Summary
Adobe opened fiscal 2026 with record first quarter revenue of $6.40 billion, up 12% from the prior-year quarter. Gross profit was $5.73 billion, up 12.6%, and gross margin reached 89.6%, up 0.5 percentage points. Operating income rose 11.8% to $2.42 billion, while operating margin was 37.8%, flat versus the prior-year quarter, with a 0.1 percentage point decrease. Net income increased 4.3% to $1.89 billion, and diluted EPS rose 11.1% to $4.60. On a non-GAAP basis, operating income was $3.04 billion, net income was $2.49 billion, and diluted EPS was $6.06.
The top line benefited from subscription momentum. Total Adobe ARR ended the quarter at $26.06 billion, up 10.9% year over year. AI-first ARR more than tripled year over year. Remaining performance obligations were $22.22 billion, up 12.8%, and deferred revenue was $7.37 billion, up 13.6%. Current remaining performance obligations were 67% of the total. Management said growth came from Creative Cloud Pro, Acrobat, Adobe Experience Platform and related apps, Adobe Experience Manager, and GenStudio solutions, partly offset by a decrease from Adobe Stock. The company also combined its former segments into a single operating and reportable segment during the quarter.
Profitability was supported by revenue growth, but net income growth lagged operating income growth. Operating margin held near the prior-year level. The company reported record first quarter operating cash flow of $2.96 billion, up 19.2%. Capital expenditures were $37 million, up 42.3%. Adobe repurchased approximately 8.1 million shares during the quarter and made payments totaling $2.48 billion under its stock repurchase program. As of February 27, 2026, $3.89 billion remained under the March 2024 repurchase authority. The company also said it expects to close its pending acquisition of Semrush Holdings for approximately $1.9 billion in the second quarter of fiscal 2026, subject to regulatory approvals and customary closing conditions.
For the second quarter of FY2026, Adobe issued targets that include Business Professionals & Consumers subscription revenue of $1.80 billion to $1.82 billion and Creative & Marketing Professionals subscription revenue of $4.41 billion to $4.44 billion. Non-GAAP diluted EPS is targeted at $5.80 to $5.85. The targets assume a non-GAAP operating margin of 44.5%, a non-GAAP tax rate of 18.0%, and a diluted share count of 402 million. Adobe reaffirmed its previously issued FY2026 targets. The guidance excludes any contribution from the pending Semrush acquisition and factors in current macroeconomic conditions.
The quarter also brought a leadership transition. CEO Shantanu Narayen, who has served as CEO for eighteen years, decided to transition after a successor is appointed. Narayen will remain as Chair of the Board, and Frank Calderoni, Lead Independent Director, will chair the special committee leading the search. Risks in the filing include macroeconomic conditions, foreign currency fluctuations, failure to innovate or compete effectively, issues with development and use of AI, acquisition integration and regulatory approvals, litigation and regulatory actions, and changes in tax regulations. The company also recorded a loss contingency tied to a legal settlement during the quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $6.40B | $6.19B | +3.3% | $5.71B | +12.0% |
| Gross profit | $5.73B | $5.54B | +3.4% | $5.09B | +12.6% |
| Gross margin | 89.6% | 89.5% | +0.1 pp | 89.1% | +0.5 pp |
| Sales & marketing | $1.71B | $1.73B | -1.2% | $1.50B | +14.2% |
| General & administrative | $463.0M | $421.0M | +10.0% | $367.0M | +26.2% |
| Total operating expenses | $3.32B | $3.28B | +1.0% | $2.93B | +13.2% |
| Operating income (loss) | $2.42B | $2.26B | +6.9% | $2.16B | +11.8% |
| Operating margin | 37.8% | 36.5% | +1.3 pp | 37.9% | -0.1 pp |
| Net income (loss) | $1.89B | $1.86B | +1.8% | $1.81B | +4.3% |
| Net margin | 29.5% | 30.0% | -0.4 pp | 31.7% | -2.2 pp |
| Diluted EPS | $4.60 | $4.35 | +$0.25 | $4.14 | +$0.46 |
Risks
Adobe faces intensifying competition from generative and agentic AI solutions, including prompt-based and multi-modal creation, document productivity, ad distribution and purpose-built AI agents, some embedded in third-party AI platforms. Competitors may use AI, different data training strategies or proprietary data access to develop competing solutions more rapidly or successfully, which could reduce sales.
Adobe's growth strategy depends on innovating in AI across Creative Cloud, Acrobat and Experience Cloud, but the filing states there can be no assurance that new or enhanced AI solutions will be successful, adopted or monetizable. AI inferencing, third-party model and hardware costs may pressure margins as Adobe scales AI.
Global AI regulations, including the EU AI Act being implemented in phases through 2030 and developing U.S. federal and state frameworks, may increase compliance, governance and R&D costs, delay or halt AI solution development, and expose Adobe to fines, investigations and liability, especially as it offers third-party AI models.
Enterprise sales cycles are extended and complex, and adding generative and agentic AI capabilities can increase technical and contractual assurances, proof-of-concept cycles and contract negotiations. Adobe's enterprise sales pattern is uneven, with a higher percentage of quarterly sales historically occurring in the final weeks of each quarter.
Adobe derives a large portion of revenue outside the U.S. and is exposed to inflation, interest rates, trade disputes, tariffs, sanctions, armed conflicts and foreign currency fluctuations. In Q1 FY2026, a weaker U.S. dollar increased revenue by approximately $123 million, partly offset by $49 million in hedging losses.
Adobe agreed to acquire Semrush Holdings for approximately $1.9 billion, expected to close in Q2 FY2026 subject to regulatory approvals. The filing notes prior difficulties obtaining regulatory approvals that terminated a previously announced acquisition and incurred additional costs, and acquisitions may fail to deliver expected benefits.
Competition for talent with AI and cybersecurity backgrounds is intense, and hybrid work may create operational, security and culture challenges. Adobe has experienced and may continue to experience higher compensation costs to retain and recruit senior management and highly skilled personnel.
General and administrative expenses increased 26% in Q1 FY2026, with the MD&A attributing part of the increase to a loss contingency associated with a legal settlement. Adobe is subject to class actions, regulatory inquiries, antitrust, consumer protection, IP and privacy claims that could result in damages, injunctions, business practice changes and management distraction.
The effective tax rate increased to 22% in Q1 FY2026 from 17% in Q1 FY2025, primarily due to an increase in the anticipated benefit from a foreign tax asset in the prior year and an increase in net tax expense related to stock-based compensation. Changes in tax laws or examinations could further affect Adobe's effective rate and profitability.
Expanding global privacy and data protection laws, including GDPR, cross-border transfer restrictions, the EU Data Act, the Digital Services Act and U.S. state laws, increase compliance obligations and potential liability. Adobe processes customer data and could face fines, lawsuits, audits and restrictions on sales.
SaaS KPIs
All quarters →Remaining Performance Obligations (RPO)
Current Remaining Performance Obligations (cRPO)
Total Adobe ARR
Summary, forecast, risks and KPIs are extracted from ADOBE INC.'s SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.