Adobe delivered another record quarter, but a softer-than-expected fourth-quarter forecast has renewed questions about the impact of artificial intelligence on the software industry’s growth model. The results arrive as investors increasingly distinguish between technology companies that benefit from AI demand and established software businesses that could face disruption from increasingly capable AI tools.

Strong Quarterly Results, Softer Forward Guidance

Adobe reported third-quarter fiscal 2026 revenue of $6.76 billion, representing 13% year-over-year growth, while non-GAAP earnings reached $6.13 per diluted share. Total annualized recurring revenue rose to $27.50 billion, and operating cash flow reached a quarterly record of $2.52 billion. Adobe also said AI-first ARR increased more than 150% from a year earlier, highlighting the company’s ability to monetize AI capabilities across its creative and productivity ecosystem.

The concern emerged in the outlook. Adobe expects fourth-quarter revenue of $6.80 billion to $6.85 billion, a range that sits slightly below the market’s expectations. The company nevertheless raised its full-year fiscal 2026 revenue target to $26.576 billion-$26.626 billion and increased its non-GAAP EPS target to $24.45-$24.50.

Why AI Is Both an Opportunity and a Risk

Adobe’s AI strategy is increasingly central to its growth outlook. Firefly, Acrobat’s AI capabilities and other AI-first products are expanding the company’s addressable market, while a freemium strategy is designed to increase user adoption and create a larger base of potential paying customers.

At the same time, generative AI is lowering barriers to content creation and introducing new competitors. Companies such as Canva and Figma are expanding their AI capabilities, while rapidly improving generative models could allow users to perform tasks that historically required specialized creative software. That creates a more complicated equation for Adobe: AI can increase product value, but it can also weaken the pricing power and differentiation of established tools.

Leadership Transition Adds Another Variable

The financial outlook also comes during an important leadership transition. Anil Chakravarthy is scheduled to become Adobe’s president and CEO on December 1, replacing longtime CEO Shantanu Narayen, who will become executive chair. The transition comes as Adobe attempts to translate its AI investments into sustained revenue growth while defending its position in a rapidly changing software market.

For investors, the key question is increasingly whether Adobe’s AI products can generate incremental demand quickly enough to offset competitive pressure. The company’s strong AI-first ARR growth suggests meaningful adoption, but the next several quarters will provide a clearer indication of whether that adoption is translating into accelerating overall growth.

Adobe’s ability to expand its user base, monetize AI features and maintain margins will remain central to the stock’s valuation. Investors are likely to focus on recurring-revenue growth, AI monetization, customer retention and competitive developments as the company enters a new leadership phase and the broader software sector adjusts to a faster pace of AI-driven disruption.