01—Abstract
Summary
Summary of the 10-Q filed March 25, 2026. Cited figures are marked; the original filing is the authoritative source.
Adobe Inc. reported solid financial results for the quarter ending February 27, 2026, with total revenue increasing by 12% year-over-year to $6.40 billiona.
Subscription revenue, the primary driver of growth, rose by 13% to $6.20 billionb, highlighting the continued strength of Adobe's cloud-based offerings. The company also saw a significant increase in operating cash flow, which grew by 19% to $2.96 billion, demonstrating strong operational efficiency and effective cash generation. Strategic initiatives, particularly in artificial intelligence (AI), are a key focus for Adobe, with the company emphasizing its commitment to integrating AI across its product portfolio to enhance creativity, productivity, and customer experiences.
The acquisition of Semrush Holdings, Inc. for $1.9 billionc, expected to close in Q2 fiscal 2026, signifies Adobe's intent to expand its capabilities and market reach. While facing a competitive landscape and evolving regulatory environment, Adobe's robust subscription model, growing Annualized Recurring Revenue (ARR), and strong cash flow position it well for continued growth and value creation for its shareholders.
02—Key points
Key Highlights
- Total revenue increased 12% year-over-year to $6.40 billion.
- Subscription revenue, representing 97% of total revenue, grew 13% to $6.20 billion, driven by strong performance in both Creative & Marketing Professionals and Business Professionals & Consumers segments.
- Operating cash flow surged 19% year-over-year to $2.96 billion.
- Total Adobe Annualized Recurring Revenue (ARR) reached $26.06 billion, a 10.9% increase year-over-year.
- The company announced the pending acquisition of Semrush Holdings, Inc. for approximately $1.9 billion, expected to close in Q2 fiscal 2026.
- Net income rose 4% to $1.89 billion, with diluted EPS at $4.60.
- Adobe's effective tax rate increased to 22% from 17% in the prior year period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Adobe Inc. kept $0.30.
- Revenue$6.40B100.0%
- Cost of revenue−$664.0M10.4%
- Gross profit$5.73B89.6%
- Operating costs−$3.32B51.8%
- Operating income$2.42B37.8%
- Interest, other & tax−$529.0M8.3%
- Net income$1.89B29.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed March 25, 2026Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $6.40B$5.71B | +12.0% |
| Cost of Revenue | $664.00M$622.00M | +6.8% |
| Gross Profit | $5.73B$5.09B | +12.6% |
| Operating Expenses | $3.32B$2.93B | +13.2% |
| Operating Income | $2.42B$2.16B | +11.8% |
| Net Income | $1.89B$1.81B | +4.3% |
| EPS (Basic) | $4.60$4.15 | +10.8% |
| EPS (Diluted) | $4.60$4.14 | +11.1% |
| Shares Outstanding (Basic) | 410.20M436.20M | −6.0% |
| Shares Outstanding (Diluted) | 410.80M437.60M | −6.1% |
05—Questions
Frequently Asked Questions
What is Adobe's primary growth driver, and how is it performing?
Adobe's primary growth driver is its subscription revenue, which continues to show strong momentum. For the quarter ending February 27, 2026, subscription revenue grew 13% year-over-year to $6.20 billion, representing 97% of total revenue. This growth is attributed to strong performance across both the Creative & Marketing Professionals and Business Professionals & Consumers customer segments.
How is Adobe's cash flow generation and what are its plans for capital allocation?
Adobe demonstrated robust cash flow generation, with net cash provided by operating activities increasing 19% year-over-year to $2.96 billion. The company continues to return value to shareholders through its stock repurchase program, having repurchased $2.48 billion worth of common stock during the quarter. Additionally, Adobe is investing in strategic growth through the announced acquisition of Semrush Holdings, Inc. for $1.9 billion.
What is Adobe's strategic focus, particularly regarding Artificial Intelligence (AI)?
Adobe is heavily focused on integrating AI across its product portfolio to enhance creativity, productivity, and customer experiences. The company is leveraging AI through initiatives like Adobe Firefly and Adobe GenStudio, aiming to provide commercially safe and trusted AI-powered solutions. This strategic emphasis on AI is seen as a key differentiator and growth driver for its subscription offerings.
Are there any significant legal or regulatory matters that investors should be aware of?
Adobe is involved in ongoing legal proceedings, including a settlement reached with the DOJ regarding subscription cancellation practices and ongoing securities and shareholder derivative litigations. While the company has settled certain matters, the ultimate outcome of other ongoing legal issues remains uncertain and could potentially impact financial results or operations.
06—Continue