Pre-Earnings Brief - Adobe Inc. (ADBE) and Li Auto Inc. (2015.HK) - Mar 11, 2026

Editor’s Note

• These pre-earnings briefs are meant to save you time before the call. Ahead of reports from Adobe and Li Auto, the goal is simply to surface the few numbers that actually move the stock. Instead of digging through multiple notes, this pulls together the key metrics, where expectations sit, and what would realistically count as a beat or miss.
• Adobe’s results could say a lot about the broader SaaS trade right now. The stock has already fallen sharply from its peak as investors debate whether generative AI strengthens the platform or starts eating into traditional software pricing models. What management says about AI monetization, ARR growth, and margins may not just move Adobe, but could shape how investors think about the entire software sector’s AI transition.
• Li Auto is a useful read-through for the EV price war in China.
  The company went from one of the industry’s most profitable players to suddenly defending margins and adjusting strategy. How Li Auto talks about deliveries, discounts, and its shift back toward EREV models should give a clearer sense of how brutal the competitive environment really is for Chinese EV makers right now.

Adobe Inc. (ADBE)

Adobe Inc. (ADBE) is scheduled to report its Q1 FY2026 earnings on March 12, 2026. Key investor focus will be on the company's ability to exceed its consensus revenue of $6.28 billion and non-GAAP EPS of $5.88, alongside Digital Media ARR growth targets. Historically, Adobe's management provides conservative guidance, often leading to beats. The earnings call will clarify the impact of AI monetization, operating expenses related to AI R&D, and Adobe's strategy to defend its market position against increasing competitive pressures.

Upcoming Earnings

• Expected reporting date: March 12, 2026 (after market close)
• Format: Call + slides / webcast

Consensus Setup

• Revenue: $6.28 billion (Q1 FY2026 guidance: $6.25 billion to $6.30 billion)
• EPS (Non-GAAP): $5.88 (Q1 FY2026 guidance: $5.85 to $5.90)
• Key margin line (Non-GAAP Operating Margin): ~45% (Q1 FY2026 guidance: ~47%)
• Any guidance items management has already pre-signaled:
  • FY2026 Total Adobe ending ARR to grow over 10%
  • FY2026 Total Revenue: $25.90 billion to $26.10 billion
  • FY2026 Non-GAAP EPS: $23.30 to $23.50

Key Metrics That Will Drive the Stock

Total Adobe Revenue

Consensus: $6.28 billion | Beat threshold: >$6.30 billion | Miss threshold: <$6.25 billion

Why it matters this quarter: This is the primary indicator of overall business health and market demand, crucial for assessing the impact of AI initiatives and competitive pressures on top-line growth.

Historical pattern: Adobe has consistently beaten its quarterly revenue guidance in the last 7 reported quarters where guidance was provided, averaging a +0.8% beat above the high end of its own range.

Guidance credibility: Sandbagging — Management reliably provides conservative revenue guidance.

Non-GAAP EPS

Consensus: $5.88 | Beat threshold: >$5.90 | Miss threshold: <$5.85

Why it matters this quarter: As a key profitability metric, this reflects operational efficiency and the effectiveness of AI monetization strategies amidst rising R&D costs.

Historical pattern: Management has consistently beaten its non-GAAP EPS guidance in the last 7 quarters (excluding a significant outlier in Q1 FY24), averaging a +1.9% beat above the high end of its own range.

Guidance credibility: Sandbagging — EPS guidance is typically conservative, leading to consistent beats.

Digital Media Ending ARR Growth (YoY)

Consensus: ~10.2% | Beat threshold: >10.5% | Miss threshold: <10.0%

Why it matters this quarter: This metric is a forward-looking indicator of recurring revenue and the health of Adobe's core creative business, heavily influenced by the adoption and monetization of AI features like Firefly.

Historical pattern: Adobe's Digital Media ending ARR growth has shown strength, achieving 11.5% YoY growth in FY2025 and 11.7% in Q3 FY2025. Management typically sets achievable ARR targets.

Guidance credibility: In-line to Sandbagging — Management usually sets realistic ARR growth targets, often meeting or slightly exceeding them.

Non-GAAP Operating Margin

Consensus: ~45% | Beat threshold: >45.5% | Miss threshold: <44.5%

Why it matters this quarter: This reflects the balance between revenue growth and increased operational expenses, particularly intense AI R&D and GPU infrastructure costs.

Historical pattern: Management has consistently guided to a tight operating margin range, typically around 45.5%-47%. While exact actuals versus guidance aren't consistently detailed, current analyst consensus of ~45% for Q1 FY26 (compared to management's Q1 FY26 guidance of ~47%) suggests increased scrutiny on AI-related cost impacts.

Guidance credibility: In-line, but with increasing market skepticism — Management provides clear margin targets, but the market is now factoring in potential headwinds from AI investments.

Surprise Scenarios

Genuine Positive Surprise

• Accelerated AI Monetization: Digital Media NNARR significantly exceeds expectations, driven by higher ARPU from Firefly premium tiers, successful enterprise GenStudio contracts, or stronger-than-anticipated conversion from freemium AI tools, signaling that AI is a net revenue driver not just a cost.
• Robust Full-Year Guidance Raise: Management raises FY2026 revenue and EPS guidance above the pre-signaled ranges by a material amount (e.g., >2-3%), indicating strong confidence in AI tailwinds and competitive differentiation.
• Strategic M&A/Partnership Breakthrough: Announcement of a major, market-differentiating AI partnership or an expedited, highly synergistic closing of the Semrush acquisition that addresses competitive concerns and provides a clear path to new growth.

Genuine Negative Surprise

• AI Commoditization Impacts Growth: Digital Media ARR growth falls notably below 10%, coupled with weak commentary on pricing power or increased customer churn due to the rise of free/cheaper AI alternatives (e.g., OpenAI's Sora, Canva, Figma).
• Material Margin Compression: Non-GAAP operating margin misses expectations significantly, attributed to higher-than-anticipated AI R&D, GPU infrastructure costs, or pricing pressure not offset by revenue gains.
• Heightened Competitive Concerns: Management acknowledges a worsening competitive landscape, indicating sustained market share loss or a delayed/ineffective response to competitive AI offerings, casting doubt on Adobe's long-term moat.
• Regulatory/Legal Headwinds: Any new or escalating regulatory scrutiny or legal challenges regarding AI training data or content authenticity that could impact enterprise adoption or add significant compliance costs.

Management Credibility Verdict

Overall Credibility: HIGH

Adobe's management team has consistently demonstrated a conservative guidance approach, routinely beating their own revenue and EPS targets across multiple quarters. This "sandbagging" behavior instills confidence in their ability to manage expectations. While recent market sentiment has turned more skeptical due to AI competition, management has been proactive in integrating AI into core products and outlining strategies, albeit without always providing granular monetization metrics to fully assuage investor concerns. Their candid communication regarding events like the Figma acquisition termination fee further underscores their transparency.

Recent Developments (Last 14 Days)

• 2026-03-06 Sell-side Rating Action (BNP Paribas): BNP Paribas maintained Neutral but significantly reduced its price target from $370 to $275, signaling increased analyst caution on Adobe's outlook.
• 2026-03-05 Sell-side Estimates Action (Baird): Baird raised Adobe's price target to $630, citing strong 2026-2027 AI revenue guidance above consensus, providing a counter-narrative to the prevailing AI-driven bearishness.
• 2026-03-04 Sell-side Target Price Action (Consensus): The average 12-month analyst target price decreased by 10.77% to $396.59, reflecting broader analyst sentiment adjustment.
• 2026-03-04 Competitive Dynamics Change: Multiple reports from the past week explicitly state that "heightened competition from new AI tools... is eroding Adobe's creative-software moat and enabling lower-cost alternatives," posing a "structural risk."
• 2026-03-05 Product Launch Action: Adobe launched mobile versions of Photoshop and Premiere Pro, aiming to expand its user base to include younger creators and freelancers who prefer mobile-first solutions.
• 2026-02-28 Key Opinion Leader Mention: A financial analyst defended Adobe against Generative AI fears, citing a strong economic moat and high defensibility, and indicating a potential long position.

Landmines & Watch Items

• AI Competitive Pressure: Ongoing market anxiety that AI tools from competitors (e.g., OpenAI, Canva, Figma) are eroding Adobe's moat and pricing power, with recent reports highlighting a 57% stock decline from 2025 peak due to these concerns.
• Operating Expense vs. AI ROI: Scrutiny on how escalating AI R&D and GPU costs impact profitability, especially given the disconnect between management's Q1 FY26 operating margin guidance and analyst consensus.

Key Questions for the Call

1. Can management provide a clear breakdown of the contribution of AI-powered features (e.g., Firefly premium, Acrobat AI Assistant paid usage, GenStudio) to net new ARR and ARPU in Q1, and outline the specific growth drivers expected to overcome recent competitive pressures from AI alternatives?
2. Given the mixed analyst sentiment, with some drastically cutting price targets while others raise them due to AI guidance, what is Adobe's updated strategic response to the perception of AI commoditization and how do you plan to defend your competitive moat against lower-cost tools?
3. What is the company's current outlook on Non-GAAP Operating Margin for Q1 and the rest of FY2026, specifically addressing the impact of increased AI infrastructure and R&D investments, and how will these be managed to prevent margin erosion?
4. Beyond the announced integrations, what are the next tangible product developments expected to be released in Creative Cloud and Document Cloud in FY2026 that leverage AI to create indispensable value for users, thereby justifying premium pricing?
5. With the Semrush acquisition expected to close in H1 2026, can you provide an update on its closing timeline and expected integration strategy, specifically detailing how it will enhance the Digital Experience segment and contribute to FY2026 revenue and ARR?

Li Auto Inc. (2015.HK)

Li Auto Inc. (2015.HK) is poised to release its Q4 and Full Year 2025 earnings on Thursday, March 12, 2026, before the U.S. market opens. Key investor focus will be on profitability, as reflected in the consensus revenue of RMB 29.06 billion and EPS of RMB 0.22, alongside critical metrics such as vehicle deliveries (consensus 109,194 units), vehicle gross margin (consensus 16.6%), and the crucial Q1 2026 delivery guidance. The report comes amidst significant challenges, including margin compression, shifts in BEV strategy, and recent bearish analyst sentiment, making the outlook for profitability and future guidance particularly impactful.

Upcoming Earnings

• Expected reporting date: Thursday, March 12, 2026 (before U.S. market open)
• Format: Conference call + webcast (management will host a call at 8:00 A.M. U.S. Eastern Time, with online registration for access details and a live/archived webcast available).

Consensus Setup

The upcoming earnings report covers Q4 and Full Year 2025 results. Management provided guidance for Q4 2025 during the Q3 2025 earnings call.

• Revenue (Q4 2025): Consensus is RMB 29.06 billion (US$4.07 billion). Management guided between RMB 26.5 billion and RMB 29.2 billion.
• EPS / Net income (Q4 2025): Consensus EPS is RMB 0.22 (US$0.03). Consensus Non-GAAP net income is RMB 269 million, while J.P. Morgan estimates a Non-GAAP net income of RMB 135 million and a GAAP net loss of RMB 144 million.
• Key margin line (Vehicle Gross Margin, Q4 2025): Consensus is 16.6% (J.P. Morgan estimates 15.7%). Overall Gross Margin consensus is 17.7%.
• Guidance items already pre-signaled: For Q4 2025, management guided vehicle deliveries between 100,000 and 110,000 units. Consensus (J.P. Morgan "Actual") for 4Q25 deliveries was 109,194 units, comfortably within management's range.

Key Metrics That Will Drive the Stock

Vehicle Deliveries (Q4 2025)

Consensus: 109,194 units | Beat threshold: >110,000 units | Miss threshold: <100,000 units

Why it matters this quarter: This metric is a direct gauge of demand resilience and market share recovery after the Q3 2025 recall of the Li MEGA and general market slowdown.

Historical pattern: Li Auto has a mixed record against delivery guidance. While Q1 2025 deliveries of >92,000 vehicles were within guidance (88,000-93,000), Q3 2025 saw deliveries of 93,211 vehicles fall below the lower end of management's 90,000-95,000 unit guidance, representing a significant 39% YoY decrease. This recent miss suggests a heightened sensitivity to actual delivery performance.

Guidance credibility: Management has been in-line to slightly sandbagging on delivery guidance, but the Q3 2025 miss highlights susceptibility to market shifts and product issues.

Revenue (Q4 2025)

Consensus: RMB 29.06 billion | Beat threshold: >RMB 29.2 billion | Miss threshold: <RMB 26.5 billion

Why it matters this quarter: Revenue indicates pricing power and the overall effectiveness of sales strategies amidst a fiercely competitive environment and recent retail discounts.

Historical pattern: Li Auto has historically sandbagged revenue guidance, beating consensus in 7 out of 8 recent quarters. However, Q3 2025 revenue of RMB 27.4 billion, while within the guided range (RMB 24.8-26.2 billion), represented a significant 36.2% YoY decrease, breaking the pattern of strong beats.

Guidance credibility: Historically strong, but the Q3 2025 performance suggests current conditions may pressure traditional outperformance, shifting to in-line or narrow range adherence.

Vehicle Gross Margin (Q4 2025)

Consensus: 16.6% | Beat threshold: >17.0% | Miss threshold: <16.0%

Why it matters this quarter: This is a critical indicator of the company's profitability in the face of ongoing price wars, retail discounts (Rmb20-40k mentioned by JPM), and product mix changes.

Historical pattern: Vehicle margin has trended downwards from a peak of 22.7% in Q4 2023. Q1 2025 saw 19.8% vehicle margin, but this plunged to 15.5% in Q3 2025 (though it was 19.8% excluding Li MEGA recall costs). Management aimed for ~19% in Q2 2025, but external factors clearly impacted this target.

Guidance credibility: Management has been prone to overpromising on margin targets, or at least highly susceptible to external shocks like recalls and competitive pricing, making current projections critical.

Net Income (Non-GAAP, Q4 2025)

Consensus: RMB 269 million | Beat threshold: >RMB 300 million | Miss threshold: <RMB 200 million

Why it matters this quarter: The return to net loss in Q3 2025 (RMB 624 million) makes this a closely watched metric to determine if profitability can be regained or if the negative trend continues.

Historical pattern: Li Auto previously achieved significant net income, including RMB 8.045 billion in Q4 2024. However, the Q3 2025 net loss of RMB 624 million (diluted net loss per ADS RMB 0.36) was a notable negative inflection point. J.P. Morgan's estimate of RMB 135 million for Q4 2025 is significantly below consensus, indicating potential downside.

Guidance credibility: Management's recent profitability has been unpredictable, with a swing from strong profit to significant loss, making forecasts less reliable.

Q1 2026 Deliveries Guidance

Consensus: 87,609 units | Beat threshold: >95,000 units | Miss threshold: <80,000 units

Why it matters this quarter: This forward-looking guidance will be crucial for investor confidence, addressing concerns about a "lack of complete new model this year" (J.P. Morgan) and the impact of the Spring Festival slowdown in February.

Historical pattern: Q1 2026 J.P. Morgan estimate for deliveries is 75,355 units, notably below the broader consensus. Management has delivered within their Q1 guidance (e.g., Q1 2025 actual >92,000 vs. 88,000-93,000 guidance) but has also significantly missed (e.g., Q1 2024 actual 80,400 vs. 100,000-103,000 guidance).

Guidance credibility: Inconsistent and highly sensitive to competitive and seasonal factors, particularly following J.P. Morgan's warning of "earnings downgrade risk" for Q1 2026 across Chinese OEMs.

Surprise Scenarios

Genuine Positive Surprise

• Li MEGA Demand Rebound & Strong Q1 2026 Outlook: A significant beat on Q4 2025 deliveries and Vehicle Gross Margin, coupled with Q1 2026 delivery guidance exceeding 95,000 units, would signal a robust recovery in demand for existing models and successful mitigation of competitive pressures. This implies the Li MEGA recall impact was more transient than anticipated.
• Strategic EREV Refocus Drives Higher Profitability: Clear evidence that the recalibrated strategy to prioritize EREVs is immediately translating into stronger-than-expected Q4 margins (e.g., Vehicle GPM >18.0%) due to cost efficiencies and pricing power, with positive forward commentary on sustained EREV-driven profitability in 2026.

Genuine Negative Surprise

• Persistent Margin Contraction & Deeper Losses: Vehicle Gross Margin for Q4 2025 dropping below 15.0% and a larger-than-expected net loss (e.g., Non-GAAP net loss >RMB 300 million) would confirm severe pricing pressure and increased R&D/SG&A expenses are weighing heavily on the bottom line. J.P. Morgan's significantly lower Net Profit estimates for Q4 2025 suggest this is a considerable risk.
• Weak Q1 2026 Deliveries Guidance & BEV Delays: A Q1 2026 delivery guidance falling below 80,000 units, especially if accompanied by further explicit delays or scaling back of the Li i8 or other BEV models, would reinforce J.P. Morgan's "lack of new models" and "underweight" thesis.

Management Credibility Verdict

Overall Credibility: MEDIUM

Management has demonstrated a track record of ambitious growth targets and rapid product development but has shown mixed credibility in consistently achieving guidance, particularly on deliveries and margins when faced with intense competition and unforeseen events (e.g., Q3 2025 delivery miss, Li MEGA recall). Their current strategic recalibration highlights a responsive, though potentially reactive, approach to market realities.

Recent Developments (Last 14 Days)

• 2026-03-05 Sell-side Rating Action (JPMorgan Downgrade): J.P. Morgan downgraded Li Auto to 'underweight' with a $14 price target, citing a "lack of major new models this year and challenging market conditions," directly impacting market sentiment ahead of earnings.
• 2026-03-05 Operational & Strategic Shift: Li Auto's 2025 sales declined approximately 30%, dropping to fifth place due to intensified competition and slower overseas expansion, leading the company to increase investment in AI-driven vehicle technologies.
• 2026-03-02 Operational KPI announcement (February 2026 Deliveries): Reported 26,421 units, a 4.51% month-over-month decrease (due to Spring Festival) but a 0.6% year-over-year increase. This signals sequential weakness but slight annual growth in a seasonally slow period.
• 2026-03-02 Product Launch Action (All-new Li L9 in Q2 2026): Management announced plans to launch the all-new Li L9 in the second quarter, providing crucial forward product pipeline visibility.
• 2026-03-02 Partnership & Technology (Qualcomm 6G coalition, AI Smart Glasses): Li Auto joined a Qualcomm-led coalition for 6G development and announced plans to integrate AI models into glasses products by 2026, showcasing significant long-term R&D and diversification efforts.
• 2026-02-27 Strategy Change (Refocus on EREV Business): Li Auto is recalibrating its 2026 strategy, shifting focus back to its EREV business to regain market leadership following underperforming BEV models and intense competition. This implies a de-emphasis on the pure-electric transition.
• 2026-02-27 Product Launch Action (Li i6 Deliveries Delayed): Deliveries of some Li i6 models were delayed due to slower-than-expected ramp-up of core component production capacity, underscoring challenges in the BEV segment.
• 2026-02-27 Product Recalls (Q3 2025 Net Loss from Li MEGA Recall): Confirmed the Li MEGA MPV recall contributed to the Q3 2025 net loss of RMB 624 million, impacting recent financial performance.

Landmines & Watch Items

• Margin Erosion: Sustained retail discounts and fierce competition risk further compressing Q4 2025 vehicle gross margins below the already depressed Q3 2025 levels, intensifying investor concerns about profitability.
• BEV Strategy Credibility: The recent strategic shift back to EREVs and Li i6 delivery delays raise red flags about Li Auto's ability to effectively compete and execute its BEV roadmap, which is crucial for long-term growth.
• Q1 2026 Guidance vs. Analyst Expectations: With J.P. Morgan forecasting a challenging 1Q26 for Li Auto (Volume -14%, Revenue -15% vs. consensus), any management guidance for Q1 2026 that falls significantly below current consensus for deliveries (87,609 units) or revenue could trigger substantial negative market reaction.

Key Questions for the Call

1. Following the strategic recalibration, what are the revised near-term and long-term targets for BEV sales volume and percentage of total deliveries, particularly given the Li i6 delays and the planned Q2 launch of the all-new Li L9?
2. Can management provide specific details on the "slower-than-expected ramp-up of core component production capacity" for the Li i6, and what concrete steps are being taken to prevent similar bottlenecks for upcoming model launches?
3. With reported retail discounts and intense competition, what is the outlook for vehicle gross margin in Q1 and Q2 2026, and what are the primary drivers for achieving or exceeding current consensus expectations?
4. How does the new focus on AI-driven vehicle technologies and the exploration of humanoid robots integrate into the core automotive business model, and what are the expected near-term financial investments and potential revenue streams from these initiatives?
5. What are the key performance indicators and timelines for achieving meaningful market penetration in Europe, given the new R&D center and Chamber of Commerce membership, and how will this overseas expansion balance with the renewed EREV focus?

Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.