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Should You Buy, Sell or Hold Adobe Stock Post Q2 Earnings?
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Key Takeaways
Adobe posted record Q2 revenues of $6.62B, up 13%, with non-GAAP EPS rising 18% to $5.96.
AI-first ARR more than tripled past $500M as subscription bookings and AI demand drove growth.
ADBE trades below industry P/E levels, while FY26 guidance calls for $26.5B-$26.6B in revenue.
Adobe Inc. (ADBE - Free Report) posted solid fiscal second-quarter 2026 results, with the top and bottom lines improving year over year and beating the Zacks Consensus Estimate.
Record revenues and disciplined investments across the company drove bottom-line improvement. GAAP gross margin was 89.2%, expanding 10 basis points year over year.
Shares of Adobe have lost 39.9% year to date, underperforming the industry, its sector, as well as the Zacks S&P 500 composite in the same time frame. ADBE shares are trading at a discount to their 52-week high. Adobe is a leading technology company offering personalized digital experiences through the infusion of artificial intelligence (AI) in its solutions.
ADBE vs Industry, Sector, S&P 500 YTD
Image Source: Zacks Investment Research
Shares of Alphabet (GOOGL - Free Report) , a player from the AI and generative AI space, have rallied 18.2% year to date, while those of Salesforce (CRM - Free Report) have lost 36.4% in the same time frame.
Sneak Peek Into Q2 Results
Non-GAAP earnings of $5.96 per share beat the Zacks Consensus Estimate by 2.23% and increased 18% year over year.
Total revenues were $6.618 billion, beating the consensus by 2.5% and increasing 13% year over year on a reported basis and 11% on a constant-currency basis. AI-first average recurring revenue (ARR) more than tripled year over year, surpassing $500 million.
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.
The adjusted operating margin was 44.5%, which contracted 100 basis points year over year.
As of May 29, 2026, cash and short-term investments totaled $5.62 billion and long-term debt was $4.8 billion.
Cash generated from operations was $2.16 billion in the reported quarter compared with $2.96 billion in the previous 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’s Optimistic Guidance
For the third quarter of fiscal 2026, Adobe expects total revenues between $6.67 billion and $6.72 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. 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.
The consensus estimate for fiscal 2026 and 2027 earnings implies a 12.4% and 12.9% year-over-year increase, respectively. The company has a Growth Score of A.
ADBE Shares Are Cheap
The stock is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 8.1, lower than the industry average of 20.49 and the median of 27.07 over the past three years. It has a Value Score of A.
Image Source: Zacks Investment Research
ADBE is cheap compared to GOOGL and CRM.
The Case for ADBE Stock
Adobe remains one of the most compelling franchises in enterprise software, supported by its leadership across creative and digital experience markets, highly recurring revenue streams, strong profitability, and growing exposure to artificial intelligence. Its flagship products benefit from significant switching costs and customer loyalty, creating a durable competitive advantage that enables pricing power and consistent subscription revenue growth.
Artificial intelligence is becoming a key catalyst for Adobe’s next phase of expansion. The company is integrating generative AI capabilities across its platform through offerings such as Acrobat AI Assistant, Firefly App and Services, and GenStudio for Performance Marketing.
Firefly, Adobe’s generative AI platform, is embedded within Creative Cloud applications, allowing users to generate content, enhance images and videos and automate design workflows. Unlike many emerging AI competitors, Adobe can leverage its large installed base of paying customers to rapidly commercialize new AI innovations while strengthening its market leadership.
Adobe has also built a strong position in digital marketing through strategic acquisitions, including Omniture. The company now offers a comprehensive suite of solutions spanning analytics, experience management, audience targeting, social engagement, and marketing optimization. Demand for these services continues to benefit from long-term trends such as cloud adoption, mobile usage, social media growth and data-driven decision-making.
The company’s successful transition from perpetual licenses to a cloud-based subscription model has improved revenue visibility, cash flow generation and earnings quality. Supported by a solid balance sheet, Adobe remains well-positioned to invest in innovation, pursue strategic growth opportunities, and return capital to shareholders despite increasing competition from large technology firms and AI-native challengers.
Muted Analyst Sentiment on ADBE
The consensus estimate for fiscal 2026 and 2027 earnings witnessed no movement in the last 30 days.
Image Source: Zacks Investment Research
Parting Thoughts on ADBE Shares
Its dominant brand, recurring revenues, high operating margins, strong cash generation and multiple avenues for growth make Adobe an attractive long-term investment opportunity. Its solid growth prospects, optimistic guidance and VGM Score of A instill confidence.
View the Zacks #1 Rank List
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Should You Buy, Sell or Hold Adobe Stock Post Q2 Earnings?
Key Takeaways
Adobe Inc. (ADBE - Free Report) posted solid fiscal second-quarter 2026 results, with the top and bottom lines improving year over year and beating the Zacks Consensus Estimate.
Record revenues and disciplined investments across the company drove bottom-line improvement. GAAP gross margin was 89.2%, expanding 10 basis points year over year.
Shares of Adobe have lost 39.9% year to date, underperforming the industry, its sector, as well as the Zacks S&P 500 composite in the same time frame. ADBE shares are trading at a discount to their 52-week high. Adobe is a leading technology company offering personalized digital experiences through the infusion of artificial intelligence (AI) in its solutions.
ADBE vs Industry, Sector, S&P 500 YTD
Image Source: Zacks Investment Research
Shares of Alphabet (GOOGL - Free Report) , a player from the AI and generative AI space, have rallied 18.2% year to date, while those of Salesforce (CRM - Free Report) have lost 36.4% in the same time frame.
Sneak Peek Into Q2 Results
Non-GAAP earnings of $5.96 per share beat the Zacks Consensus Estimate by 2.23% and increased 18% year over year.
Total revenues were $6.618 billion, beating the consensus by 2.5% and increasing 13% year over year on a reported basis and 11% on a constant-currency basis. AI-first average recurring revenue (ARR) more than tripled year over year, surpassing $500 million.
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.
The adjusted operating margin was 44.5%, which contracted 100 basis points year over year.
As of May 29, 2026, cash and short-term investments totaled $5.62 billion and long-term debt was $4.8 billion.
Cash generated from operations was $2.16 billion in the reported quarter compared with $2.96 billion in the previous 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’s Optimistic Guidance
For the third quarter of fiscal 2026, Adobe expects total revenues between $6.67 billion and $6.72 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. 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.
The consensus estimate for fiscal 2026 and 2027 earnings implies a 12.4% and 12.9% year-over-year increase, respectively. The company has a Growth Score of A.
ADBE Shares Are Cheap
The stock is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 8.1, lower than the industry average of 20.49 and the median of 27.07 over the past three years. It has a Value Score of A.
Image Source: Zacks Investment Research
ADBE is cheap compared to GOOGL and CRM.
The Case for ADBE Stock
Adobe remains one of the most compelling franchises in enterprise software, supported by its leadership across creative and digital experience markets, highly recurring revenue streams, strong profitability, and growing exposure to artificial intelligence. Its flagship products benefit from significant switching costs and customer loyalty, creating a durable competitive advantage that enables pricing power and consistent subscription revenue growth.
Artificial intelligence is becoming a key catalyst for Adobe’s next phase of expansion. The company is integrating generative AI capabilities across its platform through offerings such as Acrobat AI Assistant, Firefly App and Services, and GenStudio for Performance Marketing.
Firefly, Adobe’s generative AI platform, is embedded within Creative Cloud applications, allowing users to generate content, enhance images and videos and automate design workflows. Unlike many emerging AI competitors, Adobe can leverage its large installed base of paying customers to rapidly commercialize new AI innovations while strengthening its market leadership.
Adobe has also built a strong position in digital marketing through strategic acquisitions, including Omniture. The company now offers a comprehensive suite of solutions spanning analytics, experience management, audience targeting, social engagement, and marketing optimization. Demand for these services continues to benefit from long-term trends such as cloud adoption, mobile usage, social media growth and data-driven decision-making.
The company’s successful transition from perpetual licenses to a cloud-based subscription model has improved revenue visibility, cash flow generation and earnings quality. Supported by a solid balance sheet, Adobe remains well-positioned to invest in innovation, pursue strategic growth opportunities, and return capital to shareholders despite increasing competition from large technology firms and AI-native challengers.
Muted Analyst Sentiment on ADBE
The consensus estimate for fiscal 2026 and 2027 earnings witnessed no movement in the last 30 days.
Image Source: Zacks Investment Research
Parting Thoughts on ADBE Shares
Its dominant brand, recurring revenues, high operating margins, strong cash generation and multiple avenues for growth make Adobe an attractive long-term investment opportunity. Its solid growth prospects, optimistic guidance and VGM Score of A instill confidence.
Given its discounted valuation, it is time to add this Zacks Rank #2 (Buy) stock to one’s portfolio. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.