Adobe (ADBE) reports earnings after the bell today as the AI cycle seems to be shifting downstream. Nvidia (NVDA) and other chipmakers are limiting gains after a remarkable run, but cloud services providers like Oracle (ORCL) are next in line for massive jumps.

Where does Adobe belong in the downstream? Will it be step 3 in the cycle?

Certainly, Adobe is adopting AI into its product suite. Adobe’s revenue primarily comes from subscriptions to its digital media services. Its Creative Cloud suite encompasses Photoshop for image editing, InDesign for web layouts, Premiere Pro for video editing, and more services for hardworking creatives of all stripes. Its programs are household names, and it dominates its field.

But some may ask, do you still need an expensive Photoshop subscription when free editing apps and AI image generators can do similar tasks? The moat that Adobe had, with licensed images and prebuilt templates, could be slipping.

Even its own adoption of AI could wind up being problematic – though not specific to Adobe, there are many copyright lawsuits winding their way through the courts right now over how AI technology uses images and other creative works. Adobe may be able to head this off – it has said that it won’t train AI using users’ content and allowed users to opt out of content analytics.

As upstart competitors flood in, Adobe is also facing lawsuits over its subscription practices, the heart of its business. In 2024, the FTC alleged Adobe deceived consumers with the terms of their subscription plans and made it difficult for customers to cancel.

These are all storms on the horizon, but traders should pay close attention to Adobe’s guidance this quarter.

Zacks expects ADBE to report EPS of $5.17 (+11% vs last year) and revenue of $5.90 billion (+9% vs last year) for 3Q25. The options market is implying a +/- $30 move, or around 8.5%, so we could see a big swing either way.

Is Adobe nimble enough to adapt in this fast-changing landscape, or will the behemoth begin to lose its grip?

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