Adobe earnings could move shares over 8% on Thursday

• Adobe set to release Q1FY25 earnings after US markets close Wednesday
  
  
• Adobe expected to post slowest sales growth in 2 years
  
  
• Investors and analysts to assess whether Firefly gives Adobe an AI edge over competitors
  
  
• Wall Street predicts almost 30% more upside for Adobe shares over next 12 months
   
• Adobe forecasted to move 8.2% up/down when US markets reopen Thursday

Adobe is scheduled to release earnings from the first quarter of its 2025 fiscal year soon.

After US markets close on Wednesday, March 12th, this software giant is expected to report these key numbers for the 3 months ending 28th February 2025:

• Revenue: US$ 5.66 billion
  (9.2% year-on-year growth; if so, this would be its slowest sales growth in 2 years)
   
• Net income: US$ 2.2 billion
  (38.6% margin)
   
• Earnings per share (EPS): US$ 4.97
  (48.6% year-on-year growth)

Beyond the above figures, markets are set to pay greater heed to Adobe’s Firefly product. 

What is Adobe Firefly?

This product helps users create images and audio, translate speech, and generate 5-second videos using generative AI.

Adobe has been adding such generative AI features into its suite of applications, including Photoshop.

Adobe’s customers likely used Firefly more than 18 billion times through end-February 2025, which would be double from the 9 billion use-instances until June 2024.

Note that each 5-second video currently costs the user about $0.40 - $0.50, depending on their plan.

More importantly for investors, traders, and analysts …

Adobe’s Firefly numbers will be interpreted as it relates to the closely-watched metric: Digital Media net new annual recurring revenue.

This important metric is estimated to come in at:

• US$ 395.2 million for Q1FY25
  
  
• US$ 456.6 million for Q2FY25

At its previous (Q4FY24) earnings announcement back in December, the company already expressed its expectations for 11% growth in the full fiscal 2025 year for its Digital Media annual recurring revenue.

Note that 11% annual growth in 2025 for this segment would be slower than last year’s 13% growth.

Markets are eager to find out how much Adobe can grow its earnings through its generative AI offerings ...

and if Firefly gives Adobe enough of an edge against other AI-powered distributors, such as OpenAI and Runway.

Otherwise, disappointing growth for this segment may lead to yet another post-earnings slump for Adobe shares.

Adobe shares moving sideways leading up to earnings

For context, although this stock is 37% below its highest-ever closing price of $688.37 posted on 19th November 2021, it’s held relatively stable so far in 2025.

Adobe’s stocks have been bouncing off the critical $432 support since the second half of January, while to the upside, a mid-February ascent was resisted around the $464 area.

Adobe has a 2.5% year-to-date drop, which is much shallower compared to the double-digit year-to-date declines for other major US tech stocks:

• Nvidia: -19%
  
  
• Alphabet: -13.3%
   
• Apple: -11.8%

• Amazon: -10.4%

• Microsoft: -10%

Still, using a longer-term lens

Wall Street expects Adobe’s share price to eventually get close to the $562.00 level over the next 12 months, which represents a potential upside of almost 30%.

Of course, that 12-month median target price is likely to be altered post-earnings: another key number to look out for.

Post-earnings reaction: Higher high? Or new 2025 low?

Markets currently predict that Adobe’s stock price could move 8.2% up or down when US markets reopen on Thursday.

• An 8.2% move to the upside, as measured from Tuesday’s closing price of $433.82, could see Adobe opening Thursday’s cash session around $469.39.

Breaking above its mid-February peak would mark a higher high in this stock’s quest to stage a rebound since its year-to-date low of $404.18 back in mid-January.

• An 8.2% move to the downside, as measured from Tuesday’s closing price of $433.82, could see Adobe opening Thursday’s cash session below the psychological $400 line and post a new year-to-date low around $398.25.

Traders, are you ready?

For the immediate term, Adobe’s post-earnings reaction could also be amplified, with broader stock markets rocked of late by rising global economic fears.

Hence, we wouldn’t be surprised by a larger-than-usual move for Adobe’s stock prices this week.

And that, in turn, could present an outsized opportunity for traders who remain alert and are ready to act.