Adobe raises FY26 targets on record Q2 revenue, CFO departs

Adobe Inc reported record revenue of $6.618 billion for the second quarter of FY2026 ended May 29, 2026, reflecting a 13% year-over-year increase. The performance was driven by strong AI-driven demand across customer groups, prompting the company to raise its full-year fiscal 2026 revenue and non-GAAP EPS targets. Shantanu Narayen, chair and CEO of Adobe, attributed the results to the momentum in new AI products and noted that AI-first annualized recurring revenue (ARR) tripled year-over-year, exceeding $500 million.

Diluted earnings per share was $4.25 on a GAAP basis and $5.96 on a non-GAAP basis, beating the analyst consensus estimate of $5.82. GAAP results included a $0.17 per share non-cash goodwill impairment charge related to the Publishing & Advertising reporting unit. Total Adobe Annualized Recurring Revenue (ARR) exiting the quarter was $27.10 billion. Remaining performance obligations stood at $22.27 billion, and the company exited the period with $4.92 billion in cash and cash equivalents. GAAP operating income was $2.24 billion and non-GAAP operating income was $2.95 billion, while cash flows from operations were $2.17 billion. The company repurchased approximately 8.5 million shares during the quarter.

Financial Targets

The updated targets factor in the acquisition of Semrush Holdings, Inc. and assume current macroeconomic conditions. For the third quarter of FY2026, Adobe targets total revenue between $6.67 billion and $6.72 billion. The company projects GAAP diluted EPS between $4.40 and $4.45. Non-GAAP diluted EPS is projected between $6.05 and $6.10.

For the full year FY2026, Adobe targets total revenue between $26.50 billion and $26.60 billion, compared to the previous outlook of $25.90 billion-$26.10 billion. The company narrowed its GAAP diluted EPS projection to between $17.90 and $18.00. Non-GAAP diluted EPS is projected between $24.35 and $24.45, an increase from the prior guidance of $23.30-$23.50. Total Adobe ending ARR growth is projected at 10.2% year over year.

Management Changes

Dan Durn, executive vice president and CFO, is departing the company on June 15, 2026, to pursue a new professional opportunity. Steve Day, SVP of Corporate Finance and CFO of Adobe's Customer Experience Orchestration Business Unit, will serve as interim Chief Financial Officer effective June 15, 2026. Mr. Day brings 20 years of financial leadership experience at Adobe to the role and will report directly to CEO and Chair Shantanu Narayen.

Q2 FY2026 Financial Highlights

Metric	Amount
Record Revenue	$6.618 billion
GAAP Operating Income	$2.24 billion
Non-GAAP Operating Income	$2.95 billion
GAAP Net Income	$1.71 billion
Non-GAAP Net Income	$2.40 billion
Cash Flows from Operations	$2.17 billion
Total ARR	$27.10 billion

Adobe Inc demonstrates a mixed financial performance when compared to its major competitors in the software industry. The company exhibits strong profitability and operational efficiency but trails in revenue growth. A comparative analysis of key financial metrics reveals that Adobe is potentially undervalued relative to its peers, despite its robust earnings generation.

Financial Metrics Comparison

The following table compares Adobe's financial metrics against its industry peers:

Company	P/E	P/B	P/S	ROE	EBITDA (in billions)	Gross Profit (in billions)	Revenue Growth
Adobe Inc	13.60	8.25	4.01	16.39%	$2.66	$5.73	11.97%
Palantir Technologies Inc	146.30	36.94	64.05	10.99%	$0.76	$1.42	84.71%
AppLovin Corp	42.87	70.07	27.23	53.6%	$1.52	$1.64	58.97%
Salesforce Inc	19.81	4.09	3.72	4.51%	$4.02	$8.56	13.27%
Cadence Design Systems Inc	89.77	16.19	19.04	5.58%	$0.54	$1.26	18.66%
Synopsys Inc	105.39	2.89	9.73	0.06%	$0.61	$1.65	41.87%
Intuit Inc	17.34	3.77	3.80	15.44%	$4.33	$7.18	10.37%
Datadog Inc	583.67	20.32	22.56	1.36%	$0.08	$0.8	32.15%
Autodesk Inc	32.30	14.65	6.31	15.75%	$0.62	$1.76	18.43%
Workday Inc	42.83	5.08	3.68	3.06%	$0.47	$1.94	13.48%
Roper Technologies Inc	20.87	1.79	4.42	2.63%	$0.96	$1.45	11.29%
Zoom Communications Inc	13.84	2.76	5.79	4.3%	$0.34	$0.96	5.47%
IREN Ltd	66.86	6.90	19.99	-9.58%	$-0.12	$0.09	-0.02%
Samsara Inc	326.40	12.62	10.91	3.04%	$0.02	$0.36	30.52%
PTC Inc	12.98	4.04	5.40	15.34%	$0.8	$0.66	21.68%
Trimble Inc	26.49	2.09	3.28	1.72%	$0.2	$0.65	11.81%
Tyler Technologies Inc	41.82	3.50	5.55	2.24%	$0.15	$0.3	8.55%
Dynatrace Inc	75.15	4.53	6.11	0.65%	$0.06	$0.43	19.44%
Average	97.92	12.48	13.03	7.69%	$0.9	$1.83	23.57%

Valuation and Profitability

Adobe's valuation metrics suggest it is trading below the industry average. The Price to Earnings ratio of 13.60 is significantly lower than the industry average of 97.92. Similarly, the Price to Book ratio of 8.25 and Price to Sales ratio of 4.01 are below the industry averages of 12.48 and 13.03, respectively. These ratios indicate potential undervaluation.

In terms of profitability, Adobe outperforms the industry average. The Return on Equity stands at 16.39%, higher than the industry average of 7.69%. The EBITDA of $2.66 billion is 2.96 times the industry average, and the gross profit of $5.73 billion is 3.13 times the industry average. These figures highlight Adobe's strong operational efficiency and cash flow generation.

Revenue Growth and Financial Health

Despite strong profitability, Adobe's revenue growth of 11.97% lags behind the industry average of 23.57%. This slower growth may raise concerns about the company's ability to expand sales volume relative to its competitors.

Adobe's debt-to-equity ratio of 0.58 is lower than its top four peers, indicating a stronger financial position. This favorable balance between debt and equity is a positive indicator for investors, suggesting lower financial risk.