Adobe’s earnings stock drop of 8.9% following its second-quarter FY2026 results wrong-footed investors who had expected the software group’s record revenue to send shares higher. A £10,000 position held before the announcement is now worth £9,111, a £889 loss.
Record Numbers, Falling Share Price
The headline financials were hard to fault. Adobe reported total revenue of $6.6bn in Q2 FY2026, up 13% from $5.6bn a year earlier and ahead of consensus estimates of $6.5bn.
According to Adobe’s Q2 FY2026 earnings release, subscription revenue reached $6.42bn, representing 97% of total revenue, with remaining performance obligations of $22.27bn. Non-GAAP earnings per share rose 18% year on year to $5.96, alongside GAAP EPS of $4.25, up from $3.94 in the same period a year ago.
Artificial intelligence is generating real revenue. Annualised recurring revenue tied to AI products tripled year on year, exceeding $500m, according to the company.
Adobe’s 10-Q filing shows net income for Q2 FY2026 of $1.71bn, bringing the first-half FY2026 total to $3.60bn.
What Drove the Adobe Earnings Stock Drop
Two factors unsettled investors despite the strong numbers.
First, Adobe confirmed the departure of chief financial officer Dan Durn (the original wire identified him incorrectly as Dan Burns). According to BigGo Finance, Durn joins Marvell Technologies as CFO effective 15 June, bringing three decades of semiconductor finance experience from Applied Materials, NXP Semiconductors, and GlobalFoundries. He had also served on Marvell’s board for two years before his appointment.
The timing sharpens concerns. Durn’s exit is the second senior departure this year: long-serving chief executive Shantanu Narayen has said he will step down once a successor is found. Jefferies analyst Brent Thill wrote that Durn’s move to Marvell suggests ‘problems may be deeper at Adobe,’ and, according to Finimize, Thill noted the CEO search does not appear immediate.
Second, annualised recurring revenue from subscriptions stands at $27.1bn, with management forecasting 10.2% growth for the full year. Investors had expected a faster pace, raising questions about competitive pressure on Adobe’s core creative software franchise.
Adobe also completed the acquisition of Semrush for $1.87bn in the quarter, adding $480m in ARR, per the earnings release. The company recorded a $70m goodwill impairment in its Publishing and Advertising unit at the same time.
Outlook Raised but Valuation Stands Out
Management lifted full-year guidance. Adobe now targets total revenue of $26.5bn to $26.6bn for FY2026, against $23.8bn in FY2025. Full-year GAAP EPS is guided at $17.90 to $18.00, with non-GAAP EPS of $24.35 to $24.45, according to the Adobe Q2 FY2026 earnings release.
For Q3 FY2026, Adobe targets revenue of $6.67bn to $6.72bn, with GAAP EPS of $4.40 to $4.45 and non-GAAP EPS of $6.05 to $6.10.
The company has also been buying back its own stock aggressively. Adobe repurchased 16.6 million shares for $4.59bn year to date as of Q2 FY2026, with $26.78bn still authorised for future repurchases, per the earnings release.
At $199.35, Adobe trades on a forward price-to-earnings ratio of 9.3, according to Quartr’s earnings summary. For a company guiding to double-digit revenue growth and expanding EPS, that multiple sits well below software-sector norms.
The binary for investors now is straightforward: whether the leadership vacuum resolves quickly and ARR growth re-accelerates, or whether the dual departures signal a deeper strategic reset. The next test is Q3 results, where management’s $6.67bn to $6.72bn revenue target will either rebuild confidence or confirm the sceptics.
