Adobe Lifts Full-Year Outlook as AI-First Annual Recurring Revenue Tops $500 Million
The design-software maker posted record quarterly revenue of $6.62 billion, up 13% year over year, and tripled its AI-first ARR as it raised guidance for the second time this fiscal year.
Adobe Inc. (ADBE) reported record quarterly revenue of $6.62 billion for its fiscal second quarter, a 13% increase from a year earlier, as the design-software maker accelerated growth and lifted its full-year outlook for the second time since setting initial targets.
The results marked a continuation of a quickening pace for a company that had posted 10% year-over-year revenue growth in the fourth quarter of fiscal 2025 and 12% in the first quarter of fiscal 2026. Adobe's AI-first annual recurring revenue tripled year over year and surpassed $500 million, more than doubling from the $250 million year-end target the company had set in the third quarter of fiscal 2025.
Non-GAAP diluted earnings came to $5.96 a share, up 18% from $5.06 a year ago but down sequentially from $6.06 in the first quarter. GAAP diluted earnings were $4.25 a share, below the prior quarter's $4.60, partly reflecting a $0.17-a-share non-cash goodwill impairment charge tied to the Publishing & Advertising reporting unit. Operating cash flow fell to $2.17 billion from a record $2.96 billion in the first quarter and was roughly flat with the year-earlier period.
Subscription revenue from Creative & Marketing Professionals, Adobe's largest customer group, grew 13% year over year, accelerating from 12% in the first quarter and 11% in the fourth quarter of fiscal 2025. Business Professionals & Consumers subscription revenue maintained a 16% year-over-year pace at $1.85 billion. Total customer-group subscription revenue rose 14% to $6.39 billion, including roughly $40 million from the recently closed Semrush acquisition.
Adobe raised its full-year fiscal 2026 revenue guidance to $26.50 billion to $26.60 billion, up from the initial range of $25.90 billion to $26.10 billion set in the fourth quarter of fiscal 2025. Non-GAAP EPS guidance was lifted to $24.35 to $24.45, compared with the original $23.30 to $23.50. For the third quarter, the company projected revenue of $6.67 billion to $6.72 billion, implying continued double-digit growth. The full-year non-GAAP operating margin target was held at roughly 45%, while the GAAP margin target was trimmed to approximately 35% from 36%, reflecting the impairment charge and a loss contingency.
Total ARR reached $27.10 billion exiting the quarter, including about $480 million from Semrush, up from $26.06 billion at the end of the first quarter. Remaining performance obligations grew to $22.27 billion from $22.22 billion, with the current portion steady at 67%.
The company disclosed that Chief Financial Officer Dan Durn will depart effective June 15, 2026, with Senior Vice President Steve Day named interim CFO. Share repurchases totaled roughly 8.5 million shares for $2.11 billion in the quarter, down from $2.48 billion in the first quarter and well below the $3.50 billion deployed a year ago. The diluted share count used in full-year guidance fell to approximately 399 million from an initial 403 million, reflecting the buyback program's cumulative effect.