Adobe in the AI stack

The business and what the filings show

Adobe sells the creative, document and marketing software behind much of the world’s design and publishing work: Photoshop, Illustrator, Premiere, Acrobat and its marketing applications. Over its latest four quarters it reported $26.0B of revenue, +12% on the year before, at an 89% gross margin, the highest in the software layer, and a 36% operating margin. It turned $10.6B into free cash flow and reports remaining performance obligations of $22.2B.

Its AI strategy is the Firefly family of generative models, which Adobe calls commercially safe, built into its flagship applications and sold alongside newer AI-first products, with models from partners available in the same workflows. That positioning matters because the image and video models that could make Adobe’s tools more productive are also offered by AI labs directly to the people who use those tools.

Adobe is therefore the clearest case on the map of the book’s question about whether AI widens a moat or fills it in. A company with this gross margin has plenty of room to absorb the cost of running models; the harder test is whether revenue growth holds as generative tools make some creative work cheap enough that fewer people need professional software to do it.

How AI shows up in the numbers

AI shows up at Adobe as generative features inside its creative, document and marketing products, and as AI-first offerings priced on their own. Its filings do not split AI revenue out, so the evidence is indirect: subscription growth, gross margin as generation costs rise, and how often the company puts numbers on AI results in its earnings releases rather than only describing them.

For scale, Adobe’s revenue over the latest four quarters equals 5% of the $566B the five largest buyers spent on capital projects over their latest four quarters. Their capex rose +81% on the year before, while Adobe’s revenue grew +12%: slower than the spending, so it is capturing a smaller share of each new capex dollar, or more of its business sits outside the build-out.

How it talks about AI

In its latest earnings release, furnished to the SEC on September 10, 2026, Adobe mentioned AI 8 times in 643 words of narrative text, about 12.4 mentions per 1,000 words. Of its 5 sentences about AI, 1 included a number: a revenue figure, a growth rate, a customer count or another measurable result. Across the 8 releases we read, back to December 11, 2024, AI mentions per 1,000 words went from 2.6 to 12.4.

Specific claims are easier to check against the numbers than general enthusiasm, which is why the share of AI sentences that carry a figure is worth watching alongside how often AI is mentioned. The sentences below are quoted from the release as published, after removing safe-harbor text and company boilerplate.

• “Adobe AI-first ARR grew more than 150% year over year”
• “Adobe delivered record Q3 results, reflecting the strength of our AI innovation, expanding customer reach and leadership across creativity, productivity and customer experience," said Shantanu Narayen, chair and”
• “Reaching a landmark of more than one billion monthly active users is a defining moment for Adobe, and I have confidence that Anil will build on this momentum to drive Adobe's next chapter of growth and innovation in the AI era.”

Source: earnings release (Form 8-K, Exhibit 99.1), September 10, 2026.

The trend in the numbers

Since the start of 2023, Adobe’s largest quarter by revenue was Q3 2026 at $6.8B, and its highest gross margin was 90% in Q3 2024. The latest quarter set the revenue record for the period.

Quarter by quarter, Adobe’s revenue grew +10% in Q4 2025, +12% in Q1 2026, +13% in Q2 2026, +13% in Q3 2026 on the same quarter a year earlier. The pace has been steady.

Gross margin in the latest quarter was 89%, against 89% a year earlier, little changed. Operating margin moved from 36% to 35% over the same span. Over the latest four quarters it turned 42% of its revenue into operating cash flow and spent 1% of revenue on capital projects, against 1% a year earlier.

Where it sits in the stack

Adobe sits in the software and applications layer of the AI stack. It sits at the top of the stack, where revenue from end customers has to come from; its own spending flows to AI clouds.

Among the 27 companies in this layer on our map, it ranks number 2 by revenue and number 21 of 27 by revenue growth. Its gross margin of 89% compares with 78% for the layer as a whole, a sign that it keeps more of each dollar than its neighbors. The full layer analysis is on the software page.

Latest four quarters for 10-Q filers; latest fiscal year for 20-F filers. Companies under $100 million of revenue are left out.

Against the 27 US-listed companies in its layer, Adobe grew +12% over the latest year versus +19% for the layer combined, and converted 41% of revenue into free cash flow versus 33% for the layer. It is growing more slowly than its layer, so its share of the layer’s revenue is shrinking.

What has to go right, and what could go wrong

What has to go right. Generative features have to make Adobe’s customers more productive in ways they will pay more for, and its rights-cleared models have to stay a reason for businesses to choose Adobe over general-purpose AI tools.

What could go wrong. If AI tools from model makers become good enough for most creative work, Adobe could face pressure on both the number of seats and the price of each, while still paying to run the models it offers.

These describe the conditions the business depends on, as the filings show them. They are not a view on the stock.

Through the lens of Investing in AI

Rob May’s book offers six mental models for telling AI moats from traps. The one most useful for Adobe’s layer is “AI challenges traditional SaaS assumptions”: Per-seat pricing, zero marginal cost, smooth ARR curves, and automatic land-and-expand break down when software does work on your behalf. The mistake is not using SaaS instincts. It is using them automatically.

The question it asks of any company is: What work is this product actually doing, and how does pricing map to it? Applied to Adobe, the filings on this page are the place to start: the margin trend shows whether it holds scarce value or passes it through, the customer and financing disclosures show who it depends on, and the commitments show what it has promised before the revenue arrives.

Customers and concentration

US companies must disclose any customer that accounts for 10% or more of revenue, and foreign filers usually describe their largest customers. Concentration matters because a company’s growth is only as durable as the handful of buyers behind it, and in the AI stack those buyers are often the same few companies.

• “s For all periods presented, there were no customers that represented at least 10% of net revenue or that were responsible for over 10% of our trade receivables.” 10-K, January 15, 2026

Commitments and backlog

• Backlog. Adobe reports $22.2B of remaining performance obligations, 0.9 times its revenue over the latest four quarters: contracted revenue not yet earned.
• Purchase commitments. $6.8B of unconditional purchase obligations as of November 28, 2025 (10-K): what it has contracted to buy from its own suppliers.

What to watch

Adobe’s next quarterly report will cover the quarter ending around November 27, 2026. Large companies must file a 10-Q within 40 days of a quarter’s end and a 10-K within 60 days of the fiscal year’s end, so the new figures should arrive by about January 26, 2027 at the latest. This page, the layer pages and the next quarterly report all update from that filing.

• Revenue growth against the software layer: holding or improving it is what generative features have to deliver.
• Gross margin, where the cost of running image and video models would show as usage grows.
• Remaining performance obligations, a read on whether customers are renewing and committing for longer.
• Its place in the next quarterly AI Stack Report, which updates every company on the map from the new filings.

Figures from Adobe’s SEC filings, latest period ended August 28, 2026. Other companies: all company pages.