Adobe Inc. Q1 FY26 — Strong AI-Driven Growth and CEO Transition
Adobe delivered a strong Q1 FY26, driven by robust AI-infused product adoption and enterprise solutions, despite a faster-than-anticipated decline in its traditional stock business. The company is strategically expanding its freemium offerings to drive new user acquisition and usage, which is expected to accelerate monetization in the latter half of the year. CEO Shantanu Narayen announced his transition, initiating a search for his successor while reaffirming commitment to the company's AI-driven growth strategy.
Sustained double-digit ending ARR growth across all geographies, strong upgrades to Acrobat Studio as part of enterprise license renewals.
Acrobat and Express MAU growth: ~20% YoYAcrobat AI Assistant ARR growth: ~3x YoY
$1.78B
16% reported, 15% constant currency
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Creative & Marketing Professionals
Growth in Creative Cloud driven by CC Pro offering, strong pipeline momentum for new AI offerings across LLM Optimizer, Sites Optimizer and Brand Concierge, continued strength and retention across the enterprise customer base.
Creative freemium MAU: >80M, 50% YoY growthGenerative credit consumption: >45% QoQ increaseFirefly ending ARR (app, credit packs, Enterprise): >$250MGenStudio and AEP and apps ending ARR: >30% YoY growthCustomers with ARR over $10M: >20% YoY growth
$4.39B
12% reported, 11% constant currency
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ADBE operating KPIs by quarter
ADBE operating KPIs stated on its earnings calls, by fiscal quarter
KPI
Feb 2025 Q1 FY25
Aug 2025 Q3 FY25
Nov 2025 Q4 FY25
This call Feb 2026 Q1 FY26
May 2026 Q2 FY26
Aug 2026 Q3 FY26
Changevs prior quarter
Annual recurring revenue (ARR) Digital Media
$17.63BWe exited the quarter with $17.63 billion of Digital Media ARR, growing our ending ARR book of business 12.6% year-over-year.Source: earnings call transcript
$18.59BWe exited the quarter with $18.59 billion of Digital Media ARR, growing ending ARR 11.7% year-over-year.Source: earnings call transcript
$19.2BWe exited the quarter with $19.2 billion of Digital Media ARR, growing ending ARR 11.5% year-over-year.Source: earnings call transcript
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+3.3%
Annual recurring revenue (ARR) GenStudio
$1B+First quarter Digital Experience growth drivers included: momentum for product offerings across content, data and journeys; AEP and app subscription revenue growing nearly 50% year-on-year; GenStudio Solutions surpassing $1 billion in ending ARR book of business; early momentum in GenStudio for Performance Marketing and adoption and pipeline; and improvements in overall enterprise retention.Source: earnings call transcript
$1B+Our Workfront, Frame, AEM Assets, Firefly Services and GenStudio for performance marketing products, which are key components of the integrated GenStudio solution now exceed $1 billion in ARR growing over 25% year-over-year.Source: earnings call transcript
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Remaining performance obligation (RPO)
$19.69BQ1 business and financial highlights included: Digital Media revenue of $4.23 billion; Digital Media ending ARR of $17.63 billion, growing 12.6% year-over-year; Digital Experience revenue of $1.41 billion; cash flows from operations of $2.48 billion; and exiting the quarter, remaining performance obligations were $19.69 billion, growing 12% year-over-year and cRPO growing 11%.Source: earnings call transcript
$20.44BAnd exiting quarter remaining performance obligations were $20.44 billion, growing 13% year-over-year or 12% in constant currency and CRPO growing 10% as reported and in constant currency.Source: earnings call transcript
$22.52BFY '25 business and financial highlights included: Digital Media revenue of $17.65 billion, growing 11% year-over-year as reported and in constant currency; Digital Experience segment revenue was $5.86 billion, growing 9% year-over-year as reported and in constant currency, Digital Experience subscription revenue was $5.41 billion, growing 11% year-over-year as reported and in constant currency; Digital Media ending ARR was $19.2 billion, growing 11.5% year-over-year, exceeding our prior target of 11.3%, over 75% of Digital Media net new ARR was driven by continued growth in subscriptions and cross-sell and up-sell, with the remainder from value-based pricing, reflecting the success of our customer acquisition strategy; Total Adobe ending ARR, across Business Professionals and Consumers and Creative and Marketing Professionals, of $25.2 billion, growing 11.5% year-over-year; cash flows from operations of $10.03 billion, and ending cash and short-term investment position of $6.6 billion; RPO of $22.52 billion exiting the year, growing 13% year-over-year, or 12% in constant currency, and cRPO growing 11% as reported or 10% in constant currency; and repurchasing approximately 30.8 million shares of our stock during the year.Source: earnings call transcript
$22.22BRPO of $22.22 billion exiting the quarter, growing 13% year-over-year or 12% in constant currency and cRPO growing 12% as reported or 11% in constant currency.Source: earnings call transcript
$22.27BRPO of $22.27 billion, exiting the quarter with RPO and cRPO, both growing 13% year-over-year or 12% in constant currency.Source: earnings call transcript
$22.16BQ3 financial highlights included: total Adobe ending ARR of $27.5 billion, growing 11.2% year-over-year; total customer group subscription revenue of $6.56 billion, growing 14% year-over-year or 13% in constant currency; RPO of $22.16 billion exiting the quarter growing 8% year-over-year and cRPO growing 9% year-over-year, both as reported and in constant currency; cash flows from operations were a Q3 record at $2.52 billion and ending cash and short-term investments exiting Q3 were $5.64 billion; and repurchasing approximately 9.5 million shares of our stock during the quarter.Source: earnings call transcript
-0.5%
New Express business customers
<6,000Strong business and student adoption, Express onboarded nearly 6,000 new businesses in Q1, representing approximately 50% quarter-over-quarter growth.Source: earnings call transcript
14K+Over 14,000 organizations added Express in Q3 alone, a 4x increase in the quarter versus a year ago.Source: earnings call transcript
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Annual recurring revenue (ARR)
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$25.2BFY '25 business and financial highlights included: Digital Media revenue of $17.65 billion, growing 11% year-over-year as reported and in constant currency; Digital Experience segment revenue was $5.86 billion, growing 9% year-over-year as reported and in constant currency, Digital Experience subscription revenue was $5.41 billion, growing 11% year-over-year as reported and in constant currency; Digital Media ending ARR was $19.2 billion, growing 11.5% year-over-year, exceeding our prior target of 11.3%, over 75% of Digital Media net new ARR was driven by continued growth in subscriptions and cross-sell and up-sell, with the remainder from value-based pricing, reflecting the success of our customer acquisition strategy; Total Adobe ending ARR, across Business Professionals and Consumers and Creative and Marketing Professionals, of $25.2 billion, growing 11.5% year-over-year; cash flows from operations of $10.03 billion, and ending cash and short-term investment position of $6.6 billion; RPO of $22.52 billion exiting the year, growing 13% year-over-year, or 12% in constant currency, and cRPO growing 11% as reported or 10% in constant currency; and repurchasing approximately 30.8 million shares of our stock during the year.Source: earnings call transcript
$26.06BQ1 financial highlights included total Adobe ending ARR of $26.06 billion, growing 10.9% year-over-year.Source: earnings call transcript
$27.1BQ2 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.Source: earnings call transcript
$27.5BQ3 financial highlights included: total Adobe ending ARR of $27.5 billion, growing 11.2% year-over-year; total customer group subscription revenue of $6.56 billion, growing 14% year-over-year or 13% in constant currency; RPO of $22.16 billion exiting the quarter growing 8% year-over-year and cRPO growing 9% year-over-year, both as reported and in constant currency; cash flows from operations were a Q3 record at $2.52 billion and ending cash and short-term investments exiting Q3 were $5.64 billion; and repurchasing approximately 9.5 million shares of our stock during the quarter.Source: earnings call transcript
+1.5%
Monthly active users (MAU) Acrobat and Express
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750M+Q4 growth drivers for Business Professionals and Consumers included: double digit ending ARR growth, with strength across digital, SMB and enterprise and across all geographies; mobile ending ARR grew greater than 30% year-over-year; monthly active users of Acrobat and Express surpassed 750 million, growing 20% year-over-year; and strong customer reception of Acrobat Studio, with nearly 50% of Acrobat commercial ETLAs renewed in Q4, already upgrading to this offering.Source: earnings call transcript
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850M+Acrobat and Express MAU surpassed 850 million, growing approximately 20% year-over-year.Source: earnings call transcript
900M+Q3 growth drivers for Business Professionals and Consumers included: Double-digit ending ARR year-over-year growth across all geographies; Acrobat+ Express MAU surpassed 900 million, growing more than 25% year-over-year; Acrobat AI Assistant MAU doubled quarter-over-quarter; and strong performance in SMB across inside sales and the reseller channel.Source: earnings call transcript
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Monthly active users (MAU) Creative freemium offerings
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70M+The tremendous innovations we showcased earned over 2,000 articles and garnered 820 million video views; growing our base of creative users across Firefly, Express, Premiere Mobile and other freemium offerings, MAU for these offerings surpassed 70 million in Q4, growing over 35% year over year; accelerating adoption of Firefly Services within enterprises with over 100 new deals signed in Q4; accelerating Generative Credit consumption in Creative Cloud, Firefly and Express by individuals and enterprises, which grew approximately 3x quarter-over-quarter; strength across all routes to market and geographies, with particular strength in SMB, Enterprise and emerging markets; and key enterprise wins include Coca Cola, HUMAIN, IKEA, JPMorganChase, Lowe's, Nintendo and Sony.Source: earnings call transcript
80M+Notably, creative freemium MAU crossed 80 million, growing 50% year-over-year and includes web and mobile versions of Firefly, Express, Premiere, Photoshop and Lightroom.Source: earnings call transcript
90M+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.Source: earnings call transcript
100M+Q3 growth drivers for Creative and Marketing Professionals included: Continued strength in Creative Cloud across our teams and enterprise offerings; creative freemium MAU, which includes Firefly Express and web and mobile versions of Premiere, Photoshop and Lightroom, crossed 100 million, growing over 70% year-over-year; Firefly ending ARR across Firefly apps and Firefly credit packs grew 40% quarter-over-quarter; customer growth in Firefly Enterprise with accelerating usage quarter-over-quarter; ending ARR growth of greater than 20% year-over-year for each of Adobe Experience Manager and agentic web apps, Adobe GenStudio and Adobe Experience Platform and apps; doubled the number of paid customers quarter-on-quarter for brand visibility solutions, helping brands optimize visibility across traditional and generative search; and continued strength in retention across the enterprise customer base.Source: earnings call transcript
70B+Our platform operates at scale with over 35 trillion segment evaluations and more than 70 billion profile activations per day.Source: earnings call transcript
70B+The scale of our platform has grown to over 35 trillion segment evaluations and more than 70 billion profile activations per day.Source: earnings call transcript
70B+AEP delivers over 70 billion profile activations and 35 trillion segment evaluations per day, as well as more than 1 trillion experiences per year.Source: earnings call transcript
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Operating figures the company stated on at least two of the calls shown, checked against each call's transcript.
Click a figure to read the sentence. A dash means it was not stated that quarter.
Orderbook & backlog
2
Total RPO$22.22BQ1 FY26 end
13% YoY reported, 12% YoY constant currency
Current RPO (cRPO)Not stated as absolute valueQ1 FY26 end
12% YoY reported, 11% YoY constant currency
cRPO is the portion of RPO expected to be recognized as revenue within the next 12 months.
Product announcements
4
Product
Type
Timeline
Details
Adobe Acrobat Studio
launch
Q3 (prior quarter)
Acrobat and Express for ChatGPT
launch
Q1 FY26
Adobe LLM Optimizer
launch
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Adobe Brand Concierge
launch
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Deals & partnerships
4
Semrushacquisition
Acquisition expected to close in Q2, subject to regulatory approvals and closing conditions. Not included in current financial targets.
Airtelpartnership
New Express partnership in India, illustrating acceleration of new user acquisition at scale.
OpenAIpartnership
Joint initiative to enable brands to create ads for ChatGPT.
Firefly Foundry continues to build momentum in the media and entertainment vertical through these partnerships.
Risks & headwinds
1
Faster-than-expected decline in traditional stock businessQ1 FY26
Impacted total ARR growth by approximately 0.3 percentage points (10.9% reported vs. 11.2% without decline). Book of business is ~$450M.
Mitigation:Focus on providing customers with choice between stock and generative AI offerings for creative and marketing workflows; aim to offer combined royalty-free stock plus generative AI.
Q&A highlights
6
Given cRPO's consistent historical relationship (51-52% of next 12-month revenue), is there any reason to expect this revenue visibility to increase structurally in the future?
Management is pleased with the current progression and performance, and does not foresee any structural changes that would alter the historical dynamic between RPO, cRPO, and revenue translation.
“I don't see any reason why the trends we've seen in the business historically would inflect to drive a different dynamic as it relates to RPO, cRPO and translation to revenue.”
asked by Jay Vleeschhouwer · answered by Daniel Durn
What is the Board looking for in Adobe's next CEO?
The Board will seek a leader who prioritizes product innovation, capitalizes on the AI opportunity across creativity and marketing, drives a growth agenda for the scaled business, and aligns with the company's values and people-centric approach.
“I think at our core, we're always going to be a product company. And I think taking advantage and looking around the corner as it relates to the immense opportunity that AI has across creativity and marketing is the real opportunity for not just the CEO, but the company as well.”
asked by Saket Kalia · answered by Shantanu Narayen
What specific use cases are driving the significant increase in generative credit consumption, particularly in video and audio, and are customers moving beyond exploration?
The increase is driven by more users generating content, higher resolution generations integrated into workflows, and a shift towards higher modalities like video and audio. Firefly is becoming a destination, and existing creative professionals are purchasing additional credit packs, indicating a move beyond exploration into core creative processes.
“The net of what you're seeing here is we have more people generating than ever before. You saw that monthly active users of our freemium creative software, as an example, is up to over 80 million, 50% year-over-year. So we have more people generating. They're generating higher resolution because it's not just a fun thing to play with. It's actually part of their existing workflows. And they're generating higher modalities, things like video, audio, design.”
asked by Brad Zelnick · answered by David Wadhwani
Why did AI MAU growth dampen ARR in Q1, and when will it become ARR-positive? Also, what is the expected timeline for the CEO search?
The MAU growth dampens near-term ARR due to the freemium model's phase shift, where users engage before converting. The company expects acceleration in the back half of the year, reaffirming FY26 targets. The CEO search is expected to take a few months, with the Board taking ownership of the selection process.
“The slight difference, Keith, in those businesses tend to be that in the traditional business when somebody came and bought it, you would just immediately translate that into ARR. And here, they have to see a little bit of the paywall and they have to get -- so it's a little face-shifted is how I think about it.”
asked by Alex Zukin · answered by Shantanu Narayen
What gives Adobe confidence in monetizing the new freemium offerings despite their near-term dampening effect on ARR?
Adobe has a long history of successful freemium monetization, exemplified by Acrobat. The strategy is to attract a large base of engaged users, guide them through feature-rich journeys, and convert them into paying customers. The company emphasizes that customer preferences are shifting towards 'try before you buy,' and the ecosystem allows for deep monetization through upsell and cross-sell over time.
“We've got a long history. Acrobat, I think, is the first freemium funnel around software, and it's the one of the most performing parts of our business. And so we feel good about the journey we've been on which takes a large surface area of highly engaged users, takes them on journeys where they dive deeper from a feature functionality standpoint, hit pay walls and bring them down the funnel.”
asked by Brent Thill · answered by Daniel Durn
With high operating margins and net new ARR down, what are the team's thoughts on potentially lowering margins to accelerate growth, especially with new revenue streams?
Adobe is always looking to spend money to drive long-term value, particularly in new initiatives like Firefly and Express. While Q2 might see a slight degradation due to events like Summit, the company is constantly improving efficiency to reallocate spend towards marketing and COGS for AI products. They emphasize that they are spending on newer initiatives and will continue to seek ways to accelerate growth while maintaining a focus on ROI.
“And on some of the businesses, namely, I would say, Firefly and Express, you're absolutely right, which is the more marketing we spend on it, the more with our data-driven operating model, we continue to see it. I think you'll see as it relates to the Q2, there's a slight degradation that has as much to do with the Summit and the other events.”
asked by Michael Turrin · answered by Shantanu Narayen
2 min read 5 chapters
Detailed narrative
01
CEO Transition and Strategic Priorities
Shantanu Narayen announced his transition from CEO after 18 years, while remaining Chair of the Board to ensure a smooth succession. He emphasized the company's commitment to its fiscal '26 strategic priorities, focusing on AI transformation, customer-centric product strategy, and expanding innovation across flagship applications and new offerings like Adobe Acrobat Studio, Adobe Firefly, and Adobe GenStudio.
The search for a new CEO is expected to take a few months, with the Board taking ownership of the selection process.
02
AI-Driven Product Innovation and Monetization
Adobe is leveraging AI to reshape creation and work, expanding access through existing products like Creative Cloud and Acrobat, and reaching new audiences with Firefly and Express. The strategy involves driving new user acquisition, increasing AI usage through generative credit consumption, and automating content production for enterprises.
The company is seeing strong momentum in AI-first applications, which more than tripled their ending ARR year-over-year, positioning them to become a significant revenue driver.
03
Enterprise Momentum and Customer Experience Orchestration
Adobe's enterprise business is experiencing strong tailwinds from AI, with AEP and apps, as well as Adobe GenStudio ending ARR, growing over 30% year-over-year. The company is helping enterprises drive their AI strategy across customer experience orchestration, providing solutions for brand visibility, content supply chain, and customer engagement.
Partnerships with global leaders like Accenture and Deloitte, along with new offerings like Adobe LLM Optimizer and Brand Concierge, underscore Adobe's leadership in this space.
04
Freemium Strategy and User Adoption
Adobe's freemium strategy, particularly with Creative freemium MAU crossing 80 million (up 50% YoY) and Express MAU tripling YoY, is driving significant new user acquisition. While this approach has a near-term impact on ARR, it builds brand loyalty and sets the foundation for accelerated long-term growth through increased engagement and eventual monetization.
The company views this as a strategic shift to meet evolving customer preferences to 'try before they buy'.
05
Partnerships and Ecosystem Expansion
Adobe is actively integrating its capabilities with leading AI platforms such as Anthropic, Google, Microsoft, NVIDIA, and OpenAI, providing customers with choice and flexibility. The company is also forming strategic partnerships with advertising platforms like Amazon Ads, Google, LinkedIn, and Meta to help monetize creative content and enhance campaign efficacy.
These collaborations are seen as additive to Adobe's market opportunity, expanding its reach and reinforcing its role in the broader digital ecosystem.
