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Adobe Q2 Earnings Beat Estimates, Revenues Up Y/Y, Shares Fall
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Key Takeaways
Adobe posted Q2 revenues of $6.62B, up 13% Y/Y, and beat earnings estimates by 2.23%.
Adobe's AI-first ARR more than tripled Y/Y and exceeded $500M in the reported quarter.
Adobe raised Q3 and FY26 guidance, projecting higher revenues and non-GAAP earnings.
Adobe (ADBE - Free Report) reported second-quarter fiscal 2026 non-GAAP earnings of $5.96 per share, beating the Zacks Consensus Estimate by 2.23% and increasing 18% year over year.
Total revenues were $6.618 billion, which beat the consensus mark by 2.5% and increased 13% year over year on a reported basis and 11% on a constant-currency basis. AI-first ARR more than tripled year over year, surpassing $500 million.
Adobe shares were down 6.25% at the time of writing this article. ADBE dropped 37.5% in the year to date period, underperforming the Zacks Computer & Technology sector’s return 13.1% and the Zacks Computer Software industry’s drop 17.2%.
ADBE’s Top Line in Detail
Subscription revenues were $6.416 billion, which represented 97% of total revenues, up 13.7% on a year-over-year basis. Product revenues totaled $89 million (1.3% of the total revenues), up 1.1% year over year. Services and other revenues were $113 million (1.7% of the total revenues), down 21.5% year over year.
Adobe delivered record revenues in the reported quarter, driven by strong subscription bookings, revenue conversion and AI-driven demand across its customer groups. Total Adobe ARR at quarter-end was $27.1 billion, including approximately $480 million from the acquisition of Semrush.
Customer Group subscription revenues were $6.39 billion, up 14% year over year and 12% at constant currency. The figure included approximately $40 million from Semrush.
Business Professionals and Consumers’ subscription revenues were $1.85 billion, representing 16% year-over-year growth on a reported basis and 15% at constant currency. Creative and Marketing Professionals subscription revenues were $4.54 billion, up 13% year over year on a reported basis and 11% at constant currency.
ADBE’s Q2 Operating Details
Adobe reported second-quarter fiscal 2026 GAAP gross profit of $5.90 billion compared with $5.23 billion in the year-ago quarter. GAAP gross margin was 89.2%, expanding 10 basis points year over year.
Operating expenses were $3.66 billion, up 17.2% year over year. As a percentage of total revenues, operating expenses increased 220 basis points year over year to 55.4%.
Non-GAAP operating income was $2.94 billion compared with $2.67 billion in the year-ago quarter. The adjusted operating margin was 44.5%, which contracted 100 basis points year over year.
ADBE’s Balance Sheet & Cash Flow
As of May 29, 2026, the cash and short-term investments totaled $5.62 billion, down from $6.89 billion as of Feb. 27, 2026. Long-term debt as of May 29 was $4.8 billion compared with $5.38 billion as of Feb. 27.
Cash generated from operations was $2.16 billion in the reported quarter compared with $2.96 billion in the previous quarter.
Remaining Performance Obligations were $22.27 billion exiting the quarter. The company exited the quarter with approximately $27 billion remaining under its repurchase authorizations, including the new $25 billion authorization announced in April.
Adobe Raises Q3 and FY26 Guidance
For the third quarter of fiscal 2026, Adobe expects total revenues between $6.67 billion and $6.72 billion. Adobe expects Business Professionals and Consumers’ subscription revenues between $1.87 billion and $1.89 billion.
Creative and Marketing Professionals subscription revenues are expected to be between $4.61 billion and $4.64 billion. Non-GAAP operating margin is expected to be 44%. Adobe expects fiscal third-quarter non-GAAP earnings between $6.05 and $6.10 per share.
For fiscal 2026, Adobe now expects total revenues between $26.5 billion and $26.6 billion. Adobe expects Business Professionals and Consumers’ subscription revenues between $7.44 billion and $7.48 billion. Creative and Marketing Professionals subscription revenues are expected to be between $18.21 billion and $18.27 billion.
Non-GAAP operating margin is expected to be 45%. Adobe expects fiscal 2026 non-GAAP earnings between $24.35 and $24.45 per share. Total Adobe ending ARR growth is expected to be 10.2% year over year.
Zacks Rank & Stocks to Consider
Currently, ADBE carries a Zacks Rank #3 (Hold).
Dell Technologies (DELL - Free Report) , Teradyne (TER - Free Report) and Silicon Motion Technology (SIMO - Free Report) are some better-ranked stocks that investors can consider in the broader sector.
View the Zacks #1 Rank List
Image: Bigstock
Adobe Q2 Earnings Beat Estimates, Revenues Up Y/Y, Shares Fall
Key Takeaways
Adobe (ADBE - Free Report) reported second-quarter fiscal 2026 non-GAAP earnings of $5.96 per share, beating the Zacks Consensus Estimate by 2.23% and increasing 18% year over year.
Total revenues were $6.618 billion, which beat the consensus mark by 2.5% and increased 13% year over year on a reported basis and 11% on a constant-currency basis. AI-first ARR more than tripled year over year, surpassing $500 million.
Adobe shares were down 6.25% at the time of writing this article. ADBE dropped 37.5% in the year to date period, underperforming the Zacks Computer & Technology sector’s return 13.1% and the Zacks Computer Software industry’s drop 17.2%.
ADBE’s Top Line in Detail
Subscription revenues were $6.416 billion, which represented 97% of total revenues, up 13.7% on a year-over-year basis. Product revenues totaled $89 million (1.3% of the total revenues), up 1.1% year over year. Services and other revenues were $113 million (1.7% of the total revenues), down 21.5% year over year.
Adobe Inc. Price, Consensus and EPS Surprise
Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. Quote
Adobe delivered record revenues in the reported quarter, driven by strong subscription bookings, revenue conversion and AI-driven demand across its customer groups. Total Adobe ARR at quarter-end was $27.1 billion, including approximately $480 million from the acquisition of Semrush.
Customer Group subscription revenues were $6.39 billion, up 14% year over year and 12% at constant currency. The figure included approximately $40 million from Semrush.
Business Professionals and Consumers’ subscription revenues were $1.85 billion, representing 16% year-over-year growth on a reported basis and 15% at constant currency. Creative and Marketing Professionals subscription revenues were $4.54 billion, up 13% year over year on a reported basis and 11% at constant currency.
ADBE’s Q2 Operating Details
Adobe reported second-quarter fiscal 2026 GAAP gross profit of $5.90 billion compared with $5.23 billion in the year-ago quarter. GAAP gross margin was 89.2%, expanding 10 basis points year over year.
Operating expenses were $3.66 billion, up 17.2% year over year. As a percentage of total revenues, operating expenses increased 220 basis points year over year to 55.4%.
Non-GAAP operating income was $2.94 billion compared with $2.67 billion in the year-ago quarter. The adjusted operating margin was 44.5%, which contracted 100 basis points year over year.
ADBE’s Balance Sheet & Cash Flow
As of May 29, 2026, the cash and short-term investments totaled $5.62 billion, down from $6.89 billion as of Feb. 27, 2026. Long-term debt as of May 29 was $4.8 billion compared with $5.38 billion as of Feb. 27.
Cash generated from operations was $2.16 billion in the reported quarter compared with $2.96 billion in the previous quarter.
Remaining Performance Obligations were $22.27 billion exiting the quarter. The company exited the quarter with approximately $27 billion remaining under its repurchase authorizations, including the new $25 billion authorization announced in April.
Adobe Raises Q3 and FY26 Guidance
For the third quarter of fiscal 2026, Adobe expects total revenues between $6.67 billion and $6.72 billion. Adobe expects Business Professionals and Consumers’ subscription revenues between $1.87 billion and $1.89 billion.
Creative and Marketing Professionals subscription revenues are expected to be between $4.61 billion and $4.64 billion. Non-GAAP operating margin is expected to be 44%. Adobe expects fiscal third-quarter non-GAAP earnings between $6.05 and $6.10 per share.
For fiscal 2026, Adobe now expects total revenues between $26.5 billion and $26.6 billion. Adobe expects Business Professionals and Consumers’ subscription revenues between $7.44 billion and $7.48 billion. Creative and Marketing Professionals subscription revenues are expected to be between $18.21 billion and $18.27 billion.
Non-GAAP operating margin is expected to be 45%. Adobe expects fiscal 2026 non-GAAP earnings between $24.35 and $24.45 per share. Total Adobe ending ARR growth is expected to be 10.2% year over year.
Zacks Rank & Stocks to Consider
Currently, ADBE carries a Zacks Rank #3 (Hold).
Dell Technologies (DELL - Free Report) , Teradyne (TER - Free Report) and Silicon Motion Technology (SIMO - Free Report) are some better-ranked stocks that investors can consider in the broader sector.
Dell Technologies, Teradyne and Silicon Motion each sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for Dell Technologies, Teradyne and Silicon Motion is currently pegged at 26.35%, 34.29% and 53.56%, respectively.