Adobe NASDAQ: ADBE executives used the company’s fiscal first-quarter 2026 earnings call to highlight an AI-driven product transition that management said is expanding user adoption and enterprise demand, while also acknowledging a faster-than-expected decline in its traditional standalone stock business. The company also disclosed a leadership transition: Chair and CEO Shantanu Narayen said he will step down as CEO after more than 18 years in the role, with the board beginning a search for his successor.
CEO transition and AI strategy focus
Narayen said he will remain CEO during the transition period and intends to stay on as chair of the board to support the next CEO. He described Adobe’s opportunity set as larger in the “AI era,” emphasizing a customer-centric product strategy across multiple audiences—business professionals and consumers, creators, and marketing professionals—delivered through different routes to market and monetization models.
Management pointed to growth in “AI-first” offerings, saying ending annual recurring revenue (ARR) for these products more than tripled year-over-year. Narayen also said Adobe plans to integrate with leading AI platforms including Anthropic, Google, Microsoft, Nvidia, and OpenAI, positioning those platforms as additive distribution and workflow surfaces rather than replacements for Adobe’s applications.
Q1 financial performance and operating metrics
Chief Financial Officer Dan Durn reported Q1 revenue of $6.40 billion, up 12% year-over-year as reported and 11% in constant currency. GAAP earnings per share were $4.60, while non-GAAP EPS was $6.06, up 11% and 19%, respectively. GAAP operating margin was 37.8% and non-GAAP operating margin was 47.4%.
Other metrics highlighted on the call included:
- Total Adobe ending ARR: $26.06 billion, up 10.9% year-over-year
- Total subscription revenue: $6.17 billion, up 13% year-over-year (12% constant currency)
- Remaining performance obligations (RPO): $22.22 billion, up 13% year-over-year (12% constant currency)
- Cash flow from operations: $2.96 billion, a Q1 record
- Cash and short-term investments: $6.89 billion exiting the quarter
- Share repurchases: approximately 8.1 million shares; $3.89 billion remained on a $25 billion authorization granted in March 2024
In Q&A, Durn said he did not see a reason for structural changes in how RPO and current RPO translate to revenue relative to historical trends.
Business professionals and consumers: Acrobat and Express adoption
Adobe reported $1.78 billion in subscription revenue for business professionals and consumers, up 16% year-over-year as reported, or 15% in constant currency. President of Creativity and Productivity David Wadhwani said Acrobat AI Assistant monthly active users (MAU) doubled year-over-year and Adobe Express MAU tripled year-over-year, calling these AI-based capabilities an important driver of adoption.
Wadhwani said Express is used in 99% of U.S. Fortune 500 companies. He also discussed product and distribution efforts including “PDF Spaces,” Acrobat AI Assistant conversational experiences, and Acrobat/Express integrations that turn consumed content into generated assets such as presentations and summaries.
Wadhwani said Adobe introduced Adobe Acrobat Studio as a single offering that bundles AI creative capabilities with PDF tools, adding that upgrades into offerings that include Acrobat Studio value were “off to a strong start” across routes to market, including enterprise license renewals. He also said Adobe launched Acrobat and Express for ChatGPT in Q1 and expects similar integrations into Copilot, Claude, and Gemini as those platforms support integrated application experiences.
Creative and enterprise: Firefly usage, GenStudio momentum, and stock headwinds
Subscription revenue for creative and marketing professionals was $4.39 billion, up 12% year-over-year as reported, or 11% in constant currency. Wadhwani emphasized growth in user acquisition and AI usage, pointing to Creative Premium MAU crossing 80 million, up 50% year-over-year, and record levels of generative credit consumption.
Wadhwani said Firefly is positioned as an “all-in-one creative AI studio,” with the ability to generate using more than 30 models, including Adobe, Google, and OpenAI. He said generative credit consumption grew more than 45% quarter-over-quarter, with usage skewing toward higher-value modalities: video-generative actions grew more than 8x year-over-year and audio-generative actions doubled year-over-year. Durn added that Firefly ending ARR across the Firefly app, credit packs, and Firefly for Enterprise exceeded $250 million.
At the same time, Wadhwani and Durn acknowledged a faster shift away from Adobe’s standalone stock business. Wadhwani said the stock business saw a “steeper decline” than expected, while Narayen later quantified the stock book at about $450 million and said the decline is happening faster than planned. Narayen added that, excluding stock, growth would have been approximately 11.2% instead of 10.9%, based on his discussion of ARR growth. Management said Adobe intends to give customers “meaningful choice” between stock and generative AI as they build workflows.
On the enterprise side, President of Customer Experience Orchestration Anil Chakravarthy highlighted demand for Adobe Experience Platform (AEP) and “agentic” capabilities. He said AEP subscription revenue and native apps grew over 30% year-over-year, and the platform scale has grown to over 35 trillion segment evaluations and more than 70 billion profile activations per day. He also said ending ARR for the Adobe GenStudio family grew over 30% year-over-year, supported by integrations that move GenStudio-created assets into activation workflows across Adobe products and ad platforms including Amazon Ads, Google, LinkedIn, and Meta.
Chakravarthy cited more than 650 customer trials for Adobe LLM Optimizer, Sites Optimizer, and Brand Concierge, and said 70% of AEP customers are using agentic capabilities. He also listed enterprise customer wins during the quarter, including Centene, Deutsche Bank, Heineken, HP, Nordstrom, Paramount, Target, and WPP.
Outlook: Q2 targets and Semrush acquisition timing
Durn provided Q2 fiscal 2026 guidance that assumes current macroeconomic conditions and excludes any contribution from the pending acquisition of Semrush, which Adobe still expects to close in Q2 subject to regulatory approvals and closing conditions. Targets for Q2 include:
- Total revenue: $6.43 billion to $6.48 billion
- Business professionals and consumers subscription revenue: $1.80 billion to $1.82 billion
- Creative and marketing professional subscription revenue: $4.41 billion to $4.44 billion
- GAAP EPS: $4.35 to $4.40
- Non-GAAP EPS: $5.80 to $5.85
Adobe also reaffirmed its fiscal 2026 targets, including an expectation for total Adobe ARR growth of 10.2% for the year. Executives reiterated that freemium products and rising MAU can pressure ARR in the near term due to a “phase shift” in when users encounter paywalls, but they said they expect monetization momentum to build as the year progresses, with Wadhwani specifically pointing to acceleration in the back half of the year.
About Adobe NASDAQ: ADBE
Adobe Inc, founded in 1982 by John Warnock and Charles Geschke and headquartered in San Jose, California, is a global software company that develops tools and services for creative professionals, marketers and enterprises. Under the leadership of CEO Shantanu Narayen, who has led the company since 2007, Adobe has evolved from a provider of desktop publishing tools into a cloud-centric provider of digital media and digital experience solutions.
The company's core offerings are organized around digital media and digital experience.
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