The company’s narrative has also shifted: instead of talking about discrete AI products, Adobe is increasingly describing an AI fabric stitched through Creative Cloud, Acrobat, Experience Cloud and a growing set of agentic services.

Operating cash flow topped $10.03 billion, and Adobe returned nearly $12 billion via repurchases, ending the year with $6.6 billion in cash and short‑term investments. Remaining performance obligations climbed to $22.52 billion, up 13% year over year, with current RPO up 11%.

Digital Media: AI deepens the monetization playbook

Digital Media – the Creative Cloud and Acrobat franchise – remains the profit engine.

For FY25, segment revenue reached $17.65 billion, up 11%, with Q4 revenue of $4.62 billion also growing 11%. Ending Digital Media ARR stood at $19.2 billion, rising 11.5% and modestly beating Adobe’s prior 11.3% target.

The underlying growth drivers are starting to tilt more visibly toward AI usage rather than pure seat expansion:

• Generative credits – a metered consumption mechanism spanning Adobe’s Firefly models and third‑party models such as Gemini and OpenAI – saw 3x quarter‑on‑quarter growth.
• As customers exhaust included credits, Adobe is nudging them either into higher‑value Creative Cloud tiers (e.g., CC Pro) or into paid Firefly credit add‑ons, effectively layering usage‑based economics on top of traditional subscriptions.
• First‑time Firefly subscriptions doubled QoQ, reflecting early traction of Firefly as a stand‑alone creative entry point.

At the audience level, Adobe is now explicitly reporting two distinct vectors: business professionals and consumers, and creators and creative professionals.

Among business users:

• Subscription revenue for the business professionals and consumers group reached $1.72 billion in Q4, up 15% year over year (14% in constant currency).
• Acrobat and Express monthly active users surpassed 750 million, up 20% year over year.
• Acrobat Web MAU grew more than 30%, and AI features inside Acrobat and Reader (including Acrobat AI Assistant and the new PDF Spaces collaboration concept) saw usage up more than 4x year on year.
• Acrobat Studio, which combines AI document comprehension, Express‑style creation, and core PDF tools, is seeing early commercial traction: nearly 50% of Acrobat commercial ETLAs renewed in Q4 upgraded to the new offering.

For creators and creative professionals, Adobe is positioning Firefly as a control layer over a heterogeneous model ecosystem:

• Firefly has evolved into an app that fronts Adobe’s own commercially safe models plus more than 25 third‑party models (including Google, OpenAI, Runway and others).
• New gen‑AI features such as upgraded generative fill, upscaling and prompt editing in Photoshop, “turntable” in Illustrator, and smart masking in Premiere are driving higher in‑product AI usage.
• Freemium acquisition is gaining pace: creative freemium MAU exceeded 70 million, up more than 35% year over year, providing a broad funnel into paid tiers and credit‑driven upsell.
• Adobe is also pushing into mobile creation with Premiere Mobile and Photoshop Mobile, including a YouTube‑centric workflow that taps into Shorts’ 200 billion daily views.

The strategy is deliberately multi‑pronged: expand the top of funnel via freemium and LLM‑based surfaces (e.g., integrations into ChatGPT and Copilot), then monetize through a mix of seat upgrades, higher‑value bundles, and rising generative credit usage.

Digital Experience: Agentic web and content supply chain gain weight

Adobe’s Digital Experience segment – anchored by Adobe Experience Platform (AEP), Adobe Experience Manager and associated applications – continues to post solid growth and is increasingly framed around the emerging “agentic web.”

For FY25, Digital Experience revenue reached $5.86 billion, up 9%, with subscription revenue of $5.41 billion, up 11%. In Q4, segment revenue was $1.52 billion (+9%), of which $1.41 billion was subscription revenue (+11%).

Key metrics and themes:

• AEP and native apps ARR grew over 30% year over year, indicating robust demand for Adobe’s CDP and AI‑driven orchestration capabilities.
• Adobe’s platform now processes over 35 trillion segment evaluations and more than 70 billion profile activations per day, underscoring its role in real‑time personalization workloads.
• Ending ARR for Adobe GenStudio – the content supply chain solution – grew over 25%. Content automation offerings such as Firefly Services and Firefly Foundry saw ending ARR more than double year over year.

The company is also building new tools for the so‑called agentic web, where LLMs and AI agents mediate much of the user’s web journey:

• LLM Optimizer, Sites Optimizer and Brand Concierge are designed to help brands manage their visibility across owned properties, search engines and LLM‑driven environments.
• Adobe reported over 50 Q4 customers for these new agentic web offerings, an early but notable signal of marketer appetite.
• The pending $1.9 billion cash acquisition of Semrush is intended to deepen Adobe’s data and tooling around search engine optimization and “generative engine” optimization, helping customers shape brand presence across traditional search and LLM platforms.

International traction has picked up, with Adobe citing a record enterprise quarter in EMEA and Asia, alongside expanded ad‑network partnerships with Amazon, Google, LinkedIn, Microsoft, Snap and TikTok.

Enterprise demand and deal scale

Across the portfolio, enterprise demand appears to be broadening rather than concentrated in a single product family.

In Q4, Adobe:

• Recorded all‑time high bookings of $1 million‑plus deals.
• Increased the number of customers with > $10 million ARR by more than 25% year over year to over 150.
• Reported that ending ARR for AEP & apps grew over 30%, and that GenStudio and content automation products (Firefly Services and Foundry) are increasingly central to large digital experience wins.

The Firefly Foundry example cited – a media and entertainment customer whose annual spend expanded from about $10 million to roughly $17 million via Foundry and services – illustrates Adobe’s thesis: AI‑driven content automation can materially enlarge account value without relying solely on seat counts or list‑price hikes.

FY26 guide: slower ARR growth, higher scale

Management’s FY26 outlook pairs continued double‑digit growth with an implicit acknowledgment that growth rates are moderating at scale.

For FY26, Adobe is targeting:

• Total revenue of $25.9–$26.1 billion, a high‑single‑ to low‑double‑digit increase.
• Total ending ARR growth of 10.2%, versus 11.5% in FY25. On a dollar basis, this implies roughly $2.6 billion in net new ARR, the largest starting‑year ARR guide Adobe has issued.
• Business professionals and consumers subscription revenue of $7.35–$7.4 billion.
• Creative and marketing professionals subscription revenue of $17.75–$17.9 billion.
• Non‑GAAP operating margin of ~45%, with GAAP and non‑GAAP tax rates of approximately 20.5% and 18%, respectively.
• Non‑GAAP EPS of $23.30–$23.50, up from $20.94 in FY25; GAAP EPS of $17.90–$18.10.

For Q1 FY26, the company guides to revenue of $6.25–$6.3 billion, GAAP EPS of $4.55–$4.60, and non‑GAAP EPS of $5.85–$5.90, with a non‑GAAP operating margin of about 47%.

Notably, the guidance excludes any contribution from Semrush, whose closing is expected in 2026, subject to regulatory approvals.

For investors, the core message is that Adobe is now treating AI as both a driver of customer acquisition (via freemium and LLM integrations) and a usage meter that can push higher yields from existing customers. FY25’s numbers suggest that this hybrid of seat‑plus‑consumption economics is starting to show up in ARR and cash flow, even as headline ARR growth decelerates modestly from the low‑teens to around 10%.