What Happened?

Shares of creative software maker Adobe (NASDAQ: ADBE) fell 5% in the afternoon session after the company reported underwhelming second quarter 2025 (fiscal Q2) results, which failed to impress Wall Street. Recent price hikes to better monetize its AI offerings failed to improve the growth momentum, which remained range-bound in the low double-digit range. Notably, remaining performance obligations (RPO - key growth indicator) also fell below Wall Street's estimates. 

On the other hand, Adobe beat analysts' billings, revenue, EPS, and adjusted operating income expectations this quarter and it lifted its full-year revenue and EPS guidance. 

Still, markets were expecting more, given the potential of its cloud and AI bets, especially after it reiterated Digital Media (houses the Creative Cloud component) ARR guidance.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Adobe? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Adobe’s shares are not very volatile and have only had 6 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 12 months ago when the stock gained 17% on the news that the company reported a “beat and raise” quarter. First-quarter earnings results beat analysts' revenue, remaining performance obligations (RPO – leading revenue indicator), and EPS expectations. These beats were driven by massive outperformance in its net new Digital Media ARR (annual recurring revenue), which clocked in at $487 million (vs estimates of $434 million). Thanks to the strong results, Adobe upgraded its full-year net new Digital Media ARR and EPS guidance, sending the stock price higher. Its revenue guidance for next quarter missed Wall Street's estimates, but that didn't matter too much because the market cares most about its digital media segment. 

Overall, this was a great quarter that put a big dent in the bear argument that ADBE’s best days are behind it due to increased competition.

Adobe is down 11.8% since the beginning of the year, and at $389.13 per share, it is trading 33.7% below its 52-week high of $586.55 from September 2024. Investors who bought $1,000 worth of Adobe’s shares 5 years ago would now be looking at an investment worth $969.57.

Do you want to know what moves the business you care about? Add them to your StockStory watchlist and every time a stock significantly moves, we provide you with a timely explanation straight to your inbox. It’s free and will only take you a second.