EPS of $3.80 increased by 17.2% from previous year
Gross margin of 89.0%
Net income of 1.68B
"Shantanu Narayen: "2024 was a year of records for Adobe, with a strong focus on AI innovations shaping our trajectory for growth."" - Shantanu Narayen
In Q4 2024, Adobe Inc reported a revenue of $5.61 billion, representing a year-over-year increase of 11%. The digital media business achieved record net new Annual Recurring Revenue (ARR) of $578 million. Management highlighted strong AI-driven growth across products, particularly with Adobe Firefly, which contributed to a cumulative total of 16 billion content generations. This quarter also marked the culmination of a remarkable fiscal year, with total revenues reaching $21.51 billion, driven by robust performance in both digital media and experience segments. The management expressed confidence in the growth trajectory for FY2025, introducing guidance of $23.30 billion to $23.55 billion in revenue, supported by innovative solutions and integrations in AI and content generation.
Key Performance Indicators
Revenue
5.61B
QoQ: 3.66% | YoY:11.05%
Gross Profit
4.99B
89.01% margin
QoQ: 2.80% | YoY:13.05%
Operating Income
1.96B
QoQ: -1.76% | YoY:12.28%
Net Income
1.68B
QoQ: -0.06% | YoY:13.49%
EPS
3.82
QoQ: 1.06% | YoY:17.18%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $5.61 billion (11% YoY growth)
Digital Media Revenue: $4.15 billion (12% YoY growth)
Net New Digital Media ARR: $578 million (record for Adobe)
Digital Experience Revenue: $1.40 billion (10% YoY growth)
Gross Profit Margin: 89% (YoY steady)
Financial Highlights
- Revenue: $5.61 billion (11% YoY growth)
- Digital Media Revenue: $4.15 billion (12% YoY growth)
- Net New Digital Media ARR: $578 million (record for Adobe)
- Digital Experience Revenue: $1.40 billion (10% YoY growth)
- Gross Profit Margin: 89% (YoY steady)
- Operating Income: $1.96 billion (12% YoY growth)
- EPS: $3.79 GAAP, $4.81 Non-GAAP (GAAP up 17% YoY, Non-GAAP up 13% YoY)
- Cash flow from operations: $2.92 billion
Management commented on the implications of AI innovations, marking the transformative shifts in both Creative and Document Cloud segments, driving unprecedented levels of user engagement and product adoption.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
5.61B
11.05%
3.66%
Gross Profit
4.99B
13.05%
2.80%
Operating Income
1.96B
12.28%
-1.76%
Net Income
1.68B
13.49%
-0.06%
EPS
3.82
17.18%
1.06%
Key Financial Ratios
currentRatio
1.07
grossProfitMargin
89%
operatingProfitMargin
34.9%
netProfitMargin
30%
returnOnAssets
5.57%
returnOnEquity
11.9%
debtEquityRatio
0.43
operatingCashFlowPerShare
$6.62
freeCashFlowPerShare
$6.51
priceToBookRatio
16.13
priceEarningsRatio
33.8
Net Income vs. Revenue
Expense Breakdown
Management Commentary
- AI Innovations: Shantanu Narayen emphasized, "We had several new milestones with our AI innovations enabling us to add more than $2 billion in digital media net new ARR."
- Growth Strategy: David Wadhwani stated, "AI Assistant and other AI features like liquid mode and Firefly are accelerating productivity through faster insights, smarter document editing, and integrated image generation."
- Market Expansion: Anil Chakravarthy noted, "The market opportunity for customer experience management is large and growing, with both B2B and B2C companies selecting Adobe as their strategic partner."
These insights showcase Adobe's strategic focus on AI to enhance productivity and operational efficiencies across its platforms.
Shantanu Narayen: "2024 was a year of records for Adobe, with a strong focus on AI innovations shaping our trajectory for growth."
â Shantanu Narayen
David Wadhwani: "Our continued investment in AI is driving productivity not only for our enterprise clients but also for individual users through enhanced usability and features."
â David Wadhwani
Forward Guidance
Management has set an optimistic outlook for FY2025, targeting revenues between $23.30 billion and $23.55 billion, with a guidance for digital media segment revenue of approximately $17.25 billion to $17.40 billion. The company expects a net new Digital Media ARR growth rate of 11% YoY, supported by the success of AI-driven enhancements and continued adoption of subscription products. Key monitoring factors for investors will be the performance of Adobe's AI innovations and the ongoing transition from traditional to subscription-based models.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ADBE Focus
89.01%
34.90%
11.90%
33.80%
CRWD
74.10%
-8.06%
-2.81%
-266.29%
SPLK
84.90%
32.60%
57.60%
15.20%
PLTR
78.90%
1.33%
1.58%
551.58%
ZS
78.00%
-4.55%
-1.17%
-450.80%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Adobe's strong fundamentals, impressive revenue growth, and innovative approach to integrating AI into its core offerings suggest a robust investment outlook. The company's proactive measures to introduce tiered pricing and leverage generative capabilities position it favorably within the competitive landscape. However, investors should remain vigilant to monitor the execution of these strategies and their impact on revenue growth, particularly as Adobe navigates through potential market uncertainties.
Key Investment Factors
Growth Potential
Adobe remains well-positioned in the fast-paced software market, leveraging its market-leading creative tools and the increasing importance of AI functionalities in driving customer engagement and productivity. The introduction of tiered pricing models and new product offerings will likely aid growth in the coming year.
Profitability Risk
Primary risks include market competition from other AI-enabled creative platforms and shifts in customer preferences, particularly in response to pricing strategies. Additionally, potential economic downturns could impact corporate spending on software tools.
Financial Position
Adobe maintains a strong balance sheet with a cash and short-term investments balance of $7.89 billion and robust cash flow generation. The company's RPO stood at $19.96 billion, indicating strong contract backlog and revenue visibility.
SWOT Analysis
Strengths
Strong brand recognition and trust in creative software solutions
Market leader in digital media and increasing presence in AI
Diverse revenue streams from multiple business segments
Weaknesses
High reliance on digital media subscriptions can limit flexibility in pricing
Potential slow adoption of new tiered pricing models in some segments
Opportunities
Growing demand for AI-driven creative tools in both B2B and B2C markets
Expansion into new markets and industries through innovative solutions and collaborations
Threats
Intense competition from emerging technologies and rival platforms