Morning Note: Market News and Adobe
Market News
US Markets were weaker on Friday as events in the Middle East continued to dominate headlines. The S&P 500 closed 5,976.97 -68.29 (-1.13%) although futures indicate a modestly positive start to the weak despite the continued fighting over the weekend. Oil rose as some energy assets in Iran were targeted, sparking concern that the escalation will disrupt energy supplies. Japanese stocks climbed on a weaker yen.
Israel temporarily knocked out a natural gas processing facility Saturday linked to the giant South Pars field, Iran’s biggest, and targeted fuel storage tanks. Donald Trump vetoed an Israeli plan to kill Iran’s Ayatollah Ali Khamenei, a senior US official said. The two sides may need to “fight it out” before they’re ready to broker a peace deal, the president said.
China retail sales growth in May rose at the fastest pace since December 2023 and exceeded estimates, offsetting a slowdown in the expansion of industrial output. New-home prices fell the most in seven months.
Trump held a military parade on Saturday marking 250 years of the US Army as protesters marched against his administration in hundreds of cities.
Corporate: Kering is set to appoint Renault head Luca de Meo as its next CEO. Nissan’s CEO told Nikkei the automaker would sell some of its Renault shares. Santos’ shares surged after Adnoc made a $18.7 billion takeover bid. Airbus is near a deal to sell around 40 A220 jets to Poland’s LOT, Reuters reported.
Emmanuel Macron offered to help improve the security of Greenland, which he said was “subject to preying ambitions.”
Adobe Q2 Results
On 12 June 2025, Adobe released its quarterly results for the period ending 30 May 2025, surpassing market expectations and increasing its guidance for the full year. The results were driven by accelerating traction in the company’s generative AI tools, prompting a rise of in Adobe shares during after-hours trading.
Adobe delivered record quarterly revenue of $5.87 billion, representing an 11% increase year-over-year and exceeding the $5.79 billion expected by analysts. This performance was supported by strong demand across its Digital Media, Document Cloud, and Experience Cloud businesses.
The Digital Media division, which remains Adobe’s largest segment, brought in $4.35 billion in revenue, an 11% increase from the same period last year (or 12% in constant currency). Annualised Recurring Revenue (ARR) for Digital Media grew 12.1% year-over-year, ending the quarter at $18.09 billion. Meanwhile, the Digital Experience segment also showed robust growth, with revenue rising 10% year-over-year to $1.46 billion.
On the bottom line, Adobe reported non-GAAP diluted earnings per share of $5.06, up approximately 13% from $4.48 a year ago and ahead of consensus forecasts by around $0.10. On a GAAP basis, earnings per share came in at $3.94. The company maintained strong profitability, with non-GAAP operating income reaching $2.67 billion, consistent with Adobe’s typical mid-40s operating margin range.
Adobe continues to generate significant cash flows. The company produced $2.19 billion in operating cash flow during the quarter and closed the period with $4.93 billion in cash and $782 million in short-term investments. The company also returned capital to shareholders through the repurchase of approximately 8.6 million shares under its existing buyback programme.
A key theme this quarter was the increasing monetisation of Adobe’s artificial intelligence capabilities. Management attributed part of the outperformance to rising customer adoption of generative AI offerings, including Firefly, Acrobat AI Assistant, and integrated features powered by partnerships with OpenAI and Google. AI-related ARR is now reportedly tracking ahead of Adobe’s $250 million target for the fiscal year, indicating solid early engagement from both consumers and enterprise users.
Given the momentum, Adobe raised its full-year guidance. It now expects total revenue to fall in the range of $23.50 billion to $23.60 billion, compared to the previous guidance of $23.30 billion to $23.55 billion. Non-GAAP earnings per share are now forecast to be between $20.50 and $20.70, up from the prior estimate of $20.20 to $20.50.
For the upcoming third quarter, ending 31 August 2025, Adobe is projecting revenue of $5.875 billion to $5.925 billion. Non-GAAP EPS is expected to come in between $5.15 and $5.20. Segment-specific forecasts include Digital Media revenue between $4.37 billion and $4.40 billion, and Digital Experience revenue between $1.45 billion and $1.47 billion.
Despite these positive figures, the stock gave up some of its gains in subsequent trading sessions. Some investors expressed concern that Adobe’s AI monetisation may take longer to materially impact growth, and that the long-term contribution of these new tools remains uncertain. While ARR continues to grow steadily, the company did not raise its forecast for Digital Media ARR, which may have tempered some of the initial optimism.
In summary, Adobe posted a strong second quarter with record revenue and earnings per share, supported by healthy growth across core segments and increasing adoption of AI-driven features. The raised full-year outlook reflects management’s confidence in maintaining momentum. However, some investors remain cautious, watching closely for more concrete signs that AI-related revenue streams will accelerate meaningfully in the quarters ahead.
