Adobe ADBE reported third-quarter fiscal 2026 non-GAAP earnings of $6.13 per share, which rose 15.4% year over year and beat the Zacks Consensus Estimate by 0.82%.
Revenues of $6.76 billion increased 12.9% and beat the consensus mark by 1.02%. Growth was led by customer-group subscriptions, while total Adobe ending annualized recurring revenue (ARR) reached $27.50 billion, up 11.2% year over year. AI-first ending ARR exceeded $650 million and grew more than 150% year over year.
ADBE’s Top Line in Detail
Subscription revenues were $6.58 billion, up 13.7% year over year, and accounted for 97.4% of total revenues. Product revenues fell 1.5% to $67 million. Services and other revenues declined 14.0% to $111 million.
Adobe Inc. Price and Consensus
Adobe Inc. price-consensus-chart | Adobe Inc. Quote
Total Customer Group subscription revenues were $6.56 billion, rising 14% year over year as reported and 13% in constant currency. The recurring-revenue mix continued to dominate Adobe's top line in the quarter.
Business Professionals & Consumers subscription revenues were $1.91 billion, increasing 16% year over year as reported and 15% in constant currency. Acrobat + Express monthly active users (MAUs) surpassed 900 million, growing more than 25%, while Acrobat AI Assistant MAU doubled sequentially.
Creative & Marketing Professionals subscription revenues totaled $4.65 billion, up 13% as reported and 12% in constant currency. Creative freemium MAU crossed 100 million and advanced more than 70% year over year.
ADBE’s AI Adoption Gains Momentum
Firefly ending ARR across the Firefly App and Firefly credit packs grew 40% sequentially. Adobe also cited accelerating usage among Firefly Enterprise customers and continued strength in Creative Cloud Teams and Enterprise offerings.
Within marketing, ending ARR grew more than 20% year over year for each of Adobe Experience Manager and agentic web apps, Adobe GenStudio, and Adobe Experience Platform and apps. The number of paid Brand Visibility customers doubled quarter over quarter.
Adobe said its products now serve more than one billion monthly active users across its businesses, a base that grew more than 20% year over year. The company is also extending Acrobat capabilities to platforms, including ChatGPT, Chrome, Claude, Microsoft Edge and WhatsApp.
Adobe also announced an agreement to acquire Topaz Labs, whose AI enhancement models are expected to be integrated across Firefly, Firefly Services and Creative Cloud applications. The transaction is expected to be closed in the fourth quarter, subject to regulatory approvals and customary conditions.
Adobe’s Operating Costs Put Pressure on Margins
GAAP gross margin was 88.7%, down about 60 basis points (bps) from 89.3% reported in the year-ago quarter.
Operating expenses rose 14.8% year over year to $3.64 billion, reflecting higher research and development, sales and marketing, and general and administrative costs.
GAAP operating income increased to $2.35 billion from $2.17 billion, but the operating margin contracted to 34.8% from 36.3%.
Non-GAAP operating income was $2.97 billion, translating to a 44% margin versus 46.3% in the year-ago quarter.
ADBE's Cash Flow Hits a Q3 Record
Cash flows from operations reached a third-quarter record of $2.52 billion, up 14.8% year over year. Adobe ended the quarter with $5.64 billion in cash and short-term investments.
Remaining performance obligations (RPO) were $22.16 billion, up 8% year over year, while current RPO grew 9%.
Adobe repurchased roughly 9.5 million shares and exited the quarter with about $24.55 billion remaining under its April 2026 repurchase authorization.
Adobe Raises Fiscal 2026 Targets
For the fourth quarter of fiscal 2026, Adobe expects revenues between $6.80 billion and $6.85 billion. Non-GAAP earnings are forecast between $6.30 and $6.35 per share, with a non-GAAP operating margin of roughly 44%.
Business Professionals & Consumers subscription revenues are projected to be $1.93-$1.95 billion, while Creative & Marketing Professionals subscription revenues are expected in the range of $4.665-$4.695 billion.
For fiscal 2026, Adobe raised its revenue target to $26.576-$26.626 billion and non-GAAP earnings outlook to $24.45-$24.50 per share. Fiscal 2026 non-GAAP operating margin is projected at approximately 45%.
The company also expects ending ARR growth of 10.2% year over year, based on its fiscal 2026 beginning book of business of $25.66 billion.
Zacks Rank & Stocks to Consider
Currently, ADBE carries a Zacks Rank #4 (Sell).
Coherent COHR, MACOM Technology Solutions MTSI and Teradyne TER are some better-ranked stocks that investors can consider in the broader sector.
Coherent, MACOM Technology Solutions and Teradyne each sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rates for Coherent, MACOM Technology Solutions and Teradyne are currently pegged at 52.49%, 42.35% and 54.38%, respectively.
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