Adobe (NASDAQ: ADBE) delivered a quarter that validated the AI thesis and then some. Record Q2 revenue of $6.62 billion beat the analyst consensus of $6.45 billion by 2.6%, and non-GAAP EPS of $5.96 cleared the $5.82 estimate by a comfortable margin. More telling than the headline beat: AI-first annualized recurring revenue tripled year over year to exceed $500 million, and total ARR exiting the quarter stood at $27.10 billion, including roughly $480 million from the Semrush acquisition.
Management responded by raising full-year guidance across the board. FY26 total revenue is now expected at $26.50 billion to $26.60 billion, up from the prior range. Non-GAAP EPS guidance was lifted to $24.35 to $24.45. The Q3 targets also came in above expectations: revenue of $6.67 billion to $6.72 billion and non-GAAP EPS of $6.05 to $6.10. This is a company signaling confidence in sustained demand, not just a one-quarter beat.
The revenue composition tells a clean story. Business Professionals & Consumers subscription revenue grew 16% year over year to $1.85 billion. Creative & Marketing Professionals subscription revenue rose 13% to $4.54 billion. Both segments are benefiting from AI features that drive upsells and new customer acquisition. The Semrush acquisition, closed during the quarter, contributed roughly $40 million to subscription revenue, but organic growth remains strong.
Operating cash flow came in at $2.17 billion, and Adobe repurchased approximately 8.5 million shares during the quarter. The buyback pace is aggressive relative to the prior year, when the company repurchased 3.5 million shares in Q2. That capital return, combined with the raised guidance, suggests management sees the stock as undervalued relative to the AI-driven growth trajectory.
One item that deserves attention: GAAP net income of $1.71 billion included a $0.17 per share non-cash goodwill impairment charge related to the Publishing & Advertising reporting unit. This is a small number relative to the overall business, but it highlights that not every legacy segment is participating in the AI uplift. The impairment is a reminder that Adobe's transformation is not uniform across its portfolio.
The CFO transition is the other notable event. Dan Durn is departing on June 15, 2026, and Steve Day, SVP of Corporate Finance and CFO of the Customer Experience Orchestration Business Unit, will serve as interim CFO. Day has 20 years at Adobe and knows the business deeply, but an interim CFO during a period of raised guidance and AI acceleration introduces execution risk. Investors will want to hear how quickly a permanent replacement is named and whether the finance organization's strategic priorities shift.
Looking ahead, the key question is whether the AI-first ARR growth rate is sustainable. Tripling from a small base is impressive, but the law of large numbers applies. The raised full-year ARR growth target of 10.2% year over year implies continued momentum, but the pace of deceleration from the triple-digit AI ARR growth rate will be a focal point in coming quarters. For now, Adobe has delivered a quarter that justifies the optimism, and the guidance raise confirms that management sees the AI opportunity as durable, not ephemeral.