The software group reported revenue of $6.76 billion for the fiscal third quarter ended August 28, up 13% from a year earlier and above market expectations of about $6.7 billion. Adjusted earnings were $6.13 a share, also ahead of forecasts, while net income rose to $1.83 billion, or $4.62 a diluted share.
Adobe shares fell about 2% in extended trading after Thursday’s results and weakened further before Friday’s opening, reflecting concern over a fourth-quarter revenue forecast whose midpoint was slightly below consensus. The stock later reversed course and closed Friday 1.4% higher at $252.23, though it remained sharply lower for the year.
The investor response highlighted the tension at the centre of Adobe’s strategy. The company is deliberately widening access to free and lower-cost creative products to attract new users, particularly as artificial intelligence reshapes design, document and marketing software. Creative freemium monthly active users surpassed 100 million during the quarter, growing more than 70% year on year.
Across Adobe’s creativity and productivity products, monthly active users exceeded one billion. Acrobat and Express accounted for more than 900 million monthly users, while use of Acrobat’s AI Assistant doubled from the previous quarter. Adobe said the larger audience is intended to create a broader funnel from which more users can eventually move into paid products and higher-value AI services.
Market concern remains focused on whether Adobe can convert that enlarged free audience while defending its software franchise from AI-enabled alternatives. Grace Harmon, an analyst at Emarketer, said the revenue beat could ease fears that Adobe had “lost its footing”, but the softer fourth-quarter outlook kept attention on competitive pressure.
That expansion has a short-term cost. Interim chief financial officer Steve Day said growth in remaining performance obligations reflected Adobe’s decision to accelerate new-user acquisition through the freemium model. Remaining performance obligations stood at $22.16 billion at the end of the quarter, up 8% from a year earlier, while current remaining performance obligations increased 9%.
Total annualised recurring revenue reached $27.50 billion. Adobe has acknowledged that its emphasis on attracting users before monetising them, together with deferred pricing initiatives, can weigh on near-term additions to recurring revenue even as engagement expands.
Management said its strategy first emphasises acquisition, then greater engagement and AI usage before conversion into recurring revenue. The company said accelerating credit consumption across Creative Cloud and Firefly was evidence that customers were using generative features more intensively.
Artificial intelligence remains central to the company’s case for stronger future monetisation. Adobe said annualised recurring revenue from products it classifies as AI-first rose more than 150% year on year and exceeded $650 million. Firefly-related ending annualised recurring revenue, including the Firefly application and credit packs, increased 40% from the previous quarter.
Subscription revenue, which provides most of Adobe’s sales, increased to $6.58 billion from $5.79 billion a year earlier. Creative and Marketing Professionals subscription revenue rose 13% to $4.65 billion, while Business Professionals and Consumers subscription revenue climbed 16% to $1.91 billion.
The company raised its full-year outlook after the stronger quarter. Adobe now expects fiscal 2026 revenue of between $26.576 billion and $26.626 billion, compared with its previous range of $26.5 billion to $26.6 billion. Adjusted earnings are forecast at $24.45 to $24.50 a share.
For the fourth quarter, Adobe projected revenue of $6.80 billion to $6.85 billion and adjusted earnings of $6.30 to $6.35 a share. The revenue midpoint of $6.825 billion was slightly below the roughly $6.85 billion expectation cited by analysts following the company.
The results arrive during a major leadership transition. Anil Chakravarthy, currently president of Adobe’s Customer Experience Orchestration business, will become president and chief executive on December 1. Long-time chief executive Shantanu Narayen will move to executive chair.
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