Adobe (ADBE) Stock Drops 3% After Q4 Revenue Forecast Misses Wall Street Estimates

TLDR

• Adobe’s Q4 revenue guidance of $6.8B to $6.85B came in just below the $6.85B analyst estimate
• Non-GAAP EPS guidance of $6.30 to $6.35 was in line with the $6.30 analyst average
• Stock fell around 3% in after-hours trading after already being down 29% year-to-date
• Morgan Stanley kept its Underweight rating and $240 price target on Adobe
• Adobe named internal executive Anil Chakravarthy as new CEO, effective December 1

Adobe delivered a Q3 earnings beat but the stock dropped after its Q4 outlook fell just short of what Wall Street was looking for. The stock was trading around $248.83 before falling roughly 3% in extended trading.

Adobe Inc., ADBE

Q3 revenue came in at $6.76 billion, up 13% year-over-year and about 1% ahead of Adobe’s own guidance. Non-GAAP EPS was $6.13, beating analyst estimates. On paper, a decent quarter.

But the market was focused on what’s ahead. Adobe guided Q4 revenue of $6.8 billion to $6.85 billion. The midpoint of that range missed the $6.85 billion consensus estimate. Small miss, but enough to sting.

ADOBE $ADBE Q3’26 EARNINGS HIGHLIGHTS

🔹 Revenue: $6.8B (Est. $6.69B) 🟢; +13% YoY
🔹 Adj. EPS: $6.13 (Est. $6.09) 🟢; +15% YoY
🔹 GAAP EPS: $4.62; +11% YoY
🔹 ARR: $27.5B

Raises FY26 Guide:
🔹 Revenue: $26.58B-$26.63B (Est. $26.51B) 🟢
🔹 EPS: $24.45-$24.50 (Est. $24.36) 🟢
🔹… pic.twitter.com/uK2DdDP2X6

— Wall St Engine (@wallstengine) September 10, 2026

Non-GAAP EPS guidance for Q4 came in at $6.30 to $6.35, roughly in line with the average analyst estimate of $6.30.

Adobe also raised its fiscal 2026 revenue guidance by around $50 million, passing through the Q3 beat. It held fiscal 2026 ARR growth guidance at 10.2% and operating margin at 45%.

ARR Growth Slows as Freemium Strategy Shifts

Total annual recurring revenue reached $27.5 billion. Net new ARR came in around $400 million ahead of expectations, but that figure was down 38% year-over-year. Adobe attributed the decline to routing more demand through freemium experiences rather than paid subscriptions.

Q4 guidance implies roughly $775 million in net new ARR, nearly double Q3 but still down 16% year-over-year.

Remaining performance obligations and current RPO both grew 8% and 9% respectively, slowing from 13% growth in both metrics in Q2.

On the user side, total monthly active users crossed 1 billion, up 20% year-over-year. Creative freemium MAU surpassed 100 million, up 70%. AI-first ARR rose above $650 million, up 150%. Firefly App and credit-pack ARR grew 40% quarter-over-quarter.

Adobe’s gross profit margin sits at 89.4%, reflecting strong pricing power across its software portfolio.

CEO Change Adds to Investor Unease

Earlier this week, Adobe announced that Anil Chakravarthy, who led Adobe’s marketing and analytics software division, will become CEO on December 1.

The pick raised eyebrows. Chakravarthy’s division is smaller than Adobe’s core creative business. The other internal candidate, David Wadhwani, who oversaw the creative unit, will leave the company later this month.

Morgan Stanley reiterated its Underweight rating on Adobe following the results, keeping its price target at $240. The firm cited limited evidence of a business inflection. The stock was already down 29% year-to-date heading into the report.

Adobe’s AI-first ARR grew 150% but investors remain cautious about whether that growth can offset pressure from competing AI tools that allow users to create content without Adobe’s products.

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