Morning Note: Market News and an update from Adobe.

Market News

US CPI came in at 2.9% for August, in line with expectations. The core reading was 3.1%, in line with the previous month. Initial jobless claims came in at 263k, just above the 235k forecast, to the highest in nearly four years, aligning with the pessimistic data of late. The futures market is currently pricing in four straight quarter-point rate cuts through to January. Treasuries were little changed – the 10-year currently yields 4.04% – while gold remains firm at $3,650 an ounce. Gold has now passed its inflation-adjusted record high set in 1980.

Treasury Secretary Scott Bessent will meet Chinese Vice Premier He Lifeng in Madrid to discuss trade, TikTok, and other issues. Separately, the FT reported the US will pressure G-7 countries to hit India and China with sharply higher tariffs for buying Russian oil.

US equities moved high last night – S&P 500 (+0.9%); Nasdaq (+0.7%) – setting new all-time highs a record, on hopes of a Fed rate cut next week. In Asia this morning, gains in Japan (Nikkei 225, +0.9%) and Hong Kong (Hang Seng, +1.2%) outweighed a mixed day for mainland Chinese stocks (Shanghai Composite, -0.1%).

The FTSE 100 is currently 0.3% higher at 9,324, while Sterling trades at $1.3565 and €1.1550. Sam Altman and Nvidia’s Jensen Huang will announce billions of investments in UK data centers next week, people familiar said.

Brent Crude fell back to $65.50 a barrel, pressured by concerns over softening US demand and a supply glut. US crude inventories unexpectedly rose by 3.9m barrels last week, defying expectations for a drawdown. Newcastle coal futures dropped below $101 per tonne in mid-September, marking an over three-month low as sluggish global demand weighed on prices. 

Source: Bloomberg

Company News

Last night, Adobe released results for the third quarter of its financial year to end November 2025. The figures were a touch ahead of market expectations, a relief given the concern about potential AI headwinds going into the results. Guidance was the full year was raised as a result of strong demand for its design software and increased monetisation of its AI tools. In response, the shares rose 3% in after-hours trade.

Adobe is a global software company best known for the Acrobat product, considered the gold standard for creating, editing, scanning, signing, and sharing digital documents. The company generates annual revenue of more than $21bn through a recurring revenue model with real-time visibility – subscriptions account for more than 95% of the total. As a result, the business tends to be fairly resilient during economic downturns.

The group believes every disruptive technology has presented opportunities for Adobe to innovate and increase its addressable market opportunity. This has been true for cloud computing, mobile, as well as AI. The company estimates it has an addressable market of more than $200bn, leaving it well positioned for significant growth in the years ahead with its industry-leading products and platforms.

The company has introduced multiple generative AI models in the Adobe Firefly family including Imaging, Vector, Design, and most recently Video. However, there is increased competition, with smaller firms such as Figma eager to capture market share.

During the latest quarter, revenue grew by 10% in constant currency to a record $5.99bn, a touch above the market forecast of $5.91bn. Growth was driven by strong demand across Creative Cloud, Document Cloud, and Experience Cloud.

Digital Media is the group’s largest division, accounting for 74% of revenue. During the quarter, revenue grew by 11% to $4.66bn. Net new Digital Media Annualised Recurring Revenue (ARR) grew by 11.7% to $18.59bn. The AI-influenced ARR has now surpassed $5bn, up from over $3.5bn at the end of last year.

Digital Experience grew by 9% to $1.48bn, while the smallest division, Publishing & Advertising, fell by 16% to $50m.

The company earns very high operating margins, in the mid-40s, although in the latest quarter, the margin was down a touch at 46.3%. EPS grew by 14% to $5.31, better than the $5.18 expected by the market.

The business is very cash generative, with $2.2bn generated in the latest quarter, and the group ended the period with a small net debt position. The group repurchased $2.5bn of its shares during the quarter, leaving $8.4bn remaining on the current $25bn programme.

Adobe nudged up its guidance for FY2025. Revenue is now expected to be between $23.65bn-$23.70bn (vs. $23.50bn-$23.60bn previously), while EPS is expected to hit $20.80-$20.85 (up from $20.50-$20.70 previously).

Source: Bloomberg