I’m still bearish on Adobe after this earnings report. Yes, revenue grew about ten percent year over year and ARR ended the year roughly eleven percent higher, but the way they achieved that growth raises real concerns. For the first time in recent memory Adobe did not disclose net new user or net new ARR additions in the release. They normally highlight that metric when it is strong. Leaving it out right when they are pushing higher pricing across Creative Cloud and charging for generative AI credits looks intentional. If user growth were healthy they would have said so.
What they did report makes the picture clearer. Digital Media revenue rose, but almost all of the lift came from higher average revenue per customer. The company recently increased subscription prices and shifted customers onto more expensive AI enabled plans. That explains why revenue and ARR are up even though they chose not to show how many new users they added. It strongly suggests that the growth came from charging the existing base more, not from expanding the base itself.
That strategy can work for a few quarters but it is not sustainable in a market where capable AI based creative tools are becoming dramatically cheaper. Many customers could get similar results at a fraction of Adobe’s pricing if they switched. If user growth is slowing while ARPU rises, eventually the math breaks. When that becomes clearer in future reports the stock will have a harder time justifying its current valuation. That is why I remain bearish here despite the headline beats.