Adobe Inc.

Good day, and welcome to the Q2 FY2026 Adobe Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Doug Clark, Vice President of Investor Relations. Please go ahead.

Good afternoon, and thank you for joining us. With me on the call today are Shantanu Narayan, Adobe's Chair and CEO, David Wadwani, President of Creativity and Productivity, Anil Chakravarty, President of Customer Experience Orchestration, and Steve Day, Senior Vice President, Corporate Finance and CFO of Customer Experience Orchestration. On this call, which is being recorded, we will discuss Adobe's second quarter fiscal year 2026 financial results. You can find our press release as well as PDFs of our prepared remarks and financial results on Adobe's Investor Relations website. The information discussed on this call, including our financial targets and product plans, is as of today, June 11, and contains forward-looking statements that involve risk, uncertainty, and assumptions. Actual results may differ materially from those set forth in these statements. For more information on those risks, please review today's earnings release and Adobe's SEC filings. On this call, we will discuss GAAP and non-GAAP financial measures. Our reported results include gap growth rates and non-gap growth rates, including constant currency rates. During this presentation, Adobe's executives will refer to revenue growth and constant currency rates unless otherwise stated. Non-gap reconciliations are available in our earnings release and on Adobe's Investor Relations website. I will now turn the call over to Shantanu.

Thanks, Doug. Good afternoon, everyone, and thank you for joining us. We achieved $6.62 billion in revenue in Q2, representing 11% year-over-year growth. Gap earnings per share for the quarter was $4.25, representing 8% year-over-year growth, and non-gap earnings per share was $5.96, representing 18% year-over-year growth. Strong revenue growth was driven by subscription bookings to revenue conversion. We drove EPS growth through record top line revenue and discipline investments across the company. At Adobe, we continue to be driven by our mission to empower everyone to create and deliver innovative products to delight users based on our customer strategy. We're focused on business professionals and consumers, creators and creative professionals, and marketing professionals. For business professionals and consumers, we're delivering AI-powered, quick and easy apps to stand out through creativity and productivity. For creators and creative professionals, we're delivering power and precision to bring creative visions to life across any media type and surface. For marketing professionals, we're delivering customer experience orchestration to create, deliver, and optimize personalized digital experiences. As we reflect on the market context and our first-half performance, it is clear that relative even to the beginning of fiscal 2026, AI is accelerating customer behavior at an unprecedented speed, and we need to evolve our strategy and execution to address these changing expectations. Much like how developers have embraced and expanded the AI coding market, There's a transformation underway for how consumers are discovering, experiencing, onboarding, and purchasing products across all categories, including creativity, productivity, gaming, and entertainment. As it relates to creativity and productivity, there's an unprecedented demand across additional surfaces for the combination of content consumption and content creation. Conversational interfaces and agents now orchestrate across tools to achieve outcomes faster. The proliferation of media generation models is reshaping and democratizing content workflows from ideation through delivery. AI-first applications that will serve broader audiences need to provide free, intuitive onboarding that drive usage and monetization through paywalls. Big picture, the immediate opportunity for Adobe is to accelerate new user acquisition and lifetime value through a freemium offering. As it relates to business professionals and consumers, we have dramatically increased Acrobat and ExpressMile from greater than 700 million to greater than 850 million year over year. The opportunity is to serve billions of business professionals and consumers through a comprehensive freemium funnel building on the success of the Adobe Reader model. Over the last year, we've delivered tremendous innovation across AI Assistant, PDF Spaces, Express, and Conversational Interfaces, and made these innovations available across surfaces including AI Mode in Reader, Edge, Chrome, and WhatsApp. Business professional and consumer traffic on Adobe.com seeking Adobe capabilities is growing 35% year over year. We believe this traffic is better served through a customized, friction-free onboarding experience without immediate paywalls and will result in greater customer acquisition and deeper engagement over time. Based on the early success and mau adoption of freemium journeys for Acrobat and Express, we're ready to expand this experience more aggressively. For next-generation creators, the opportunity is to deliver an AI production studio across web and mobile that seamlessly integrates with the power and precision capabilities of Creative Cloud. We have increased our creative freemium MAU from 50 million to 90 million year over year. The opportunity is to attract hundreds of millions of additional creators through a freemium funnel based on the early success of Firefly. Over the last year, we have delivered tremendous innovation across ideation through boards, generation with support for multiple media models, semantic image and video editing, and conversational interfaces that are available across surfaces, including mobile, web, and flagship Creative Cloud applications, such as Photoshop, Illustrator, and Premiere. The new personalized journeys for creators drove approximately 50% increase in Firefly ARR quarter over quarter through Firefly apps and credit packs. Based on this early success, we are confident that we should expand the Firefly freemium experience to acquire and delight the next generation of creatives. Creative Cloud continues to perform well as the best-of-breed offering for creative and marketing professionals globally. While we focus on accelerating creator acquisition through the freemium Firefly funnel, we have made the decision to defer previously planned Creative Cloud second-half line optimizations. As it relates to the customer experience orchestration, a genetic opportunity in the enterprise, marketing professionals are looking to automate and rapidly create, deliver, and personalize content at scale across every channel in a way that drives customer engagement and elevates their brand. Content creation designed specifically for marketing use cases is exploding. New AI coworkers and agents offer organizations the ability to deliver automation and outcomes powered by context, data, MCPs, and skills. These address the dual needs of enterprises to expand consumer centricity and cost savings in the era of AI. Business models are expanding to include consumption and outcome-based pricing along with subscriptions. The total marketing opportunity across people, software, agency, and channel spend is enormous. AI is changing enterprise behavior as they're increasingly bringing more marketing capabilities in-house through their adoption of software platforms and the creation of custom models that uniquely capture their brand intelligence. IT organizations are looking to Adobe to to accelerate their provisioning, deployment, and customization to serve their consumers through the availability of headless and agentic capabilities with pricing models that address outcomes as well as AI usage. Customer experience orchestration, AI-first ARR, grew 4x year over year, reflecting how Adobe is the leader in both the traditional marketing category and the emerging customer experience orchestration category. The introduction of Adobe CX Enterprise and CX Enterprise co-worker at Adobe Summit expands the vision and delivery of our category-defining CXO solutions. The successful acquisition of SEMrush unifies our search engine optimization, generative engine optimization, and AEM solutions to further extend our CXO offering. We will deliver this integrated offering that addresses brand visibility at the Cannes Lions Festival of Creativity later this month. This combination of creativity and marketing uniquely differentiates Adobe. No other company brings together what creatives and marketers can do across our applications and delivery platforms. Adobe Gen Studio ARR grew over 25% year over year, reflecting enterprise demand for an end-to-end solution that spans workflow and planning, creation and production, asset management, activation and delivery, and reporting and insights. Adobe's AI innovation has driven an impressive 3x year-over-year increase in AI-first ARR to greater than 500 million. We believe now is the time to aggressively acquire the next generation of Adobe loyalists. The strategic shift to acquire more freemium customers through Adobe and Firefly lowers our second half ARR growth expectations from individual subscribers. We believe these changes do make Adobe even stronger. We continue to target double-digit total ARR growth for Adobe, which now includes the SEMrush acquisition. Based on our strong first half revenue performance and the inclusion of SEMrush, We are pleased to raise our fiscal year revenue and non-GAAP EPS targets. As we announced, Dan Dern has decided to pursue a new opportunity outside the software industry. I'd like to thank Dan for his contributions to Adobe and wish him well. I'm pleased that Steve Day, who has been at Adobe for 20 years, serving in numerous financial leadership roles, will serve as interim CFO upon Dan's departure. I continue to be incredibly energized by Adobe's long-term AI opportunity and the innovative products we are delivering to a broader set of customers. Given my decision to transition to board chair, I wanted to provide an update on the CEO search, which is progressing well. The board has been actively engaged in a comprehensive process. While we all continue to be ruthlessly focused on driving execution, our goal is to have Adobe's next CEO in place to put their stamp on planning for fiscal 27 and beyond. I'll now turn it over to David.