Adobe Stock Plummets to 8-Year Low as Freemium AI Strategy Rattles Investors

Adobe beats expectations but another top executive leaves, putting pressure on its stock

Adobe beats expectations but another top executive leaves, putting pressure on its stock A bad day for the creative software company Adobe Inc. was made even worse after it revealed another top executive is departing. The news overshadowed a solid earnings and revenue beat. The company said today that its Chief Financial Officer Dan Durn is going to leave on June 15, having served in the role for almost five years, seeking a new "professional opportunity." He will be replaced by Steve Day, senior vice president of corporate finance and the CFO of the Customer Experience Orchestration business, on an interim basis. The market reacted negatively to the news, which came just three months after longtime Chief Executive Shantanu Narayen (pictured) announced his own plans to step down from the company later in the year, once a successor has been found. Narayen has served as the company's CEO for 18 years, notably overseeing the company's shift from selling packaged software to a software-as-a-service model. Adobe's stock fell more than 5% in late trading, having already slumped more than 6% during the regular trading session, as the announcement appeared to eclipse an upbeat financial report. The company reported second-quarter earnings before certain costs such as stock compensation of $5.96 per share, surpassing Wall Street's expectation of $5.82 per share. Revenue for the period came to $6.62 billion, up 13% from a year earlier and above the $6.45 billion forecast. Adobe also raised its full-year revenue guidance, saying it now expects sales of between $26.50 billion and $26.60 billion, up from an earlier range of $25.9 billion to $26.1 billion. Analysts are targeting full-year revenue of $26.1 billion. For the current quarter, Adobe is seeking earnings of between $6.05 and $6.15 per share on sales of $6.67 billion to $6.72 billion. Wall Street is forecasting earnings of just $5.77 on $6.52 billion in sales. Narayen told analysts on a conference call that the strong results reflect "strong AI-driven demand across our customer groups." He explained that this has prompted the company to rethink its strategy going forward, and that it will now focus on expanding its "freemium" artificial intelligence offerings in an effort to grow its user base. This will come at the expense of short-term annualized recurring revenue growth, he said. The CEO insisted that the strategy will pay off, helping the company to acquire new customers through a frictionless onboarding process without immediate paywalls. He told analysts that it's the best way to accelerate adoption of the company's AI products. According to Narayen, the company's user number growth during the second quarter offers strong evidence for this belief. During the quarter, Adobe Acrobat and Express grew its monthly active user base to 850 million, up from 700 million a year ago. Meanwhile, creative freemium monthly active users grew to more than 90 million, up from just 50 million one year earlier. Ultimately, Narayen thinks there's an opportunity to amass "billions" of Acrobat and Express users and hundreds of millions of creative users. However, Durn conceded that the plan will put pressure on Adobe's ARR in the short term. ARR is a key metric that's closely watched by investors as it provides evidence of the company's return on its AI investments. "This shift will come at the cost of short term ARR, but will accelerate user acquisition in MAU while building the foundation for long-term growth by removing friction from user onboarding, enabling deeper user engagement, and driving stronger lifetime value," he said, appearing in his last conference call for the company. "We're confident that driving MAU, which has an impact on ARR, is the right trade-off and will drive future business growth." Narayen also tried to reassure investors that Durn's departure won't cause too much disruption, despite the new plan to focus on freemium offerings. He explained that his successor Day is a longtime company veteran. "Steve has been a key member of our finance organization for two decades, and his deep understanding of Adobe's business will be critical as we execute our strategy to deliver AI innovations to a broader set of customers across creativity, productivity and customer experience orchestration," Narayen said.

Why Adobe Stock Just Hit Its Lowest Point in 8 Years

Get personalized, AI-powered answers built on 27+ years of trusted expertise. Worries about Adobe's growth plans and turnover inside the company's C-suite have the stock tumbling to its lowest point in eight years. Adobe (ADBE) shares were down 7% to around $202 in recent trading, their lowest level since early 2018. Adobe was among the leading decliners in the S&P 500 on day when markets gained broadly, after the company warned its strategy to grow users could hold back revenues, and announced the departure of its CFO. Executives said during Thursday's earnings call that Adobe is looking to prioritize growing users of its AI features through its "freemium" model, allowing users to try its AI products without facing paywalls, and delaying previously planned price increases -- decisions they said could hamper short-term revenue growth. Adobe also said Thursday that CFO Dan Durn is departing the company at the start of next week, marking the loss of another top executive after announcing in March that longtime CEO Shantanu Narayen will step down once a successor is found. Durn is taking the CFO job at chipmaker Marvell Technology (MRVL). The announcements overshadowed otherwise solid results. Adobe reported adjusted earnings of $5.96 per share on $6.62 billion in revenue for its fiscal second quarter, each better than analysts had forecast. Adobe's third-quarter targets also topped estimates, and the company lifted its full-year revenue and adjusted EPS outlook. "Meaningful growth acceleration and share gains from AI would be a clear rebuttal from Adobe that it is outpacing the pack," William Blair analysts wrote following the results. "However, this seems unlikely in the near term, which suggests the sentiment overhang is likely to linger, especially with a CEO transition in the works." UBS analysts cut their price target to $225 from $260 Friday, and said they worry that Adobe stock could "fade even further" following the strategy shift deprioritizing revenue growth, and that the availability of free AI tools could give Adobe less leverage to raise prices in the future. With Friday's losses, Adobe shares are now down more than 40% since the start of the year, and have lost roughly half of their value in the last 12 months.

Adobe Brings Creative AI Agent To Photoshop, Premiere, Illustrator - Adobe (NASDAQ:ADBE)

This news comes as S&P 500 futures are gaining 0.6%, contributing to a positive tone in the broader market. * Adobe stock is at significant support. Why did ADBE hit a new low? Adobe Expands Creative Agent Across Firefly and Creative Cloud Adobe has announced an upgrade to its Firefly creative AI studio, enhancing its capabilities with new tools and features designed to streamline the creative process. The upgraded experience allows creators to move seamlessly from ideation to production, improving collaboration and customization. The company is introducing its creative agent across Premiere, Photoshop, Illustrator, InDesign, and Frame.io, enabling users to automate multi-step tasks through natural-language prompts. Adobe is also extending its creative tools to major AI platforms, including ChatGPT, Claude, Copilot, Gemini and Slack, bringing its capabilities to hundreds of millions of users across their existing work environments. Adobe GenStudio for Commerce Media Networks On Wednesday, Adobe introduced GenStudio for Commerce Media Networks, enabling retailers to support scalable, on-brand advertising at the point of purchase. It is aimed at helping businesses deliver personalized, brand-consistent content across channels. GenStudio is part of Adobe CX Enterprise, an end-to-end agentic AI system designed to streamline the customer lifecycle from acquisition to retention. ADBE Technical Analysis: Oversold Signals And Key Levels Currently, Adobe's stock is trading significantly below its moving averages, with the 20-day simple moving average (SMA) at $238.64, indicating that shares are about 18.4% below this level. The Relative Strength Index (RSI) is at 28.45, suggesting the stock is in oversold territory, which could indicate a potential for a rebound if buying interest increases. Support and resistance levels are critical to watch: * Key Resistance: $200 -- This level is significant as it represents a psychological barrier and is close to the recent swing high. * Key Support: $195.02 -- This is the 52-week low, indicating a critical level where buying interest may emerge. ADBE Earnings Preview and Analyst Price Targets Adobe is slated to provide its next financial update on Sept. 10, 2026 (estimated). * Revenue Estimate: $6.55 Billion (Up from $5.99 billion) * Valuation: P/E of 11.2x (Indicates value opportunity) Analyst Consensus & Recent Actions: The stock carries a Hold rating with an average price target of $263.26. Recent analyst moves include: * Citigroup: Neutral (Lowers target to $228 on June 12) * Goldman Sachs: Sell (Lowers Target to $190 on June 12) * Jefferies: Hold (Lowers Target to $230 on June 12) ADBE Top ETF Holdings and Passive Flow Exposure Significance: Because Adobe carries significant weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock. ADBE Stock Price Activity: Adobe shares are trading down 1.24% at $193.85 on Thursday, according to Benzinga Pro data. Photo via Shutterstock This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Adobe Pauses Price Hikes For 'Short-Term' AI Push -- But At What Cost To ARR Growth? - Adobe (NASDAQ:ADBE)

Freemium Funnel Over Price Hikes During Thursday's second-quarter earnings call, management revealed that while the second-quarter revenue grew 11% year-over-year to $6.62 billion, the aggressive push to acquire next-generation users will depress second-half subscription growth. The Cost To ARR The intentional shift to expand free access across flagship platforms like Firefly, Express, and Acrobat AI Assistant directly answers Wall Street's burning question regarding the financial trade-off. "The strategic shift to acquire more freemium customers through Adobe and Firefly, lowers our second half ARR growth expectations from individual subscribers," admitted CEO Shantanu Narayen. Wolfe Research analyst Alex Zukin asked point-blank about a projected half-billion-dollar organic ARR headwind, Narayen clarified the math. He noted that "maybe half of the impact of ARR is as a result of what we are doing around deferring that creative, price line optimizations," while the remaining half stems from going full steam on the freemium model. Management frames this as a "short term" sacrifice necessary to remove friction and build long-term customer lifetime value. Rising Infrastructure Costs However, independent market analysts remain skeptical of the strategy. Chief Market Strategist at Futurum Equities, Shay Boloor, pointed out that the aggressive freemium transition introduces intense structural pressure, turning Adobe into a "show-me" story. Generative AI fundamentally shifts how content is made, but it also increases competition and "lowers the margins because AI compute is expensive," Boloor warned. Adobe Raises Guidance Despite the immediate ARR headwinds and the sudden departure of CFO Dan Durn, Adobe raised its full-year fiscal 2026 revenue targets to a new range of $26.50 billion to $26.60 billion. Management strongly defends the pivot, asserting that capturing top-of-funnel traffic -- which grew 40% on adobe.com -- is the right move to secure Adobe's dominance. How Has ADBE Performed In 2026? Shares of ADBE have fallen by 37.48% year-to-date. It closed 6.25% lower at $218.80 apiece on Thursday, and it was down 5.65% in overnight trading. Over the last month, ADBE stock was down 11.11%, and it fell 37.56% over the last six months; the stock was 47.00% lower over the year. Benzinga's Edge Stock Rankings indicate that ADBE maintains a weak price trend in the long, medium and short terms, with a poor value score. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo courtesy: Charles-McClintock Wilson / Shutterstock.com Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

Adobe Reports Q2 2026 Results: Full Earnings Call Transcript - Adobe (NASDAQ:ADBE)

Thank you. That does conclude today's conference. We do thank you for your participation. Have an excellent day. Customer Experience Orchestration AI 1st ARR grew 4x year over year, reflecting how Adobe is the leader in both the traditional marketing category and and the emerging Customer Experience Orchestration category. The introduction of Adobe CX Enterprise and CX Enterprise Co Worker at Adobe Summit expands the vision and delivery of our category defining CXO solutions. The successful acquisition of Semrush unifies our search engine optimization, Generative Engine Optimization and AEM solutions to further extend our CXO offering. We will deliver this integrated offering that addresses brand visibility at the Cannes Lions Festival of Creativity later this month. This combination of creativity and marketing uniquely differentiates Adobe. No other company brings together what creatives and marketers can do across our applications and delivery platforms. Adobe Gen Studio ARR grew over 25% year over year, reflecting enterprise demand for an end to end solution that spans workflow and planning, creation and production, asset management, activation and delivery and reporting and insights. Adobe's AI innovation has driven an impressive 3x year over year increase in AI 1st ARR to greater than 500 million we believe now is the time to aggressively acquire the next generation of Adobe loyalists. The strategic shift to acquire more freemium customers through Adobe and Firefly lowers our second half ARR growth expectations from individual subscribers. We believe these changes do make Adobe even stronger. We continue to target double digit total ARR growth for Adobe which now includes the Semrush acquisition. Based on our strong first half revenue performance and the inclusion of Semrush, we are pleased to raise our fiscal year revenue and non GAAP EPS targets. As we announced, Dan Dern has decided to pursue a new opportunity outside the software industry. I'd like to thank Dan for his contributions to Adobe and wish him well. I'm pleased that Steve Day, who has been at Adobe for 20 years serving in numerous financial leadership roles, will serve as interim CFO upon Dan's departure. I continue to be incredibly energized by Adobe's long term AI opportunity and the innovative products we are delivering to a broader set of customers. Given my decision to transition to Board Chair, I wanted to provide an update on the CEO search which is progressing well. The board has been actively engaged in a comprehensive process while we all continue to be ruthlessly focused on driving execution. Our goal is to have Adobe's next CEO in place to put their stamp on planning for fiscal 27 and beyond. Thanks Shantanu hello everyone. AI is rewriting how the world creates and gets work done and the audiences for creativity and productivity tools is bigger now than at any point in our history. From social creators and students to business professionals in large enterprises, the opportunity for Adobe is massive. These customers are looking for a range of products from easy to use creative tools to professional levels of power and precision and are increasingly turning to conversational experiences to accelerate their work. Adobe is the only company that has the portfolio breadth to meet this broad range of creativity and productivity needs. While we continue to attract strong traffic to adobe.com, which grew over 40% year over year. Our traditional direct to paid journeys may not always fulfill visitor intent as a growing number of new users are first looking to quickly complete their intended task as they begin their relationship with Adobe. Given products like Adobe Firefly Express and Acrobat AI Assistant have friction free onboarding and significant adoption. We can now rebalance our journeys to better serve this new generation of users. We rather than send them predominantly to direct to paid journeys. This shift will come at the cost of short term ARR but will accelerate user acquisition in MAU while building the foundation for long term growth by removing friction from user onboarding, enabling deeper user engagement and driving stronger lifetime value in Q2 subscription revenue for business professionals and consumers was 1.85 billion, growing 15% year over year. BPC traffic grew 35% year over year with MAU growing from greater than 700 million to greater than 850 million in Q2 year over year with significant contributions from AI Assistant, Express Creation and PDF Spaces Sharing. This quarter we introduced the Adobe Productivity Agent, shifting Acrobat to from a static document tool to an interactive experience. The Productivity Agent is an AI experience built into Acrobat that draws on Adobe Acrobat's document intelligence and Adobe Express's AI first creation capabilities to help business professionals understand, create and share information. It can turn documents into rich outputs like presentations, podcasts and social content such support conversational PDF editing and power the new sharing capabilities in PDF Spaces. Customers get the agent through Acrobat AI plans. Users can also now share branded PDF spaces with customizable AI assistants tailored to a specific audience, whether for sales, prospecting, content marketing or research delivery. Early adopters of PDF spaces including Vice Media, Kid Cuddy, Jessica Yellen and Mindy Wise are using PDF spaces to move audiences from passive reading to interactive engagement. Acrobat Student Spaces launched this quarter to strong early adoption. The number of higher education students with access to Express Premium through their schools has grown more than 60% year over year and customer wins this quarter include Accenture, Dateville, kpmg, Merck, NHL, New York State Court System, the Church of Jesus Christ of Latter Day Saints, Defense Information Systems agency and US Department of Housing and Urban Development. In Q2 subscription revenue for creative and marketing professionals was 4.54 billion, growing 11% year over year. Demand for AI content creation is exploding across ideation channel generation and semantic editing and generative creative consumption continues to show strong growth. Our strategy is to empower everyone to create from first time creators to seasoned professionals to large enterprises seeking to scale content production. In Q2CNCP traffic to Adobe.com grew over 50% year over year with creative freemium MAU growing from greater than 50 million to greater than 90 million. This immense volume of traffic drawn to the Adobe brand includes users seeking to purchase Creative Cloud, Photoshop and other CC apps and an increasing number of new users who are looking for Adobe Magic to complete a creative task with a friction free experience. Firefly Freemium users who convert to our paid plans are highly engaged with early indications of significant credit consumption. Firefly ARR grew approximately 50% quarter over quarter through Firefly apps and credit packs. We were excited to launch the Adobe Creative Agent Beta in Q2. The agent is available as part of Creative Cloud and Firefly subscriptions and provides a conversational experience to achieve complex and repetitive creative tasks. Photoshop added Rotate Object and Illustrator Release Turntable both enabling subscribers to turn 2D photos and illustrations into into 3D renditions. They can rotate and harmonize into their work capabilities like these drove record AI usage within our flagship applications. Firefly continues to support third party models now with Clang 3.0 and Clang 3.0 Omni Firefly ending ARR across Firefly app, Firefly Credit Packs and Firefly Enterprise is approaching 300 million exiting Q2 Firefly Enterprise spanning Firefly Services, Adobe Firefly Foundry and Brand Intelligence is helping the world's largest brands industrialize content production with brand safe custom models. The number of generated assets grew more than four times year over year, making it an AI content engine for marketing at scale. Our announced Nvidia partnership will bring accelerated computing to to Adobe Firefly Foundry for faster higher performing custom models across Image, Video, Audio, Vector and 3D plus a cloud native 3D digital twin built on Omniverse and open USD and Enterprise wins this quarter include Merck, SAP ServiceNow, Tesco, the Coca Cola Company Workday and Xfinity. In summary, demand for creativity and productivity in the AI era is dramatically increasing as evidenced by our record traffic on adobe.com while we continue to fulfill demand for Acrobat and Creative Cloud, the early success of Firefly Express and Acrobat AI Assistant gives us conviction that this is the time to aggressively serve new users with a friction free premium journey. We're confident that Driving Maui, which has an impact on ARR, is the right trade off and will drive future business growth. I'll now turn it over to Anil. Thanks David hello everyone. In Q2AI continued to be a tailwind for our enterprise business, enabling us to deliver creative and marketing professional subscription revenue of $4.54 billion, growing 11% year over year. These results underscore the continued explosion in content and the imperative to deliver personalized customer experiences at scale. The opportunity for AI powered marketing automation and customer experience orchestration is large and growing and we are continuing to gain market share and expand our leadership. We are focused on three critical AI for Solutions, Adobe Experience Platform and Native apps for customer Engagement Adobe Gen Studio for Content Supply Chain and Adobe Experience Manager and Agentic Web Apps for brand visibility. Q2 highlights included GenStudio ending ARR grew over 25% year over year as leading brands and agencies continue to standardize on Adobe to power their content supply chain Subscription revenue for AEP and native apps grew over 30% year over year. AEP delivers over 70 billion profile activations and 35 trillion segment evaluations per day as well as more than 1 trillion experiences per year. Over 80% of AEP and AEM customers are now using AgentIQ capabilities built into our products. Over 1500 customer trials are underway for our AgentEC web offerings, Adobe LLM optimizer sites optimizer and brand concierge. 60% quarter over quarter growth for forward deployed engineering and integrated services offerings designed to co, innovate and deliver customized AI powered CxO solutions. Q2 industry analyst recognition being named a leader in two Gartner Magic Quadrants including Customer Journey analytics and orchestration and content marketing platforms and two Forrester Waves including email marketing service providers and customer analytics technologies and global enterprise. Customer wins in Q2 included Dentsu, Merkel Defense Information Systems Agency, Diriya Company, Kaiser Foundation Hospitals, Merck, Sharp and Dome, NHL, SAP ServiceNow, Stagwell, Stellantis, Tesco and the Coca Cola Company. In April we closed the acquisition of Semrush, a leading provider of search engine optimization and generative engine optimization solutions. Semrush added $480 million ARR to our book of Business and expands our ability to serve marketers of every scale. We are rapidly integrating SEMRUSH into Adobe Uniting Semrush's Discoverability Intelligence with Adobe's agentic web apps we look forward to unveiling a comprehensive brand visibility solution combining Semrush with Adobe at the Cannes Lions Festival of Creativity later this month. At Adobe Summit in April where we hosted over 14,000 in person attendees, we launched Adobe CX Enterprise, a new end to end agentic AI system that simplifies how enterprises manage their entire customer life cycle. From acquiring and engaging prospects to driving conversion and lasting loyalty, Adobe CX Enterprise brings together AI agents agent skills and model context protocol endpoints with an intelligence and governance layer to deliver reliable and auditable agentic workflows that enable highly personalized, differentiated customer experiences. Over 20,000 global brands have built their business on Adobe and CX Enterprise will help usher them into the era of agentic AI. As part of CX Enterprise, we announced CX Enterprise Co Worker, a specialized AI agent that executes tasks based on business goals, dramatically increasing productivity and campaign execution. CX Enterprise Co Worker has garnered tremendous customer interest since launch with over 150 leading enterprises and in the early adoption program prior to general availability. Customer experience is one of the first areas of AI power transformation for enterprises around the world. Our conversations with C level executives reflect how they view Adobe as the trusted partner for this transformation in in the era of agentic AI. In Q2 we announced native integrations with major enterprise AI platforms including Microsoft Copilot, Anthropic, OpenAI and Google Gemini. Our partnership with Nvidia brings CX Enterprise coworker capabilities into the Nemo Claw Enterprise Agent platform, enabling brands to deploy Adobe's Customer Experience Intelligence within Nvidia's secure Policy governed open shell runtime. Leading global agencies including Dentsu, Hawas, Omnicom Publicis, Stagwell and WPP are standardizing on Adobe combining our AI powered capabilities with their unique IP and industry expertise to co develop innovative differentiated solutions for joint clients. Our vision, deep expertise in creativity and marketing, track record of innovation and broad partner ecosystem uniquely position Adobe as the partner of choice for AI powered customer experience orchestration. Thanks Anil. Today I will start by summarizing Adobe's performance in Q2FY26, highlighting growth drivers across our customer groups and I'll finish with our financial targets. In Q2, Adobe achieved record revenue of 6.62 billion, growing 13% year over year as reported and 11% in constant currency. Diluted earnings per share were $4.25 on a GAAP basis, and $5.96 on a non GAAP basis. Our GAAP results reflected a 70 million or 17 cent per share of a non cash goodwill impairment charge related to our publishing and advertising reporting unit. Q2 financial highlights included total Adobe ending ARR of $27.1 billion growing 12.5% year over year, including approximately $480 million from the acquisition of SEMrush. Total customer group subscription revenue of 6.39 billion, growing 14% year over year or 12% in constant currency, including approximately $40 million from the addition of SEMrush RPO of 22.27 billion exiting the quarter with RPO and Crpo both growing 13% year over year or 12% in constant currency. Cash flows from operations in the quarter were 2.17 billion and ending cash and short term investments exiting Q2 was 5.63 billion and repurchasing approximately 8.5 million shares of our stock during the quarter. Exiting Q2 we have approximately $27 billion remaining under our authorizations, including the new $25 billion authorization announced in April. Customer Group Results and Insights Business Professionals and Consumers. Subscription revenue was 1.85 billion, increasing 16% year over year as reported or 15% in constant currency. Q2 growth drivers for business professionals and consumers included sustained double digit ending ARR year over year growth across all geographies. Acrobat and Express MAU surpassed 850 million, growing approximately 20% year over year. Acrobat AI Assistant ARR growing approximately 3x year over year and strong performance in the enterprise across both commercial and government creative and marketing professionals. Subscription revenue was 4.54 billion, increasing 13% year over year or 11% in constant currency. Q2 growth drivers for creative and marketing professionals included growth in Creative Cloud driven by the CC Pro offering creative freemium. MAU which includes web and mobile versions of Firefly, Express, Premiere, Photoshop and Lightroom crossed 90 million, growing over 70% year over year. Continued strong generative credit consumption driven by video and audio. Firefly ending ARR including Firefly apps and credit plans and enterprise firefly offerings approaching 300 million with the intent to drive more traffic to firefly freemium in H2 ending ARR across Gen Studio, AEP and apps and AEM and Agentiq web growing over 20% year over year Enterprise customers with over $10 million in ARR growing greater than 20% year over year and continued strength in retention across the enterprise customer base. Let me now turn to our financial targets which include SEMrush and assume current macroeconomic conditions. Given strong year to date performance, we are raising full year revenue and non GAAP eps targets. For FY26, we are targeting total Adobe revenue of 26.5 to $26.6 billion business professionals and consumers subscription revenue of 7.44 to $7.48 billion creative and marketing professional subscription revenue of 18.21 to $18.27 billion, which now includes approximately 280 million from SEMrush total Adobe ending ARR book of business growth of 10.2% year over year compared to our FY26 beginning book of business of $25.66 billion, GAAP EPS of $17.90 to $18 and non GAAP EPS of 24.35 cents to 24.45 cents. Our FY26 targets assume a non GAAP operating margin and of approximately 45%, a GAAP tax rate of approximately 22.5% and a non GAAP tax rate of approximately 18%. Our FY26 total Adobe ARR growth target of 10.2% now reflects both the addition of the SEMrush Book of Business as well as the strategic choice to accelerate MAU freemium growth and defer previously planned Creative Cloud line optimizations. We believe this is the right long term strategy to expand our customer base and strengthen the foundation for durable growth. For Q3 FY26 we are targeting total Adobe revenue of 6.67 to $6.72 billion, business professionals and consumer subscription revenue of 1.87 to $1.89 billion, creative and marketing professional subscription revenue of 4.61 to $4.64 billion, GAAP EPS of $4.40 to $4.45 and non GAAP EPS of $6.05 to $6.10. For Q3, we assume non GAAP operating margin of approximately 44% and a GAAP tax rate of approximately 23% and a non GAAP tax rate of approximately 18%. We believe Adobe is well positioned to capitalize on the expanding AI opportunity, our focus remains on helping customers achieve better outcomes through innovation, relentless execution, and deep integration of AI across our portfolio. We are expanding our user base, deepening engagement and investing with discipline in the opportunities that will drive Adobe's next phase of growth. Thanks, Steve. We are at a transformative moment in the industry and for the company. The convergence of AI agentic workflows and the explosion of content demand is creating significant opportunities that play directly to Adobe's strength. My focus continues to be driving execution against our product roadmap and in successfully expanding to new monetization models that reflect how the diversity of our customers want to engage with Adobe. I'm committed to driving this as we finalize the right leader for Adobe's next chapter of growth. It gives me confidence beyond our products and groundbreaking technology is our people. Adobe remains one of the greatest places to work in the industry and the talent and culture we have built over decades is the foundation for this transformation. Thank you. We will now take your questions. Thank you. If you would like to signal with questions, please press star1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one. If you would like to signal with questions. And the first question will come from Michael Turin with Wells Fargo Securities. Hey, great, thanks very much. I appreciate you taking the question and I guess just realize it wasn't planned, but with Dan leaving, I think we're going to field questions on how the company manages through this level of transition in a world where there are a lot of questions around just disruption or changes to the market across software. So maybe you can just speak to how you maintain continuity with both the CEO search and CFO transition in motion, and maybe also touch on the profile of what you're looking towards or think the company needs and its next stage at this point. Sure, Michael, let me take that. And I will first start off by saying the leadership team that exists in the finance organization. organization is absolutely seasoned and top notch. So, you know, I wish Dan well. It's clear that where he's going is where his background and expertise has been, but I'm confident that we won't miss a beat, I think, as it relates to, you know, any other questions associated with the transition, I'm happy to answer that. But my short answer is we have an incredibly seasoned leadership team and, you know, I will continue to work with them closely as I have in the past, to make sure that we drive all our strategic objectives. And just if I may, a follow up just on the decision to defer line optimizations on Creative Cloud. I assume we're coming up on just potential price increase there. So maybe speak to why that's the right decision for a today and how you think that kind of sets the creative business up for future growth. Yeah, happy to, Michael. I mean, I think if we really look at it, we just look at what's happening with the AI opportunity for creativity as this incredible opportunity that is upon us right now. And no other company is as well positioned, given what we have across our models, across our products and across our interfaces, to take advantage of it. So this is really about saying what we have done as it relates to capturing MAO with Acrobat and express what we've done with respect to Firefly, the entire creative market. You know, sometimes I like to also categorize this much like what's happened with the code Opportunity. If you think about what's happened with the code Opportunity across AI, it's just completely been turned upside down. And every company is thinking about how they can add to all of the billions that is already spent in code. The same opportunity exists, I think, in every single category, whether that's gaming, entertainment and creativity. And this is an opportunity for us not just to focus on creative pros and communicators who've traditionally been the strength of this company, but to actually become that AI platform for all creativity across every single surface. The success that we've seen associated with what we have done on these new products, we talked about the mao, we've talked about the ARR that's coming. We want to just have a singular focus right now to make sure that we go capture that immense opportunity with a singular focus and a clear marketing message. It also is based on a complete confidence that we have that the creative business is extremely stable. The amount of innovation that we have delivered in that space continues to make us a category of one as it relates to our focus on that particular market. And so that one we can differ. It's not going away, but anything that comes in the way of the company aligning and the market understanding that we're going to go after that entire creative opportunity right now, I think will detract from what is the real price for this company. So hopefully that gives you some color. And I think in terms of the impact on ARR, you can think of it as maybe half of the impact of ARR is as a result of what we are doing around deferring that creative price line optimizations. Hey guys, appreciate you taking my question. Apologize for any background noise. Maybe just at the risk of redundancy or simplification, just why now to accelerate the freemium MAU motion. I think before we were thinking that the previous messaging was that it could actually positively impact second half ARR, the freemium motion. And now it's turning into a headwind as they convert. Or so maybe just simplify why now is the right time. And then I've got a quick follow up. Sure. I think you should think of it more in terms of does that early success that we're having across all of them give you confidence to actually go even more aggressively about this? So that's how I think about this, Alex. In terms of why now, we all recognize that when you look at the traffic that's coming to the Adobe site, that traffic is just gushing. And so when we think about how we can capture that with a unique value proposition associated with delighting them and making sure we have a friction free experience and anything that comes when we take a step back. We have built this incredible business, but it's a balanced business. We're always trying to figure out what we send to the freemium and what we send to ARR. I think this singular clarity will enable us to capture way more people in the audience. And so the why now has more to do with the fact that we are seeing the success associated with what we've done. The products, whether it's Acrobat Express or Firefly, are there. The ability to support third party models is there. And I'll have David also add. So it's really the success that we're seeing and the incredible amount of traffic that says if we don't take advantage of this opportunity right now, we will just unnecessarily diffuse it and we will send people other places when they want to come, have that engagement with Adobe and are looking for the Adobe brand in Adobe Magic to help them solve their creativity needs. David. Yeah, and maybe Alex, I'll just add on a couple examples to what Chantan was saying to demystify what we mean by user behavior changing and evolving. Let me give you one example with Acrobat and one example with Creativity and Firefly to hopefully cement this a bit. So what we see is a shift in or an emergence in terms of LLM usage and that is driving a lot more intent based search. So what is an intent based search? Someone might type into a search engine, summarize this PDF, right? And what we do is we are using SEO and SEM and some of Anil's SEMrush capabilities now to make sure that we're ranking high. When someone types in something like summarized PDF. When the user clicks on our link, we take them. Instead of taking them to adobe.com and talking to them about Acrobat, we're now taking them directly into Acrobat Web with a single call to action which is upload your PDF and then we summarize it for them. And when we summarize it for them, we then introduce them to this idea that they can use AI assistant to even have and ask some questions and we use this process to let them build habit before we start giving them paywall. So that's an evolution. If we just took that traffic direct to a paid flow to buy Acrobat and download Acrobat, it wouldn't produce as much opportunity long term for Adobe. Similarly in Firefly we see things like, you know, a growth in terms like generate pixel art for social media posts. Again, we rank really high in SEO SEM and then we take them directly into Firefly so they can upload an image of themselves, create this pixelated version, maybe introduce them to this idea that you can convert that to video, but it's a very different flow and that's where the world is going. And then maybe just to follow up then if we think about the combination of that action that you described and the postponement of the line optimizations as driving roughly, I think by our math, about a half a billion dollar adjustment to the organic ARR downward, like what is the payback period on that? So that 500 million, let's say that you're investing in this Motion. What is the payback period and multiple that you think you can get as a result of the successful strategy that you're potential successful strategy that you're embarking on? Well, let me give you some color. I think on the second one first, which is, you know, the creative pro line optimizations, we can introduce them as we continue to deliver value. So that one is just, you know, a phase shift. And as we add that, we will actually think, we believe that we're going to have better offerings that are more differentiated the more these freemium offerings are successful. So that one for us, we just look at it and say we're deferring it but not closing it. So hopefully that gives you some color. And then in terms of the traffic, if the disproportionate amount of traffic is going to go to these premium offerings, you're right about, hey, how does that start to come back? And, you know, we're already seeing some of it as it relates to the MAU that we have on Firefly. So we shared some numbers on that as well as on Express, you know, which are growing well. But that will play out, I think, over 2027. More important, I think it sets the company up for the right, you know, sort of really growing our customer base, which like we've done with Reader, you know, then pays off for decades. And maybe the other thing just to give color, because I'm sure people will ask this question as you think about it, in terms of how it plays out over the second half. You know, maybe the way to think about it is if you go back and look at our fiscal 24 or our fiscal 25 results, you know, you can understand whatever our second half ARR expectations are, they probably typically pay out 40 and 60 in Q3 and Q4, given we'll be making more of these changes in Q3 as it relates to, you know, changing the traffic patterns. And we expect our seasonal enterprise trend, the enterprise and everything we're doing around content continues to be an area of strength for us that will be perhaps a little bit more proportionately in Q4 than it was in Q4 in the last few years. So hopefully that gives you both color on the line optimizations we can always introduce. But we wanted to be transparent with you, I think, as it relates to the moving of the freemium. And we believe that the best way to do that is to take their content that they have already within their content management system like Adobe Experience Manager and make sure it gets out there, whether it's the bots and the agents that these LLMs have or third party sites which have credibility with these LLMs, making sure that all the brand visibility shows up in the right places. That requires the integration of what Semrush brings, which is the outside in knowledge of how what is actually being prompted for what's being searched for and that data database that they have of all of the prompts and search queries and so on and combine it with the inside out intelligence that we have with all the content. Marrying those two provides us the opportunity to bring the most comprehensive brand visibility solution in the market. And that's what we're introducing at CAN later this month. So we are super excited about that and I believe we believe that this is going to be a must have for every cmo. Yeah, thanks for asking that question. I think we've made a lot of progress in terms of how we think about the evolution of, of a Creative agent and productivity agent, and also introduced basically customer experience coworker at Summit a couple months ago. Overall, what we've done is we've taken all of our core capabilities in our creative flagship applications as an example, and we've used that to create a, create a series of capabilities that are accessible to the endpoint. So in other words, the Creativity Agent can Now really access 50 creative tools across our ecosystem and that AI assistant is then available in Firefly and to our Creative Cloud subscribers. But we've also, to exactly to your point, we've also taken that AI system, that Creative Agent, and made it available inside of both ChatGPT and inside of Claude, with Copilot and Gemini coming very soon. And what that lets us do is it lets us, again similar to what we were talking about, go to where user experience and user intent actually initiates. So if someone starts to want to do something with AI Assistant to create a logo, convert that logo to some merchandise, be able to post that merchandise across social media networks, you can do all of that conversationally at this point. In that context, if you have anything you want to do that goes beyond what you can do conversationally, we use that opportunity to journey them over to Firefly for a deeper, richer AI tooling experience. So the whole end to end experience here is about getting to users where they are, letting them do a lot more conversationally, really reducing the bar to create more content, but then also leveraging the opportunity to monetize them by converting them over to Firefly as an example. And the last thing I'll say is the monetization model for these AI agents is similar in that it's basically about credit consumption and we think it drives a lot more credit consumption and opportunity for upsell. And as it relates to your question on partnerships, maybe just add a couple more points. I mean, firstly you have to look at what the economic model is for a lot of these companies. So whether it's Amazon, Microsoft or Google, we are huge users of their cloud services, which at the end of the day is a significant revenue stream for them. So, you know, we have great partnerships with all three of them. I think with Google specifically, we also partner on how we can jointly go to media and entertainment. We are a big user of their Nano Banana within our application. So I think there's a lot of synergy associated with that. I think with OpenAI and with anthropic they are looking to say, how can they become more of a sort of platform of choice and. And provide us, I think, all of their focus right now, I would say Brad, is on code, and that's where everybody is doing. A student body left on that. And I think creativity is an area that we not only have a passion for, that we're uniquely qualified. And so, you know, this is our time and our opportunity to leverage everything that they are providing. And so with every one of them, we have great partnership. But I think as it relates to the consumer side of creativity, which is where this is going after, we're, I think, a company of one in terms of the focus that we can have on that particular business. Hey, guys, thanks for taking the question, fitting me in. I want to go back to the discussion earlier. There's a lot of debates right now around kind of moats in software. And if I think back to Summit, there's a big focus on kind of what you're doing with AI agents internally. And I think there's an important emphasis on your differentiation of being having 20 years of customer relationships and proprietary data around that, as well as being that governance on ability layer for agentic workflows. Can you just talk about the importance of that in the ecosystem and then if I could sneak another one in. Maybe I'll start with the second and then we can all touch on the first. And we are all a team of one. So you can ask anybody that question, Billy, and you'll get the same answer. I think as it relates to the stock buyback, I think, you know, we had a $25 billion authorization previously. We added to that with another $25 billion authorization in April. Of the first authorization, I think if you look at it, there's 2 billion left. And, you know, we would have completed it in less than, you know, 11 quarters or so. So, you know, we're clearly showing a lot of confidence that we should be using our capital allocation to buy back our stocks. Semrush was a good acquisition. We're confident about, you know, our ability to monetize that it further differentiates our marketing solutions. And I'll come to the marketing part but you know, we are continuously looking at a whole bunch of companies. There's going to be some very interesting tuck ins as it relates to technology because none of them have business models that are sustainable or monetizable. So it is actually a good time for us to look at technology companies I think as it relates to differentiation, we always talk about content and the fact that we have these behaviors and we have the data as a huge differentiator for us. I know there's a lot of talk about what's happening in the enterprise, the number of CEOs and CFOs who are coming to us and talking about hey, we have this transformation. A big, big component of that transformation is customer experience. And Adobe, you're the one who's going to help us with that in terms of both the content and the understanding of the customer. That's a huge differentiator. I think we're clearly focus on that has separated us from anybody else in the customer experience orchestration on the Creative Pro. As I continue to say, our understanding of that customer base is unique. And this is now about saying how do we extend both of those into also the consumer space in the era of AI and so that's how we look at it. And to your point, our ability to take the depth of our technology, whether it's in audio, whether it's in video, whether it's in imaging and bring that to Firefly. The speed and velocity by which we can bring it has to do a lot with what the technology code base is underlying and the understanding of behaviors. Thanks for taking the question. I guess this one's made for David. David, when we think about this push into freemium and changing that up a little bit, I guess how do you get comfortable on the long term economics in terms of lifetime value, I guess. What are you seeing in terms of those customers going through sort of a gestation period then monetizing over a certain period of time. Can you send some more color to that? Because I get the idea of adding a lot more new users to the platform, but just trying to get a sense on how you guys get comfort about the stickiness of those users after A certain period of time and the ultimate monetization opportunity. Thanks. Yeah, happy to take that. Again, just the foundation of the, the press here really starts with understanding user intent and user behavior. As I mentioned in the example of that transition to increasing intent based expression when they're searching, that just gives us an opportunity to massively open up the top of funnel, which you're starting to see with the over 40% increase in traffic to adobe.com through those activities. And if you think about the journey the user goes from, they go from searching directly to using our product, which does result. And we see that in our stats, that results in higher engagement, which you then start to see in terms of monthly active user growth. And what we see is on the back end of that, when they convert to a paid user, they tend to have much higher engagement and usage patterns than those that go directly into paid, which translates into lifetime value and long term value for the company. And in terms of why now? Again, that question was asked earlier. Why now? Because we see all the right signals, right? The product is there. We see the traffic is up 40% year over year. We see the strong usage of the product. We see that MAO is up 70% year over year when looked at it. And we even talked about how that has started to translate into ARR growth with 50% as an example ARR growth that you see quarter over quarter for Firefly. So all of those early indicators are there and really what we're working to do as we bring more of that traffic over is that that just needs time to play out. Shanti. One of the questions we get is just the reset for this next tectonic shift. And I realize you're guiding margins down a bit, but I think many investors believe that you could be doing more and putting a much bigger moat and investment in to protect yourself. I don't know if that view is right or wrong, but I'm curious, why not be a little more severe in terms of the push and the pivot? You went through this from Perpetual Subscription. You obviously nailed it and had incredible results from that pivot. Maybe it's not the right analogy, but I think we're getting a lot of questions on that. Yeah, I think, Brent, this is Actually indication that we are really going to pivot, as you, to use your words, into getting this acquisition and customers. I mean, perhaps what's not as evident is under the surface how we are increasingly moving all of the expenses that we have and spend that we have and the scrutiny on just making sure that we find the money to spend. So we will not be short term focused on this, Brent, in terms of, you know, spending money to make sure we capitalize on the opportunity and. But we are spending on this and we will continue to. Whether it's on the models, whether it's in marketing, whether it's in the product associated with these, we do not intend to be short term at all about trying. This is, as you point out correctly, Brent, this is not about balance. This is about saying, hey, be clear about your strategic intent. And we are saying it's about becoming that platform of choice for AI right now. It is about getting those users to engage with Adobe and partner with Adobe. But be assured that as it relates to cloud spend, what we are doing on models as well as what we are doing in marketing, we are spending the money. The good news is we get a lot of, you know, Anil's products relatively, you know, cheap in order to be able to use it. So our efficiency on that is probably better than anybody else in the industry. Hey guys, thanks for taking the question here. You know, maybe for Shantanu and David, you know, as I think about the original freemium business at Adobe, it's really acrobat. And I think the hope here is that some of your products like Express and Firefly can replicate that success. Maybe the question is, can you just compare and contrast the, maybe the next generation of freemium products in terms of what's similar, what's different than some of the really successful freemium businesses that we've built up over the years. Yeah, thanks Saket. Happy to share a little bit about this. For the broader context of folks that may not have been tracking us as long as you have. If you really take a step back, we've talked a lot in terms of the Acrobat funnels as part of our data driven operating model and the level of scrutiny and detail we understand around the breakup of. When we Talk about the 850 million monthly active users. Many of them are on desktop reader, some of them are in our Chrome extension, some of them are in Microsoft Edge extension, some of them are on mobile devices. We're able to look at the Utilization of, of all of that reader experience in those free experiences and understand the specifics of how users are engaging in each of those and look for the right opportunities in those surfaces to put up paywalls and opportunities to convert. So we found in that process things like Edit PDF or Redact PDF inquiries are a great opportunity to take a user that's built up a habit using, using these products and convert them to a long term paid customer. A lot of that same learning, that infrastructure that we have in place for Acrobat that we've developed over the years, that same infrastructure applies to everything we're doing, as you said, with Express, with firefly, with Acrobat AI assistant. And the foundation of how we're taking that 90 million of creative freemium MAU and converting that is identical. Maybe the difference that we see as an opportunity, and this goes back to why we're investing so heavily right now in going after where we see user behavior, is that that intent no longer just starts in the product. That intent now also starts as part of their search history and the things they're doing in search. And so the investment in terms of driving a broader percentage of that search directly into the same flows and the same model that we've done with Acrobat over the years, I think that's really the opportunity to fundamentally change and reshape this business for decades to come. So very excited about what we've learned and there's growth that we can apply to new experiences as well. In the reader case it was distribution. In this case the new model is freemium. And that's the underlying theory behind both of those, is get the product right and get usage going. Because that's the way to monetize it, I think as it relates to the two other things that are, I think, learnings from what we will continue to do on Firefly, how we can expand from Firefly into Creative Cloud. And we are doing a really great job of that, which is you try things in Firefly and you want to expand to Creative Cloud. That's pretty seamless. You want to start with Creative Cloud and have Firefly. That's also very seamless in terms of how much innovation we've delivered. It's slightly different with Acrobat Express in that, with Acrobat Express it's a little bit more of paywalls in terms of how we're doing it. So what I look at when we see what we are doing is usage is common, getting the product is common, and then making sure that at the appropriate times we find ways to add value and, and find ways to monetize it. And so I think that's the learning that we have. But usage at the end of the day. And since I believe that's the last question, I mean, let me just. Because I think the whole set of questions has really been around. Hey, as you think about this era of AI and as you think about what's happening with creativity, what gives you confidence associated with some of the things. And I'll repeat what I said, which is we really think this is this unique opportunity for creativity with everything that's changing with AI and user behavior and user intent and how users discover products based on the early success. To say now's the time to have the singular focus in the company, get the alignment and go really drive the creative Cloud business continues to do well. That is not where tweaking it is going to allow us to get the next hundreds of millions of customers. And on the marketing side enterprises, we just continue to extend the offerings that we have and tying together content between what we are doing on the client side and the enterprise. That entire economic pool, as I think Anil talked about, in terms of how much money is being spent across content creation, marketing folks, practitioners, the agencies as well as the channels, that is only going to increase and that's going to go the benefit of that. And the economic pool is going to go to folks who can help automate that and provide technology and software to do that. So, you know, that's why we feel really good about these changes and we feel this is the way to continue to drive. We're also pleased with what we have done as it relates to the conversion of ARR to revenue. I should recognize that that's why you've seen the overachievement. And so, you know, that speaks to again the stability I think that we see in the ARR from customers. So thank you for joining us today and we look forward for those of you who are going to be at Cannes, certainly stop by and see what Adobe has to offer. Otherwise. We'll see you at the next call. Thank you. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.

Adobe raises guidance despite shift in financial leadership

Adobe has raised its annual revenue forecast, betting on the robust adoption of its artificial intelligence tools to drive growth. The software giant now expects full-year revenue between $26.5bn and $26.6bn, up from its previous estimate of $25.9bn to $26.1bn. Despite this improved outlook, it's shares fell about 6% following the release of the results. The group views AI as a primary lever to strengthen its position in an increasingly competitive market. Solutions integrating artificial intelligence have taken center stage in its strategy, as new entrants seek to gain market share in the creative and productivity software sectors. Adobe also announced the departure of its Chief Financial Officer, Dan Durn. Effective June 15, Steve Day, the current Senior Vice President of Corporate Finance, will serve as interim CFO. This transition comes just months after the announcement of the CEO's future departure. Dan Durn will join Marvell Technology, where he will also serve as CFO for the specialist in AI-focused semiconductors.

Adobe to Focus on 'Freemium' User Growth Over Short-Term Revenue Gains as CFO Exits -- Update

Adobe plans to focus on its "freemium" artificial-intelligence offerings in an effort to grow its user base at the expense of short-term annualized recurring revenue growth amid plans for its finance chief to step down. Acquiring new customers through a frictionless onboarding process without immediate paywalls will be the best way to drive adoption of Adobe's AI products, Chief Executive Officer Shantanu Narayen said on an analyst call. The company's second-quarter user numbers provide proof points for this shift, Narayen said. Acrobat and Express monthly active users grew to more than 850 million from 700 million year-over-year, while creative freemium monthly active users grew to more than 90 million from 50 million. Still, the strategy will pressure Adobe's ARR in the second half of the year, executives said. ARR has become a closely watched metric for investors looking to see whether the company's AI investments are generating returns. "This shift will come at the cost of short term ARR, but will accelerate user acquisition in MAU while building the foundation for long-term growth by removing friction from user onboarding, enabling deeper user engagement, and driving stronger lifetime value," Chief Financial Officer Dan Durn said. "We're confident that driving MAU, which has an impact on ARR, is the right trade-off and will drive future business growth." Narayen sees an opportunity for Adobe to amass billions of Acrobat and Express users and hundreds of millions of users of the company's creative products. Shares of Adobe fell 5.5% to $206.67 in after-hours trading on Thursday. The stock closed down 6.2% at $218.80, and has tumbled 37% this year. The company also said that Durn is leaving on June 15. He will become CFO of the semiconductor company Marvell Technology. Steve Day, Adobe's senior vice president of corporate finance, will serve as interim chief financial officer. Durn's exit compounds a coming leadership takeover at Adobe. Narayen said in March that he would step down once his successor has been appointed, ending his 18-year tenure at the helm of the software company. The leadership changes leave Adobe searching for candidates to fill two top positions as the company which, like many software peers, faces pressure to prove to investors that it can capitalize on artificial-intelligence tools rather than be replaced by them. Adobe also lifted its full-year financial targets, citing growing demand for its AI products. The company now expects full-year revenue of between $26.5 billion and $26.6 billion, up from a range of $25.9 billion to $26.1 billion. It projected adjusted per-share earnings between $24.35 and $24.45, up from a range of $23.30 to $23.50. Analysts polled by FactSet are expecting full-year adjusted earnings of $23.54 a share on revenue of $26.06 billion. The company logged a second-quarter profit of $1.71 billion, or $4.25 a share, compared with $1.69 billion, or $3.94 a share, a year earlier. Stripping out certain one-time items, the company reported adjusted earnings of $5.96, ahead of the $5.82 a share expected by analysts, according to FactSet. Revenue rose 13% to $6.62 billion. Analysts polled by FactSet were expecting $6.45 billion. The company ended the quarter with $27.1 billion in annualized recurring revenue, beating analyst expectations of $26.6 billion. The metric, closely watched by investors looking to judge the returns on Adobe's AI investments, includes around $480 million from Semrush Holdings, a brand visibility platform acquired by the company in April. The results are "reflecting strong AI-driven demand across our customer groups," Narayen said. For the current third quarter, the company is forecasting adjusted earnings of between $6.05 and $6.10 a share on revenue between $6.67 billion and $6.72 billion. Analysts are expecting $5.77 in adjusted earnings on $6.52 billion in revenue.