Preview — Barron's

The recent Costco COST and AutoZone AZO quarterly releases kick-started the 2025 Q1 earnings season. We have another four S&P 500 members on deck to report Q1 results this week, including Oracle ORCL on Monday, March 10th, and Adobe ADBE on Wednesday, March 12th.

The earnings reports from Costco and AutoZone, as well as this week’s reports from Oracle and Adobe, are for their respective fiscal quarters ending in February, which we and other research organizations count as part of the overall March-quarter, or Q1 tally. By the time the big banks come out with their quarterly results about a month from now, we will have such Q1 results from almost two dozen S&P 500 members.

Regular readers of our earnings commentary are familiar with our favorable view of corporate profitability. The growth pace has been steadily accelerating in recent quarters, with the preceding quarter’s +14.6% earnings growth rate (+17.3% on an ex-Energy basis) reaching its highest level in three years.

We believe these favorable growth trends will remain in place in the current and coming quarters, with the sectors contributing to the growth momentum expanding beyond the Tech core of the last couple of years.

We are mindful of the potential negative macroeconomic effects of policy uncertainty, which appears to have also started showing up in some of the sentiment measures. The guidance downgrades from several retailers in recent days, where they cited tariffs and other sources of uncertainty, could very well be an early sign of a downshift in the earnings picture. We have been experiencing a relatively elevated magnitude of negative revisions to estimates for the current period (2025 Q1) even before the more recent signs of weakness in data, as we will share here a little later.

The expectation is that Q1 earnings will be up +6.2% from the same period last year on +3.8% higher revenues, which would follow the +14.6% earnings growth on +5% revenue gains in the preceding period.

The chart below shows current earnings and revenue growth expectations for 2025 Q1 in the context of where growth has been over the preceding four quarters and what is currently expected for the following three quarters.

Adobe ADBE is set to report its first-quarter fiscal 2025 results on March 12.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

For first-quarter fiscal 2025, Adobe projects total revenues between $5.63 billion and $5.68 billion. The company expects non-GAAP earnings between $4.95 per share and $5 per share.

The Zacks Consensus Estimate for revenues is pegged at $5.65 billion, suggesting growth of 9.11% from the year-ago quarter’s reported figure. The consensus mark for earnings has been unchanged at $4.97 per share over the past 30 days, indicating 10.94% growth from the figure reported in the year-ago quarter.

ADBE’s earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average earnings surprise being 2.59%.

Adobe Inc. Price and EPS Surprise

Adobe Inc. price-eps-surprise | Adobe Inc. Quote

Let us see how things have shaped up for ADBE shares prior to this announcement.

ADBE’s Q1 Segmental View is Encouraging

For the first quarter of fiscal 2025, Adobe expects Digital Media segment revenues between $4.17 billion and $4.2 billion.

The Zacks Consensus Estimate for Digital Media segment revenues is pegged at $4.18 billion, suggesting a 9.6% year-over-year growth. The consensus estimate for Creative Cloud revenues stands at $3.33 billion, indicating 8.5% year-over-year growth. Document Cloud’s consensus estimate for revenues is pegged at $855 million, implying 14% growth from the year-ago quarter’s reported figure.

Digital Experience segment revenues are anticipated to be $1.38-$1.40 billion. Experience Subscription revenues are expected to be $1.27-$1.29 billion.

The consensus mark for Digital Experience revenues is pegged at $1.40 billion, indicating 8.5% year-over-year growth. The Zacks Consensus Estimate for Digital Experience subscription revenues is pegged at $1.29 billion, indicating 10.8% year-over-year growth.

Factors to Note Prior to ADBE’s Q1 Earnings

Adobe’s strong Generative AI (GenAI) portfolio and a rich partner base, which includes the likes of Amazon AMZN, Microsoft MSFT and Alphabet GOOGL, are expected to have driven its top-line growth in the fiscal first quarter.

Adobe expanded its GenAI portfolio with the launch of Firefly Image Model 3, enhancements to vector models, richer design models and the all-new Firefly video model. The deep integration of these models into Adobe’s tools, such as Lightroom, Photoshop, Premiere, InDesign and Express, has improved the experiences for creative professionals globally. Firefly generations now have crossed 16 billion cumulative generations.

Strong Adobe Express adoption by businesses is noteworthy. The increasing number of integrations into leading social, productivity and collaboration apps like ChatGPT, Google, Slack, Wix, Box, Hubspot and Webflow significantly increases Adobe Express’ customer reach.

Adobe’s Document Cloud AI Assistant is now available in Acrobat across desktop, web and mobile, and integrated into Chrome, Microsoft Teams and Edge extensions. Adobe GenStudio, which integrates Express, Firefly, Workfront, Experience Manager, Customer Journey Analytics and Journey Optimizer, is riding on strong adoption in the content supply chain for enterprises.

These factors are expected to have driven first-quarter fiscal 2025 results amid stiff competition and the sluggish monetization rate of Adobe’s GenAI solutions.

ADBE Shares Lag Sector in a Year

In the trailing 12-month period, Adobe shares have declined 20%, underperforming the broader Zacks Computer and Technology sector’s return of 11.1% and the Zacks Computer Software industry’s appreciation of 0.7%.

ADBE Stock’s Performance

(16:50 GMT) Adobe Price Target Cut to $550.00/Share From $590.00 by RBC Capital

President Donald Trump's administration is considering various measures to limit the use of Chinese artificial intelligence startup DeepSeek, including a ban of the chatbot from government devices due to national security concerns, the Wall Street Journal reported Friday citing people close to the matter.

US officials voiced concern on how DeepSeek handles user data since the company said it stores the data on Chinese servers, according to the people.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)