ADOBE Q2 FY26 earnings call ADBE

Management declared that AI is accelerating customer behavior at 'unprecedented^🌐 speed,' prompting a deliberate shift from direct-to-pay journeys toward friction-free freemium onboarding across Acrobat, Express and Firefly. The immediate opportunity is to accelerate new-user acquisition and lifetime value through freemium funnels rather than route surging adobe.com traffic straight to paywalls. This comes at the cost of short-term ARR — lowering second-half ARR growth from individual subscribers — but management framed it as building the foundation for durable, decades-long growth analogous to the original Adobe Reader model. The FY26 total ARR growth target was reset to 10.2%.

Business Professional & Consumer traffic on adobe.com grew 35% YoY and total adobe.com traffic grew over 40% YoY, with Creative & Creative Professional traffic up over 50% YoY. Acrobat + Express MAU rose from >700M to >850M YoY (~20%), and creative freemium MAU (web/mobile Firefly, Express, Premiere, Photoshop, Lightroom) jumped from >50M to >90M (+over 70% YoY). Management cited rising engagement post-first-experience and early conversion signals — Firefly ARR up ~50% QoQ — as conviction that now is the time to lean in. David Wadhwani illustrated intent-based search flows (e.g. 'summarize PDF,' 'pixel art') routed directly into product with delayed paywalls to build habit before monetization.

Adobe's AI-first ARR reached greater than $500 million, up 3x YoY. Firefly ending ARR — spanning Firefly apps, credit packs and Firefly Enterprise (Firefly Services, Firefly Foundry, Brand Intelligence) — is approaching $300M exiting Q2, growing ~50% QoQ. New AI agents (Adobe Creative Agent beta, Adobe Productivity Agent) are monetized through the existing credit-consumption model, and the Creative Agent is available inside Claude and ChatGPT with Copilot and Gemini coming soon. Generated assets in Firefly Enterprise grew more than 4x YoY. Record AI usage was reported within flagship apps (Photoshop Rotate Object, Illustrator Turntable, Premiere color mode).

CXO AI-first ARR grew 4x YoY. GenStudio ending ARR grew over 25% YoY; AEP and native-apps subscription revenue grew over 30% YoY; and combined ending ARR across GenStudio, AEP + apps and AEM + Agentic Web grew over 20% YoY. AEP now delivers over 70 billion profile activations and 35 trillion segment evaluations per day and more than 1 trillion experiences per year. Over 80% of AEP and AEM customers use built-in agentic capabilities, with over 1,500 trials underway for agentic web offerings (LLM Optimizer, Sites Optimizer, Brand Concierge) and 60% QoQ growth in Forward Deployed Engineering and Integrated Services. Enterprise customers with over $10M ARR grew greater than 20% YoY.

Adobe closed the Semrush acquisition in April, adding $480M ARR and contributing ~$40M to Q2 subscription revenue and ~$280M to FY26 revenue guidance. Semrush's SEO/generative-engine-optimization and outside-in prompt/search database is being unified with Adobe's AEM and agentic web apps to build a comprehensive brand-visibility solution for CMOs, to be unveiled at Cannes Lions later in June. Management frames brand visibility across LLMs, social and third-party sites as a must-have for every CMO.

CFO Dan Durn is departing to pursue an opportunity outside the software industry; Steve Day, a 20-year Adobe veteran, was named interim CFO. Concurrently, the CEO search is 'progressing well' as Shantanu Narayen transitions to Board Chair, with the goal of having the next CEO in place to shape FY27 planning. Management stressed a 'seasoned, top-notch' financial leadership team and continuity of execution through both transitions.

Q2 revenue was a record $6.62B (+11% cc / +13% reported), with GAAP EPS $4.25 and non-GAAP EPS $5.96 (+18% YoY). GAAP results absorbed a $70M ($0.17/share) noncash goodwill impairment tied to the Publishing and Advertising reporting unit. Total ending ARR reached $27.1B (+12.5% YoY), RPO was $22.27B (RPO and cRPO both +13% YoY / +12% cc), operating cash flow was $2.17B, and ending cash & short-term investments were $5.63B. Adobe repurchased ~8.5M shares, leaving ~$27B under authorization (including the new $25B April authorization). Management attributed revenue overachievement to strong subscription bookings-to-revenue conversion.