Key Metrics to Watch Tonight Ahead of Adobe’s Q2 Earnings

That wraps up our initial coverage of Adobe’s Q2 results. Thank you for stopping by!

Check out management’s earnings call at 5 PM EST for more updates.

Adobe disclosed that CFO Dan Durn will leave the company on June 15, the beginning of next week, to pursue another professional opportunity. This is likely a contributing factor to why Adobe’s stock is down 6% after Q2 earnings.

Steve Day, currently SVP of Corporate Finance and CFO of Adobe’s Customer Experience Orchestration business, will serve as interim CFO.

It’s important to note that Adobe’s current CEO, Shantanu Narayen, is also looking to transition once the company names a successor.

Adobe emphasized that Day brings two decades of experience at the company and will work directly with CEO Shantanu Narayen as Adobe continues its AI-focused growth strategy.

Adobe raised its fiscal 2026 revenue and earnings outlook after delivering record second-quarter revenue of $6.62 billion, up 13% year-over-year. The company now expects fiscal 2026 revenue of $26.5 billion to $26.6 billion and non-GAAP EPS of $24.35 to $24.45.

Management cited strong demand for its AI-powered products across consumers, creators, marketers, and enterprise customers. The company said AI-first annual recurring revenue more than tripled year-over-year and now exceeds $500 million.

While still a small portion of Adobe’s overall business, the milestone provides evidence that the company’s AI strategy is beginning to generate meaningful revenue. Investors have spent the last year debating whether Adobe can monetize AI. Tonight’s results suggest that the answer is increasingly becoming yes.

With the beat now official, here’s the updated thesis check on Adobe (NASDAQ:ADBE).

Bull Case

• Revenue of $6.62 billion topped guidance’s high end of $6.48B, with EPS of $5.96 clearing the $5.85 ceiling.
• Revenue grew 13% YoY, accelerating from Q1’s 12.0% pace, validating AI monetization traction.
• At a forward P/E of 10 and an average analyst target of $329.33, the setup favors re-rating.

Bear Case

• The stock is now down 6% after reporting earnings, and shares are still down 43.91% over one year.
• Insiders have been net sellers across 123 transactions, including CEO Narayen’s 75,000-share April disposal.
• Without a raised FY26 guide above $26.10B, the stock may fall further on the call.

Adobe just reported earnings, with shares initially up about 1% following the report. Here are the key numbers:

• Revenue: $6.62 billion vs. $6.45 billion expected
• Adjusted EPS: $5.96 vs. $5.81 expected

Quick read:

• Adobe delivered another clean beat, topping Wall Street expectations on both revenue and earnings by roughly 3%.
• Revenue grew 13% year-over-year while EPS increased 18%, showing continued operating leverage despite investor concerns around AI competition.
• The stock’s muted reaction suggests investors are focused on guidance, AI monetization, and management’s long-term growth outlook.

Adobe has beaten earnings expectations for eight consecutive quarters, but that hasn’t been enough to lift the stock.

Shares have fallen sharply over the past year as investors focus on whether Adobe can prove its AI strategy will drive meaningful revenue growth rather than simply defend its existing business.

Adobe has highlighted strong momentum in products like Firefly, with AI-related annual recurring revenue growing rapidly from a small base. The challenge is scale.

As a result, Wall Street will be paying close attention to AI adoption metrics, net new ARR, and any changes to full-year guidance. Strong AI growth alone may not be enough. Investors want proof that AI can move the needle across Adobe’s $25 billion-plus business.

One of the more controversial Adobe debates heading into Q2 earnings is centered around capital allocation.

Over the past two years, Adobe spent more than $23 billion repurchasing stock at an average price above $400 per share. With shares recently trading near $230, critics argue that the company deployed a massive amount of capital at prices far above what the market values the business at today.

Investors will be watching to see whether management announces a new authorization or provides updated commentary on future capital returns during tonight’s report.

Tonight’s Q2 earnings report matters less than the Q3 outlook and any FY26 revision. Adobe (NASDAQ:ADBE) reaffirmed full-year revenue of $25.90B to $26.10B and non-GAAP EPS of $23.30 to $23.50 at Q1, and management has historically guided conservatively before raising at mid-year, as it did in Q2 and Q3 FY25.

Bullish vs. Bearish Scenarios

• Bullish: FY26 revenue raised above $26.10B, EPS above $23.50, Q3 ahead of Street, and AI-first ARR growth accelerating from Q1’s tripling YoY.
• Bearish: FY26 merely reaffirmed, Q3 below consensus, AI-first ARR decelerating, or cautious tone on the Semrush deal and CEO succession.

Investors also want clarity on operating margin holding near 44.5% and RPO momentum.

Bull Case

• Adobe (NASDAQ:ADBE) has beaten EPS estimates in 7 of the last 8 quarters, and Polymarket pegs tonight’s beat probability at 97.8%.
• AI-first ARR more than tripled YoY in Q1, with total ARR at $26.06B and RPO up 13% YoY to $22.22B.
• Retail sentiment surged from neutral to a peak bullish score of 78 on earnings morning.
• Shares trade at a P/E of 14, leaving room for a re-rating.

Bear Case

• Q2 guidance midpoint EPS of $5.80-$5.85 is below Q1’s $6.06 print, signaling sequential deceleration.
• Even when Adobe beats, the stock drops: average day-of move is -4.99% across the last five beats.
• Shares are down 43.91% over one year, with insiders net selling across 123 recent transactions.
• CEO succession and generative AI competition cloud the multi-year story.

Adobe stock is down about 5% today, suggesting investors have low expectations heading into tonight’s Q2 earnings. Shares trade at around 10x forward earnings, suggesting investors remain skeptical about the company’s ability to translate its AI investments into meaningful growth.

The key question tonight is whether Adobe can prove that AI is becoming a revenue driver rather than just a product feature. Investors will be watching for growth in AI-related annual recurring revenue, adoption of Firefly-powered tools, and signs that core subscription revenue remains healthy.

A strong report could help reset sentiment after months of concern that generative AI is disrupting Adobe’s business model. A cautious outlook, however, would likely reinforce fears that competitors are capturing a larger share of the AI opportunity.

This quarter, investors are looking to see AI momentum translate into measurable financial results.