Adobe heads into its fiscal third-quarter earnings report with a problem that strong revenue growth alone may not solve. The software giant is scheduled to report results on Thursday, September 10, and Wall Street is looking for roughly $6.69 billion in revenue alongside adjusted earnings of about $6.08 per share. Those numbers would represent another quarter of double-digit growth, yet Adobe stock enters the report under intense pressure after falling 6.73% on Friday, September 4, to $266.51, only one day after closing at $285.75. The selloff followed Adobe’s announcement of a major leadership transition and reinforced a much bigger concern hanging over the shares: investors still are not convinced that Adobe is winning the artificial-intelligence era rather than merely defending itself from it.
That is what makes this week’s Adobe stock earnings unusually important. The company’s underlying financial performance remains strong, subscription revenue is still expanding at a double-digit rate, remaining performance obligations continue to rise, and Adobe says annual recurring revenue from AI-first products has already surpassed $500 million. Yet the stock has struggled because Wall Street is asking a different question from the one it asked several years ago. Investors no longer need Adobe to prove that Photoshop, Acrobat and Creative Cloud are excellent businesses. They want evidence that generative AI can create a meaningful new growth engine before lower-cost tools from competitors chip away at Adobe’s dominant position.
Thursday’s numbers will therefore be judged on two levels. The first is straightforward: does Adobe beat its financial targets? The second is far more consequential: can management convince investors that Firefly, AI-powered workflows and Adobe’s expanding freemium strategy will eventually translate into stronger growth rather than pricing pressure and customer churn?
Adobe Has Already Set a High Bar for the Quarter
Third-quarter guidance gives investors a clear benchmark. After reporting fiscal second-quarter results in June, management forecast total Q3 revenue of $6.67 billion to $6.72 billion and non-GAAP earnings per share between $6.05 and $6.10. Adobe also expects Business Professionals & Consumers subscription revenue of $1.87 billion to $1.89 billion and Creative & Marketing Professionals subscription revenue between $4.61 billion and $4.64 billion. Wall Street’s roughly $6.69 billion revenue estimate sits almost directly in the middle of that range, while consensus EPS is close to the upper end of management’s target.
That creates a difficult setup for the stock because merely delivering what the company already promised may not generate much excitement. The company has built a reputation for consistent profitability, strong margins and reliable subscription revenue, which means investors tend to look beyond the headline beat and focus heavily on forward guidance and recurring-revenue trends. A few cents of EPS upside could therefore matter less than management’s commentary about fiscal 2027 growth, AI adoption and pricing.
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Second quarter demonstrated just how strong the core business still is. Revenue reached a record $6.62 billion, increasing 13% year over year, while subscription revenue climbed 14% to $6.416 billion. Non-GAAP EPS reached $5.96, and Adobe generated $2.17 billion of operating cash flow during the quarter. The company was confident enough to raise its full-year fiscal 2026 revenue target to between $26.5 billion and $26.6 billion and lift its adjusted EPS outlook to $24.35 to $24.45.
Those are not the numbers of a business collapsing under competitive pressure. Yet Adobe’s share price tells investors that strong present-day earnings are not the only thing being discounted. The market is worrying about what happens next.
The $500 Million AI Number Has to Get Bigger
Adobe’s strongest response to concerns about generative AI has been the rapid growth of what it calls AI-first annualized recurring revenue. The company said that figure had more than tripled year over year and exceeded $500 million by the end of the second quarter. That is a meaningful milestone because it provides tangible evidence that customers are paying for AI-powered products rather than merely experimenting with free features.
The problem is scale. The company exited Q2 with total ARR of $27.10 billion, meaning AI-first ARR still represents only a small portion of the company’s overall recurring-revenue base. The opportunity is enormous if Adobe can keep compounding that number rapidly, but investors want to see the transition happen fast enough to offset disruption elsewhere in the creative-software market.
Management is attacking that challenge through a dramatically broader funnel. On the company’s second-quarter earnings call, they said traffic from Business Professionals & Consumers seeking capabilities on Adobe.com was growing 35% year over year. Adobe also said creative freemium monthly active users had expanded from roughly 50 million to 90 million over the previous year, and management believes Firefly, Express and other free entry points could eventually attract hundreds of millions of additional creators.
That strategy sounds compelling because generative AI has lowered the barrier to creating professional-looking images, video and marketing material. They can potentially bring millions of new users into its ecosystem who never would have subscribed to a traditional professional Creative Cloud package. The unanswered question is how effectively those users convert into paying customers. Thursday’s earnings call could become especially important if management offers new data on Firefly adoption, AI consumption, paid conversion or the growth rate of AI-first ARR.
If the $500 million figure keeps accelerating, investors may begin treating Adobe’s AI push as an expanding revenue opportunity. If the company talks mainly about user growth without demonstrating meaningful monetization, skepticism could deepen.
$22.27 Billion Backlog Shows Customers Are Still Committing
One of the strongest arguments against the idea that Adobe is losing its grip on customers is the company’s remaining performance obligations. Adobe ended the second quarter with $22.27 billion of RPO, up 13% from $19.69 billion a year earlier. Approximately 67% of those remaining obligations, excluding certain enterprise agreements, are expected to be recognized over the following 12 months.
That backlog provides Adobe with substantial revenue visibility and suggests enterprises are continuing to make long-term commitments despite the proliferation of new AI tools. It also gives management breathing room as it changes how products are packaged and sold. Investors will therefore watch Thursday’s RPO and current-RPO figures closely because another strong increase would indicate that the company’s enterprise relationships remain resilient.
But backlog strength alone will not erase competitive concerns. Adobe’s challenge is that generative AI is changing the economics of creative software at the same time that alternative platforms such as Canva and Figma are competing aggressively for customers. Citi analyst Tyler Radke has reportedly highlighted evidence that some customers are consolidating paid Creative Suite licenses and that Adobe has been discounting Creative Cloud Pro in response to competitive pressure. He expects a solid quarter but remains cautious about the company’s longer-term growth trajectory.
That is why the details around subscription growth could have an outsized influence on Adobe stock. Investors want to know not simply how many users Adobe reaches, but whether revenue per customer can remain healthy while AI creates more alternatives.
Entering Earnings With a Leadership Shock
The earnings report also arrives only days after Adobe announced one of the most significant leadership changes in its modern history. On September 3, the company said Anil Chakravarthy will become president and CEO effective December 1, while longtime CEO Shantanu Narayen will become executive chair. Chakravarthy currently runs Adobe’s Customer Experience Orchestration business and worldwide field operations.
The announcement might normally have been viewed as an orderly succession. Instead, investors reacted nervously because David Wadhwani, who led Adobe’s creative business and had been considered a potential CEO candidate, announced his departure shortly afterward. Adobe shares subsequently plunged 6.73% on September 4, wiping out the previous day’s gain and closing at $266.51.
That leadership uncertainty follows another significant departure earlier in the year. CFO Dan Durn left the company in June, triggering concern about strategy even as the company raised its financial outlook. Reuters reported at the time that the CFO departure contributed to a roughly 5% after-hours decline in the shares.
The timing makes Thursday’s call unusually sensitive. Investors will want reassurance not only about financial performance but also about strategic continuity as Adobe navigates one of the biggest technological transitions in its history. Chakravarthy’s background in customer experience and enterprise software may ultimately broaden Adobe’s growth opportunities, but the market clearly wants more clarity about what the leadership change means for Creative Cloud and the company’s AI strategy.
Firefly Could Decide Whether Adobe Is Disrupted or Reinvented
The central debate around earnings remains Firefly and the broader AI ecosystem. Adobe’s competitive advantage is not simply that it can generate images or video. Standalone AI models already do that. The company’s larger opportunity is to embed generation directly inside Photoshop, Premiere, Acrobat, Express and enterprise workflows where professionals already spend their time.
If that strategy succeeds, AI may actually strengthen Adobe’s moat because users will value the combination of generation, editing, collaboration, workflow integration and commercially oriented tools. If generative AI instead makes professional creative software dramatically easier to replicate, Adobe could face a long-term pricing problem even while maintaining strong near-term revenue growth.
Recent initiatives show how aggressively Adobe is pursuing user adoption. The company recently expanded its partnership with Saudi Arabia’s government and Humain in a deal valued at more than $4 billion, with plans to provide 12 months of free access to Firefly Standard and Adobe Express Premium features to more than 27 million Saudi citizens and residents. The initiative illustrates Adobe’s willingness to use large-scale distribution and free access to seed future AI adoption.
That same freemium logic is becoming increasingly important across Adobe’s product portfolio. It could create an enormous funnel of future paying customers, but it also delays the moment when investors can clearly measure monetization. Thursday’s report needs to narrow that gap.
What Could Send Adobe Stock Higher After Earnings?
The bullish scenario begins with revenue and EPS at or above the top end of Adobe’s guidance, but the more powerful catalyst would be evidence that AI monetization is accelerating. Investors would likely welcome another sharp increase in AI-first ARR, continued double-digit RPO growth and strong Creative & Marketing Professionals subscription revenue. Reaffirming or raising full-year guidance would strengthen the argument that competition is not materially eroding Adobe’s financial performance.
Management commentary could be even more important than those numbers. If Adobe shows that Firefly users are converting into paying customers, Creative Cloud pricing remains resilient and enterprise customers are expanding their AI usage, the market may begin to reconsider how much disruption risk is already priced into ADBE stock.
The valuation setup potentially adds fuel to that scenario. Adobe closed September 4 at $266.51, roughly 28% below its 52-week high of $370.86. The stock’s sharp decline means expectations are hardly euphoric going into earnings, creating room for a relief rally if management delivers convincing evidence that Adobe’s AI transition is gaining commercial traction.
What Could Send ADBE Lower Again?
The bearish scenario would not necessarily require a headline earnings miss. Adobe could meet consensus estimates and still disappoint investors if subscription growth weakens, AI monetization appears slower than hoped or management gives cautious commentary about the coming fiscal year. Analysts are already questioning whether the company’s reliance on converting free users into paying customers will generate enough incremental growth, and another quarter of strong engagement without equally impressive monetization could reinforce those concerns.
Leadership uncertainty could amplify any disappointment. With a new CEO arriving in December, a departing creative-business leader and an earlier CFO transition, weak forward guidance might be interpreted as evidence that Adobe’s challenges are becoming structural rather than temporary. At that point, even another record revenue quarter might struggle to change the narrative surrounding the shares.
That is the unusual position Adobe finds itself in ahead of Thursday. Financial performance remains robust, but investor confidence has weakened. The earnings report therefore has to repair something that does not appear directly on the income statement.
Earnings Preview: This Quarter Is Really About Trust
For investors watching Adobe stock earnings, the obvious numbers are roughly $6.69 billion in revenue and about $6.08 in adjusted EPS. But those figures are only the opening act. The report’s real importance will come from AI-first ARR, subscription growth, RPO, Firefly adoption and whatever management says about Adobe’s strategy under its incoming leadership.
The company has already shown that its legacy franchises remain powerful. It generated record Q2 revenue, more than $2 billion of quarterly operating cash flow and over $22 billion in remaining performance obligations. The market’s concern is not whether Photoshop and Acrobat are profitable today. It is whether Adobe can turn AI from a threat to those businesses into the next major reason customers pay Adobe.
That makes September 10 a credibility test as much as an earnings report. Strong numbers combined with accelerating AI monetization could make Adobe’s battered valuation look increasingly difficult to ignore. A routine beat accompanied by vague AI metrics could leave investors asking the same uncomfortable question they have asked for much of the year.
Adobe does not merely need to prove that it can survive the generative-AI revolution.
It needs to convince Wall Street that it can still lead it.
Disclaimer
This article is for informational purposes only and does not constitute financial or investment advice. Readers should conduct their own research and consider consulting a qualified financial advisor before making investment decisions. This article was researched and drafted with the support of AI, then reviewed, fact-checked and edited by the editorial team before publication.
