Adobe Q2 Earnings Beat Estimates, Revenues Up Y/Y, Shares Fall

Adobe ADBE reported second-quarter fiscal 2026 non-GAAP earnings of $5.96 per share, beating the Zacks Consensus Estimate by 2.23% and increasing 18% year over year.Total revenues were $6.618 billion, which beat the consensus mark by 2.5% and increased 13% year over year on a reported basis and 11% on a constant-currency basis. AI-first ARR more than tripled year over year, surpassing $500 million.Adobe shares were down 6.25% at the time of writing this article. ADBE dropped 37.5% in the year to date period, underperforming the Zacks Computer & Technology sector’s return 13.1% and the Zacks Computer Software industry’s drop 17.2%.ADBE’s Top Line in DetailSubscription revenues were $6.416 billion, which represented 97% of total revenues, up 13.7% on a year-over-year basis. Product revenues totaled $89 million (1.3% of the total revenues), up 1.1% year over year. Services and other revenues were $113 million (1.7% of the total revenues), down 21.5% year over year.                                     Adobe Inc. Price, Consensus and EPS Surprise Adobe Inc. price-consensus-eps-surprise-chart | Adobe Inc. QuoteAdobe delivered record revenues in the reported quarter, driven by strong subscription bookings, revenue conversion and AI-driven demand across its customer groups. Total Adobe ARR at quarter-end was $27.1 billion, including approximately $480 million from the acquisition of Semrush.Customer Group subscription revenues were $6.39 billion, up 14% year over year and 12% at constant currency. The figure included approximately $40 million from Semrush.Business Professionals and Consumers’ subscription revenues were $1.85 billion, representing 16% year-over-year growth on a reported basis and 15% at constant currency. Creative and Marketing Professionals subscription revenues were $4.54 billion, up 13% year over year on a reported basis and 11% at constant currency.ADBE’s Q2 Operating DetailsAdobe reported second-quarter fiscal 2026 GAAP gross profit of $5.90 billion compared with $5.23 billion in the year-ago quarter. GAAP gross margin was 89.2%, expanding 10 basis points year over year.Operating expenses were $3.66 billion, up 17.2% year over year. As a percentage of total revenues, operating expenses increased 220 basis points year over year to 55.4%.Non-GAAP operating income was $2.94 billion compared with $2.67 billion in the year-ago quarter. The adjusted operating margin was 44.5%, which contracted 100 basis points year over year.ADBE’s Balance Sheet & Cash FlowAs of May 29, 2026, the cash and short-term investments totaled $5.62 billion, down from $6.89 billion as of Feb. 27, 2026. Long-term debt as of May 29 was $4.8 billion compared with $5.38 billion as of Feb. 27.Cash generated from operations was $2.16 billion in the reported quarter compared with $2.96 billion in the previous quarter.Remaining Performance Obligations were $22.27 billion exiting the quarter. The company exited the quarter with approximately $27 billion remaining under its repurchase authorizations, including the new $25 billion authorization announced in April.Adobe Raises Q3 and FY26 GuidanceFor the third quarter of fiscal 2026, Adobe expects total revenues between $6.67 billion and $6.72 billion. Adobe expects Business Professionals and Consumers’ subscription revenues between $1.87 billion and $1.89 billion.Creative and Marketing Professionals subscription revenues are expected to be between $4.61 billion and $4.64 billion. Non-GAAP operating margin is expected to be 44%. Adobe expects fiscal third-quarter non-GAAP earnings between $6.05 and $6.10 per share.For fiscal 2026, Adobe now expects total revenues between $26.5 billion and $26.6 billion. Adobe expects Business Professionals and Consumers’ subscription revenues between $7.44 billion and $7.48 billion. Creative and Marketing Professionals subscription revenues are expected to be between $18.21 billion and $18.27 billion.Non-GAAP operating margin is expected to be 45%. Adobe expects fiscal 2026 non-GAAP earnings between $24.35 and $24.45 per share. Total Adobe ending ARR growth is expected to be 10.2% year over year.Zacks Rank & Stocks to ConsiderCurrently, ADBE carries a Zacks Rank #3 (Hold).Dell Technologies DELL, Teradyne TER and Silicon Motion Technology SIMO are some better-ranked stocks that investors can consider in the broader sector. Dell Technologies, Teradyne and Silicon Motion each sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Long-term earnings growth rate for Dell Technologies, Teradyne and Silicon Motion is currently pegged at 26.35%, 34.29% and 53.56%, respectively.   Beyond Nvidia: AI's Second Wave Is HereThe AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.See Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks