Overview
Adobe
ADBE · NASDAQQ3 FY2026Software · Creative Tools and Document Cloud
Since the Report − 0.3%
Revenue grew 13.0% year over year, EPS beat the estimate by 1.0%; the stock fell 2.1% in its first reaction.
- RevenueQ3
- $6.76B
- ▲ 13% YoY · Expected $6.69B
- Earnings Per ShareAdjusted
- $6.13
- 1% Above Expectations
Verdict
HOLDAll three tests in Adobe's third quarter landed in line: revenue 1.0% above the estimate, adjusted earnings 1.0% above, and the fourth-quarter guidance midpoint 0.4% below; score 60, view hold. The stock fell 2.32% during the session and a further 2.14% after hours: remaining performance obligations are growing slower than revenue and the timetable for monetising free users is unclear. The same evening, Adobe said Shantanu Narayen's twenty-nine years as CEO will end on December 1.
Close on Report DaySep 10
$248.83▼ 2.1%Report-Day Move
- Market Cap(Today)
- ≈ $96.6 B
- 1Y Return(At Report)
- − 30%
- P/E(At Today's Price · $17.91 · Trailing 12M)
- 13.9
- PEG(Forward 3-year)
- 0.96
- Net Margin(Trailing 12M)
- 28.1%
Earnings Summary
In 30 Seconds- Revenue of $6.76B beat expectations by 1%; adjusted EPS of $6.13 also topped the estimate by 1%.
- The Q4 revenue guidance midpoint of $6.825B came in 0.4% below market expectations.
- Shares fell 2.1% after hours on the soft outlook and slower growth in remaining performance obligations.
The Numbers
Total Annual Recurring Revenue
$27.50B
▲ 11.2% YoY
AI-First Recurring Revenue
$650M
▲ 150% YoY
Adjusted Operating Margin
44%
Operating Cash $2.52B
Remaining Performance Obligations
$22.16B
▲ 8% Slower Than Revenue
Quarterly Revenue ($ Billion)
5.99
Q3 25 · $5.99 B
6.19
Q4 25 · $6.19 B · QoQ + 3.4%
6.40
Q1 26 · $6.40 B · QoQ + 3.3%
6.62
Q2 26 · $6.62 B · QoQ + 3.4%
6.76
Q3 26 · $6.76 B · QoQ + 2.1% · YoY + 12.9%
6.80-6.85
Q4 26E · 6.80-6.85 · QoQ + 1.0% · YoY + 10.2%
- Q3 25
- Q4 25
- Q1 26
- Q2 26
- Q3 26
- Q4 26E
Q4 FY2026 Company Guidance
- Revenue6.80 – 6.85 billion6.80 billion6.85 billion
Midpoint 6.825 · Market Expectation 6.85Midpoint 0.4% Below Estimate ▼
- Adjusted Earnings Per Share6.30 – 6.35 $6.30 $6.35 $
Midpoint 6.325 · Market Expectation 6.30In Line ✓
- Creative & Marketing Subscriptions4.665 – 4.695 billion4.665 billion4.695 billion
4.65 Delivered This QuarterFlat
- Business Professionals & Consumers1.93 – 1.95 billion1.93 billion1.95 billion
1.91 Delivered This QuarterModest Step Up 1.6% ▲
How to Read the Chart
The blue band is the company's low-high range; its length shows how much room the company left itself. The black triangle and the line beneath it mark where the market expected, and the notch in the band is the range's midpoint. The triangle appears only where a market expectation is known. When the company gave a single number rather than a range and no market expectation is known, that row gets no band at all: there is no length to measure and no position to compare. Axis is ±0.6% around the midpoint.
Segment and KPI Data
Revenue by Segment
- Creative & Marketing Professionals$4.65 BShare 70.9%▲ 13.0% YoY
Customer group subscription revenue.
- Business Professionals & Consumers$1.91 BShare 29.1%▲ 16.0% YoY
Customer group subscription revenue.
Key Metrics
Operating Cash Flow
$2.52 B
Press Release
Shares Repurchased
9.50 M shares
Press Release
Monthly Active Users
1.00 B users
Press Release
Shares are computed over the segment total: $6.56 B. The segment total differs from consolidated revenue ($6.76 B); the company's eliminations and other lines are not in this table. Source: Press Release.
Metrics come only from the company's own filings; each one names the document it was taken from.
“It's incredible that these innovations are now used by over 1 billion monthly active users across all businesses.”
- One Billion Monthly Users
- AI-First Revenue
- December CEO Handover
Summary and Review
Summary
In the quarter ended August 28, Adobe's revenue was $6.76 billion against a $6.69 billion expectation, a gap of 1.0%. Adjusted earnings per share were $6.13 versus $6.07 expected, also 1.0%. The fourth-quarter guidance midpoint is $6.825 billion against $6.85 billion, a gap of −0.4%. All three tests sit inside the ±2% band: in line. On the decision table that is the hold band; score 60. Revenue grew 13%; recurring revenue reached $27.50 billion, up 11.2%.
The numbers beat and the stock still fell, because the beat was small and the outlook left two questions open. Fourth-quarter revenue was guided to $6.80-6.85 billion; only the top of the range reaches the expectation. Remaining performance obligations stood at $22.16 billion, up 8%. That is slower than revenue, and the measure gauges future demand. A third headline was the change at the top. The shares fell 2.32% in the session and 2.14% more after hours, to $243.50.
The quarter is solid, but the thesis is not tested here. Adobe pushes traffic into the free tier, defers price increases and lets usage drive conversion. Free creative users passed 100 million, up more than 70%. If the strategy works, today's 150% growth in AI revenue runs for several more quarters. If not, a large base stays unmonetised. That uncertainty and the slow-growing backlog place the score mid-band. The stock trades 29.7% below a year ago, at 13.9 times earnings.
Full Review
AI revenue is now a measurable size.
AI-first recurring revenue passed $650 million and grew more than 150% year over year. A quarter earlier it was around $500 million. Firefly's recurring revenue rose 40% quarter over quarter. Against $27.50 billion of total recurring revenue the number is still small, about 2.4%. But the debate has shifted from whether this can be monetised to how fast. Management also said credit consumption accelerated across Creative Cloud. By segment, subscription revenue from creative and marketing professionals grew 13% to $4.65 billion. The business professionals and consumers segment grew 16% to $1.91 billion. A year ago the single biggest doubt investors held was whether AI would turn into revenue. This quarter answers it directly; the answer does not yet carry the thesis, but it shows the direction.
Free users are deliberately not being monetised.
Free creative users passed 100 million, growing more than 70% year over year. Monthly active users across all businesses passed one billion. Management is explicit that this is a choice. Users are acquired through the free tier first. Engagement is then deepened through AI usage. Conversion happens on usage signals rather than by forcing the issue. Price actions on Creative Cloud were deferred for the same reason. In the short run that is an investment which never appears on the income statement. Adjusted operating margin held at 44% and cash from operations hit a record $2.52 billion. So the cost of that investment is not visible in the margin today. The main reason the stock fell on results night is the timetable: the base is visibly growing, but the date it turns into revenue is not.
The backlog is growing slower than revenue.
Remaining performance obligations are signed work not yet recognised as revenue. That line stood at $22.16 billion, up 8% year over year. In the same quarter revenue grew 13% and recurring revenue 11.2%. The measure is treated as an indicator of future demand. Falling behind revenue therefore draws attention: current growth is strong, but work is not accumulating in the book at the same pace. One quarter is not a trend. Enterprise renewal timing shifts between quarters. Even so, it will be one of the first lines to check in December. In a quarter where all three tests came in line, this is the reservation that holds the score in the middle of the band rather than at its top. If the book catches up with revenue the reservation lifts; if it widens, the guidance test gets tested next quarter.
The midpoint of guidance sits below expectations.
Fourth-quarter revenue was guided to $6.80-6.85 billion. The midpoint is $6.825 billion against a market expectation of $6.85 billion, a gap of −0.4%. So the top of the range only just reaches the expectation. Adjusted earnings per share were guided to $6.30-6.35; the midpoint is $6.325 against an expected $6.30. That is in line too. Full-year guidance was raised, to $26.576-26.626 billion of revenue and $24.45-24.50 of adjusted earnings per share. The picture is this: the company says it will finish the year above expectations. But it places the final quarter's revenue just below them. The guidance test is not closed; it sits well inside the 2% threshold. The market still read the direction of the surprise as down, and the stock priced that.
A twenty-nine-year run as CEO ends in December.
Shantanu Narayen, who has led Adobe for twenty-nine years, becomes executive chair on December 1, 2026. Anil Chakravarthy, currently President of Customer Experience Orchestration, takes over as president and CEO. The handover is internal and dated, so there is no sudden gap. The timing still matters. The company is entering exactly the period in which the results of its free-tier strategy will be measured. The executive running that strategy is changing. For investors it means the next two quarters will be read through the new management's first signals as much as through the numbers. Two lines to watch next quarter. First, where revenue lands within the $6.80-6.85 billion range. Second, whether the 8% growth in remaining performance obligations was a one-quarter effect or the new level.
Looking Ahead
Strengths and Risks
6 Strengths · 6 RisksStrengths
6- Revenue hit a record $6.76 billion, up 13% year over year against a $6.69 billion expectation.
- AI-first recurring revenue passed $650 million, growing more than 150% year over year.
- Total annual recurring revenue reached $27.50 billion, up 11.2%.
- Adjusted operating margin held at 44%Cash from operations hit a record $2.52 billion.
- Full-year guidance was raised to $26.58-26.63 billion of revenue and $24.45-24.50 of adjusted earnings.
- Free creative users passed 100 millionMonthly active users across all businesses passed one billion.
Risks
6- The fourth-quarter revenue guidance midpoint of $6.825 billion sits below the $6.85 billion market expectation.
- Remaining performance obligations grew 8%, trailing both revenue and recurring revenue.
- The timetable for monetising the free user base is unclear, and price actions were deliberately deferred.
- A twenty-nine-year CEO handover lands exactly as the strategy's results come up for measurement.
- AI revenue is about 2.4% of total recurring revenueİt has to keep growing to carry the thesis.
- The stock is 29.7% below its level a year ago, and the 12% gap to the analyst target is among the narrowest in years.
What to Watch
4- December 2026Fourth-quarter results — revenue guided to $6.80-6.85 billion, adjusted earnings to $6.30-6.35.
- December 1, 2026Anil Chakravarthy becomes CEO and Shantanu Narayen becomes executive chair.
- Fourth quarter: the Topaz Labs acquisition is expected to close.
- December 2026Whether the 8% growth in remaining performance obligations was a one-quarter effect or the new level.
Upcoming Earnings
To Understand This