Adobe Inc.

Adobe reported Q2 revenue of $6.62 billion, up 13% year over year as reported and 11% in constant currency. GAAP EPS was $4.25, up 8% year over year, and non-GAAP EPS was $5.96, up 18% year over year. Q2 ending ARR was $27.1 billion, up 12.5% year over year including approximately $480 million from Semrush; total customer group subscription revenue was $6.39 billion, up 14% year over year or 12% in constant currency. Cash flows from operations were $2.17 billion, ending cash and short-term investments were $5.63 billion, and Adobe repurchased approximately 8.5 million shares. For Q3 FY26, Adobe guided to revenue of $6.67 billion to $6.72 billion and non-GAAP EPS of $6.05 to $6.10. For FY26, Adobe raised guidance to revenue of $20.5 billion to $20.6 billion and non-GAAP EPS of $24.35 to $24.45, with an assumed non-GAAP operating margin of about 45%.

Shantanu Narayen framed the quarter as a strategic inflection point driven by AI and changing customer behavior. He emphasized that Adobe is reworking its go-to-market to use freemium experiences to acquire more users and increase lifetime value, even if that lowers near-term ARR. He also highlighted confidence in Adobe’s leadership continuity, said the company is committed to its AI opportunity, and described the next CEO search as progressing well.

Steven Day emphasized that Q2 performance was record-setting, with revenue of $6.62 billion, GAAP EPS of $4.25, and non-GAAP EPS of $5.96. He pointed to strong cash generation, with $2.17 billion in operating cash flow, $5.63 billion in cash and short-term investments, and roughly $27 billion remaining under repurchase authorizations, including the new $25 billion authorization announced in April. He also laid out FY26 and Q3 guidance, noting the company is assuming current macro conditions and that FY26 ARR growth of 10.2% reflects both Semrush and the decision to accelerate freemium MAU growth while deferring Creative Cloud line optimizations.

The main analyst focus was on leadership transition, the decision to defer Creative Cloud pricing/line optimizations, and the logic for pushing freemium harder now. Management said the finance organization is seasoned, that continuity is intact during the CFO and CEO transition, and that the strategic shift is being driven by strong early success in Acrobat, Express, and Firefly plus surging traffic to adobe.com. On monetization timing, management said the payback from freemium and deferred pricing should play out over 2027 and that they are willing to accept short-term ARR pressure to build a larger, more engaged customer base.