Update shared on 12 Jun 2026
Fair value Increased 0.87%Thesis Update: Upward Revision on Adobe (ADBE) Post-Q2 CY2026 Earnings
I am raising my fair value estimate for Adobe following this morning's strong earnings print and updated outlook.
The Core Catalyst:
The revision hinges on two key updates: raised FY2026 revenue guidance and a ~2% point drop in unadjusted operating margin. The net result of the revenue and earnings beat is a net positive to my model.
My Take on the Market Mispricing:
The market is heavily discounting Adobe’s phenomenal cash generation. The bears tracking AI risk are missing the tangible monetization data: AI-First ARR has tripled YoY, now topping $500 million.
Q2 Data Highlights:
- Revenue: $6.62B vs. $6.45B expected (+12.7% YoY, 2.6% beat).
- Adjusted EPS: $5.96 vs. $5.81 expected (2.5% beat).
- Operating Income (Adj.): $2.95B (44.5% margin, 2.6% beat).
- Margins: Unadjusted operating margin sat at 33.8% (down from 35.9% YoY). FCF margin dropped to 31.8% from 45.7% sequentially.
- Forward Guidance (Midpoints): FY26 Revenue lifted to $26.55B (vs $26.09B consensus); FY26 Adj. EPS lifted to $24.40 (3.6% beat).
- Business Momentum: Total ARR at $27.1B (+12.5% YoY); Billings at $6.40B (+11.9% YoY).
Feedback welcome!
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