I used to think ADBE was the baby thrown out in the SaaSpocylypse narrative bathwater, although I think the market is actually being prescient here (like, in newspaper industry).
Although it's had 6 consecutive beat and raise quarters, there are clear cracks showing it's foundation.
1. Operating and FCF margins starting to compress - Freemium costs are adding up, and they say they are strategically delaying monteziation, although I think it shows they have no pricing power. In the Freemium space, image editing / generation is a commodity and consumers will use whatever is cheap and easy (meaning, I don't think they will ever meaningfully monetize the freemium user).
2. Organic ARR slowing - yes, ARR did increase this quarter after a many quarter downtrend, although that's because of the Semrush acquisition (acquiring growth). I think it hides the deeper trend that the business is eroding.
3. Goodwill impairment in Publishing & Advertising - only $70 million, non cash, so what? It's also the second consecutive quarter where there's signs that the legacy business isn't as good as management though (last quarter it was in Stock business). What will it be next quarter?
On top of this, the two most important executives (CEO, CFO) are both turning over at the same time.
It's a time of business model transition with high execution risk, and the longer management takes to respond to the market, the worse it'll be for the future.
I wouldn't be a buyer here - yes, price is low one can argue it's de-risked, but there's opportunity cost and better buys out there imho.
Anyhow, full Q2 breakdown with further expansion of the above here --> [https://thepursuitofcompounding.substack.com/p/adobe-q2-2026-hairlines-becomes-a?r=xy3ae](https://thepursuitofcompounding.substack.com/p/adobe-q2-2026-hairlines-becomes-a?r=xy3ae)
