Adobe Inc. (ADBE) 10-Q 2026: AI Summary

Summary

Full summary

The Print

Adobe reported Q3 fiscal 2026 revenue of $6.76B (up 13% YoY) and net income of $1.83B ($4.62 diluted EPS), with Total Adobe ARR reaching $27.50B, up 11.2% YoY.

Total revenue rose 13% YoY to $6.76B, with subscription revenue up 14% to $6.58B. Management attributes subscription growth to strength in Creative Cloud flagship apps and Adobe Experience Manager and agentic web apps, including the contribution from Semrush, and to strength in Acrobat. Net income rose 3% to $1.83B while cost of revenue rose 19% and operating expenses rose 15%, both outpacing the 13% revenue increase.

Total revenue of $6.76B increased $772M, or 13%, compared to the year-ago period, with subscription revenue of $6.58B up 14%.
Net income of $1.83B increased $55M, or 3%, compared to the year-ago period; diluted EPS of $4.62 versus $4.18.
Total Adobe ARR of $27.50B as of August 28, 2026 increased by 11.2% from $24.74B as of August 29, 2025 revalued using currency rates determined at the beginning of fiscal 2026.
Cash flows from operations of $7.65B during the nine months ended August 28, 2026 increased by $775M, or 11%, compared to the year-ago period.

Results That Matter

Financial highlights: current period, prior period, change, and investor takeaway per metric
Metric	Current Period	Prior Period	Change	Investor Takeaway
Total revenue	$6.8B	$6.0B	+12.9%	Revenue increased $772M, or 13%, compared to the year-ago period, with subscription revenue of $6.58B up 14%.
Subscription revenue	$6.6B	$5.8B	+13.7%	Increases in subscription revenue for the Creative & Marketing Professionals customer group were driven by strength in Creative Cloud flagship apps and Adobe Experience Manager and agentic web apps, including the contribution from Semrush.
Gross profit	$6.0B	$5.3B	+12.2%	Gross profit increased $651M YoY; total cost of revenue rose 19% to $763M, outpacing the 13% revenue increase.
Operating income	$2.4B	$2.2B	+8.3%	Operating income increased $181M YoY; operating expenses rose 15% to $3.64B, outpacing the 13% revenue increase.
Net income	$1.8B	$1.8B	+3.1%	Net income increased $55M, or 3%, compared to the year-ago period; the provision for income taxes rose 28% to $530M and the effective tax rate rose to 22% from 19%.
Diluted net income per share	$4.6	$4.2	+10.5%	Diluted EPS rose 10.5% while net income rose 3.1%, with shares used to compute diluted net income per share declining to 395.5 million from 424.1 million.

Earnings Quality & Cash Conversion

For the nine months ended August 28, 2026, general and administrative expenses included a goodwill impairment charge of $70 million associated with the Publishing & Advertising reporting unit and loss contingencies of $92 million associated with a legal settlement and other legal matters, both presented as separate line items in the single reportable segment table. The three-month period included no loss contingency or goodwill impairment. The effective tax rate rose to 22% for the three months from 19%, which management attributes primarily to a decrease in the net tax benefit from effects of non-U.S. operations and an increase in the net tax expense related to stock-based compensation.

Red flag

Cost of revenue rose 19% and operating expenses rose 15% for the three months, both outpacing the 13% revenue increase, contributing to net income growth of 3% versus revenue growth of 13%.

Red flag

Working capital declined to $(2,730) million from $(37) million at November 28, 2025, with the current ratio falling to 0.77x from 1.00x.

Value Drivers & Capital Allocation

“In April 2026, our Board of Directors granted additional authority to repurchase up to $25 billion in our common stock through April 30, 2030.”
— Filing statement

Period net income attributable to the parent / period-end equity, not annualized: 15.5% (prior at 2025-08-29: 15.1%); period net income attributable to the parent / period-end assets, not annualized: 6.1%.

Forward Signals

The filing provides no quarterly or full-year revenue or EPS guidance. It states that the 2025 U.S. Tax Act restores immediate expensing of domestic research and development costs and modifies certain international provisions effective for us starting in fiscal 2026 and 2027, respectively, and that Adobe anticipates a reduction to its effective rates for cash taxes paid for fiscal 2026 and beyond.

Known trends

Adobe states that it expects to continue its investing activities, including short-term and long-term investments, purchases of computer and server hardware to operate its network infrastructure, sales and marketing, product support and administrative staff.
Adobe states that cash reserves may be used to repurchase stock under its stock repurchase program and to strategically acquire companies, products or technologies that are complementary to its business.
Adobe states that it intends to refinance the current portion of its debt on or before the due date, subject to market conditions.

Subsequent events

On June 24, 2026, Adobe entered into a definitive agreement to acquire Topaz Labs Inc. for approximately $340 million, primarily in cash consideration, subject to regulatory approvals and customary closing conditions, expected to close in the fourth quarter of fiscal 2026.

“Based on our current business plan and revenue prospects, we believe that our existing cash, cash equivalents and short-term investment balances, our anticipated cash flows from operations and our available revolving credit facility will be sufficient to meet our working capital, operating resource expenditure and capital expenditure requirements for the next twelve months and for the foreseeable future.”
— Adobe Inc. (MD&A)

Risks

3 source-verified filing excerpts. 1 item withheld because the evidence could not be matched. Selected excerpts are not a complete risk inventory.

Filing excerpt 1

EvidenceOn March 12, 2026, we reached an agreement to settle the action, and on March 13, 2026, we filed a stipulation of dismissal with the Court.

Filing excerpt 2

EvidenceIn view of the complexity and ongoing and uncertain nature of the outstanding proceedings and inquiries, at this time we are unable to estimate a reasonably possible financial loss or range of financial loss, if any, that we may incur to resolve or settle the Securities Action and the Derivative Actions.

Filing excerpt 3

EvidenceIn the second quarter of fiscal 2026, we recorded a goodwill impairment charge related to our Publishing & Advertising reporting unit. We may be required to record additional charges to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets is determined, negatively impacting our results of operations.

Balance Sheet & Liquidity

Leverage: Identified debt as of 2026-08-28 (carrying amount): long-term debt including current maturities of $4.8B. Not separately reported in this filing's standardized data: short-term borrowings. Total debt, net debt and debt-to-equity are therefore not stated.

Liquidity: Cash and cash equivalents of $4,359M plus short-term investments of $1,280M; a $1.5B senior unsecured revolving credit agreement with no outstanding borrowings as of August 28, 2026, and a $3B commercial paper program with $250M outstanding.

Working capital: Current assets $9.2B vs. current liabilities $11.9B (current ratio 0.77x). Prior reported balance sheet as of 2025-11-28: $10.2B vs. $10.2B (1.00x).

Maturities & covenants

During the nine months ended August 28, 2026, Adobe reclassified the senior notes due February 1, 2027 and April 4, 2027 as current debt; the carrying value of the current portion of senior notes was $1.35 billion, and Adobe intends to refinance the current portion of its debt on or before the due date, subject to market conditions.
Adobe's senior notes do not contain financial covenants; the February 2020 notes include covenants that limit its ability to grant liens on assets and to enter into sale and leaseback transactions, subject to significant allowances.

Notable Footnotes

Item	Impact
Semrush acquisition completed April 28, 2026 for $1.87 billion, primarily in cash consideration, with $1,251 million recorded as goodwill.	The acquisition increased goodwill to $14.04 billion from $12.86 billion and added $582 million of identifiable intangible assets; financial results and pro forma financial information were not presented as the impact was not material.
Goodwill impairment of $70 million associated with the Publishing & Advertising reporting unit recorded in the second quarter of fiscal 2026.	The charge was recorded in general and administrative expenses and partially offset the increase in goodwill from the Semrush acquisition.
Remaining performance obligations of approximately $22.16 billion as of August 28, 2026.	Approximately 67% of remaining performance obligations, excluding certain enterprise customer agreements, are expected to be recognized over the next 12 months with the remainder recognized thereafter.
Commercial paper program with $250 million outstanding as of August 28, 2026, with a carrying value of $248 million and a weighted average interest rate of 3.77%.	There were no outstanding borrowings under the commercial paper program as of November 28, 2025.

Ask ADBE’s 10-Q anything

Get plain-English answers, each cited to the exact filing text. Try a starter question:

AI-generated. Informational only, not investment advice. May be incomplete or contain errors. The authoritative source is always the original SEC filing.