$ADBE · ADOBE INC.

Adobe filed its 10-Q for Q3 FY2026 (ended August 28, 2026), reporting revenue of $6.76B (+12.9% YoY), net income of $1.827B (+3% YoY), and GAAP diluted EPS of $4.62. Subscription revenue of $6.58B (+14% YoY) drove the top line, but cost of revenue jumped 19% and operating expenses rose 15%, compressing operating margin to 34.8%. Total Adobe ARR reached $27.50B (+11.2% YoY) with remaining performance obligations of $22.16B (+8%). The company repurchased $6.88B in stock over nine months, reducing shares outstanding to 391M.

Stock fell 4.52% in the regular session to $238.25, and is down an additional 0.97% since filing at $240.58. The market is penalizing the margin compression story — revenue growth remains solid at 13%, but cost growth (19% cost of revenue, 15% opex) is eroding the bottom line, with net income up only 3%.

Adobe's margin compression — 19% cost growth vs. 13% revenue growth — signals that even dominant SaaS platforms face profitability headwinds as AI and cloud infrastructure costs escalate.

Adobe's 12.9% revenue growth and 88.7% gross margin remain best-in-class among enterprise SaaS peers, but the margin compression narrative echoes broader software-sector concerns about AI infrastructure costs pressuring profitability even at scaled platforms.

Cost of revenue grew 19% YoY vs. 13% revenue growth, driven by subscription delivery costs; operating expenses rose 15% with R&D up 18% and G&A up 20%. Goodwill impairment of $70M was recorded in the nine-month period. Debt increased with $1.597B reclassified to current from long-term.