Adobe (NASDAQ; ADBE) recently announced its fiscal first quarter results for the period ending February 2025, reporting earnings of $5.08 per share on revenues of

Adobe’s decline was mainly due to its disappointing forward guidance. Q2 revenue forecast came in at $5.77–$5.82 billion vs. the consensus of $5.8 billion. Investors were likely spooked as the lower end of the guidance still implies a chance of Adobe missing expectations.

Not only that, but Adobe reported $2.5 billion in positive free cash flow for the quarter, twice last year's $1.2 billion, and 36% more than reported net income. By these metrics, the quarter looked exceptionally strong, and earnings quality at Adobe was very good.

What Happened? Shares of creative software maker Adobe (NASDAQ:ADBE) fell 13.2% in the morning session after the company reported underwhelming fourth-quarter (fiscal Q1 2025) results, as remaining performance obligations (RPO - leading growth indicator) fell short of analysts' estimates.