Goldman Sachs on Adobe Inc. (ADBE.US) 3QFY26: Top-of-Funnel Momentum Builds, but the Monetization Path Remains in Question
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Goldman Sachs keeps its Sell rating on Adobe (ADBE.US) and lifts the 12-month target price from US$190 to US$200, implying roughly 20.7% downside against the current US$252.23, with valuation still based on an unchanged 9x SNTM GAAP net income P/E. 3QFY26 broadly beat expectations: revenue of US$6.760 billion was 1% above Street (in line at constant currency), total ARR of US$27.50 billion and a 44% EBIT margin matched estimates, EPS of US$6.14 beat both Goldman's US$6.10 and Street's US$6.08, and free cash flow of US$2.438 billion (36% margin) came in about 300bps ahead. Since 2H FY26 Adobe has deliberately widened its freemium funnel, deferring pricing actions to prioritize user acquisition and engagement. Early signals are encouraging: total MAU surpassed 1 billion (+20% y/y), creative freemium MAU exceeded 100 million (+70%), Firefly ARR grew 40% sequentially, and AI-first ARR topped US$650 million (+150%). Goldman's core question is whether this engagement converts into sustainable monetization and durable ARR growth; RPO deceleration is at least partly tied to new creators favoring monthly contracts that generate less RPO than annual commitments. The CEO transition to Anil Chakravarthy, with David Wadhwani departing, adds execution variables. Revenue forecasts for FY26/27/28 move to US$26.601/29.018/31.490 billion, with FY27 the key window for conversion evidence.
Key exhibits
Exhibit 1
