Adobe (NASDAQ:ADBE) reported record fiscal second-quarter revenue and raised its full-year revenue outlook, while executives outlined a strategic shift toward more aggressive freemium user acquisition across Acrobat, Express and Firefly that is expected to weigh on second-half annual recurring revenue growth.
Chair and CEO Shantanu Narayen said Adobe generated $6.62 billion in revenue in the quarter, up 11% year over year in constant currency. GAAP earnings per share were $4.25, up 8%, while non-GAAP earnings per share were $5.96, up 18%. Steve Day, senior vice president of corporate finance and CFO of Customer Experience Orchestration, said reported revenue growth was 13%.
Adobe Leans Further Into Freemium AI Products
A major focus of the call was Adobe’s decision to accelerate freemium onboarding for AI-powered products. Narayen said AI is changing how users discover, try and purchase software, particularly through conversational interfaces, intent-based searches and agents that coordinate across tools.
For business professionals and consumers, Narayen said Acrobat and Express monthly active users rose from more than 700 million to more than 850 million year over year. He said traffic on adobe.com from this audience seeking Adobe capabilities is growing 35% year over year and is “better served through a customized, friction-free onboarding experience without immediate paywalls.”
David Wadhwani, president of Creativity and Productivity, said adobe.com traffic grew more than 40% year over year overall, while Creative and Creative Cloud-related traffic grew more than 50%. He said Adobe’s traditional direct-to-paid journeys may not always match the intent of new users who want to complete a specific task before committing to a subscription.
Wadhwani gave examples such as users searching for “summarize this PDF” or “generate pixel art for social media posts.” In those cases, he said Adobe is increasingly taking users directly into Acrobat Web or Firefly to complete the task, then building engagement before introducing paywalls.
“This shift will come at the cost of short-term ARR,” Wadhwani said, but he added that Adobe expects it to accelerate user acquisition, increase monthly active users and support long-term lifetime value.
Creative Cloud Pricing Moves Deferred
Adobe also said it has deferred previously planned second-half Creative Cloud “line optimizations,” which executives described during the question-and-answer session as pricing or packaging-related actions. Narayen said the decision reflects Adobe’s focus on capturing the broader AI creativity opportunity through Firefly and other freemium experiences.
“This is really about saying, what we have done as it relates to capturing MAU with Acrobat and Express, what we’ve done with respect to Firefly, the entire creative market,” Narayen said. He said Adobe sees an opportunity not only among creative professionals and communicators, but also to become an AI platform for creativity across more use cases and surfaces.
In response to an analyst question, Narayen said roughly half of the second-half ARR impact comes from deferring Creative Cloud line optimizations, with the other half tied to shifting more traffic into freemium experiences. He said the Creative Cloud changes are deferred, “but not closing it,” and said the freemium strategy would play out more fully in 2027.
Segment Results Show Growth Across Acrobat, Firefly and Enterprise
Day said total Adobe ending ARR was $27.1 billion, up 12.5% year over year, including approximately $480 million from the acquisition of Semrush. Total customer group subscription revenue was $6.39 billion, up 12% in constant currency, including about $40 million from Semrush.
Business professionals and consumers subscription revenue was $1.85 billion, up 15% in constant currency. Day said Acrobat and Express monthly active users surpassed 850 million, growing approximately 20% year over year, and Acrobat AI Assistant ARR grew approximately three times year over year.
Creative and marketing professionals subscription revenue was $4.54 billion, up 11% in constant currency. Wadhwani said creative freemium monthly active users increased from more than 50 million to more than 90 million year over year. Firefly ARR grew about 50% quarter over quarter through Firefly apps and credit packs, and Firefly ending ARR across apps, credit packs and enterprise offerings was approaching $300 million exiting the quarter.
Narayen said Adobe’s AI-first ARR rose three times year over year to more than $500 million.
Customer Experience Business Highlights Semrush and Agentic AI
Anil Chakravarthy, president of Customer Experience Orchestration, said AI continued to support Adobe’s enterprise business. He said Adobe GenStudio ending ARR grew more than 25% year over year, while subscription revenue for Adobe Experience Platform and native apps grew more than 30%.
Chakravarthy said more than 80% of Adobe Experience Platform and Adobe Experience Manager customers are using agentic capabilities built into Adobe products. He also said more than 1,500 customer trials are underway for Adobe’s agentic web offerings, including Adobe LLM Optimizer, Sites Optimizer and Brand Concierge.
Adobe closed its acquisition of Semrush in April. Chakravarthy said Semrush expands Adobe’s ability to serve marketers and will be integrated with Adobe’s agentic web apps. He said Adobe plans to unveil a combined brand visibility solution at the Cannes Lions Festival of Creativity later this month.
Guidance Raised as Leadership Transition Continues
For fiscal 2026, Adobe now targets total revenue of $26.5 billion to $26.6 billion. Day said the outlook includes Semrush and assumes current macroeconomic conditions. Adobe expects business professionals and consumers subscription revenue of $7.44 billion to $7.48 billion, and creative and marketing professionals subscription revenue of $18.21 billion to $18.27 billion, including approximately $280 million from Semrush.
For the third quarter, Adobe forecast total revenue of $6.67 billion to $6.72 billion, GAAP earnings per share of $4.40 to $4.45 and non-GAAP earnings per share of $6.05 to $6.10.
Narayen also addressed leadership changes. He said Dan Durn has decided to pursue an opportunity outside the software industry, and Steve Day will serve as interim CFO upon Durn’s departure. Narayen, who has announced plans to transition to board chair, said the CEO search is “progressing well” and that the board’s goal is to have the next CEO in place to help shape planning for fiscal 2027 and beyond.
About Adobe (NASDAQ:ADBE)
Adobe Inc, founded in 1982 by John Warnock and Charles Geschke and headquartered in San Jose, California, is a global software company that develops tools and services for creative professionals, marketers and enterprises. Under the leadership of CEO Shantanu Narayen, who has led the company since 2007, Adobe has evolved from a provider of desktop publishing tools into a cloud-centric provider of digital media and digital experience solutions.
The company’s core offerings are organized around digital media and digital experience.
