Stephen Mitchell

Global market insights from meeting companies worldwide. Travel to meet all companies locally. Eyecatching insights versus consensus...

Exactly. No coincidence

Top 10 $ADBE call insights for me: 1. Deliberately lowering second-half ARR from individual subscribers to fund a bigger freemium push across Firefly, Express, and Acrobat. 2. The roughly $500M ARR impact is split about half from deferring Creative Cloud price optimizations and about half from the freemium push. 3. The deferred Creative Cloud optimizations are a timing shift, not a cancellation. Call said they can reintroduce them later. 4. Second-half ARR is expected to skew more toward Q4 than the usual 40/60 Q3/Q4 pattern. 5. Firefly ARR grew about 50% quarter-over-quarter and is approaching $300M exiting Q2. 6. Adobe is applying the “proven Acrobat Reader freemium model” to Firefly and Express, now tied to intent-based search. 7. Adobe is using Semrush to rank on intent queries like “Summarize PDF” and route users into Acrobat Web or Firefly. 8. Adobe Creative Agent is already distributed inside Claude and ChatGPT, with Copilot and Gemini coming, and monetized through credits. 9. Customer Experience Orchestration AI-first ARR grew 4x year-over-year, with over 80% of platform customers using agentic capabilities. 10. Management signaled interest in technology tuck-in M&A because many AI targets lack sustainable or monetizable business models. 👀

$ADBE is still a show-me story because the quarter beat, guidance was raised and AI-first ARR tripled YoY but market still wants proof on organic growth and whether AI is expanding the moat. AI-first ARR crossing $500M is encouraging but against a $27B ARR base its not yet large enough to change Adobe’s overall growth profile Adobe remains a high-quality software company trading at 10x earnings being treated like a show-me turnaround in the AI era.

🔽Evercore downgrades Adobe $ADBE on annual recuring revenue outlook reset Evercore ISI downgraded Adobe to In Line from Outperform with a price target of $225, down from $325. Stifel this morning also downgraded Adobe post earnings. Adobe's fiscal Q2 results were largely in line with expectations, but the company reset its fiscal 2026 organic annual recuring revenue outlook by $500M, the analyst tells investors in a research note. The firm says Adobe is prioritizing freemium user growth and is deferring previously planned Creative Cloud price increases. Evercore admits to being wrong in assuming a "washed-out valuation could bridge investors to a narrative reset tied to the CEO transition." It believes investor sentiment is unlikely to turn meaningfully more positive until a new CEO and CFO are in place. Further, with Adobe's organic fiscal 2026 ARR growth now in the 8% range, there is limited upside to Street fiscal 2027 forecasts, says Evercore.

39 times. Everyone a trading opportunity

This chart is why I'm staying away from the SpaceX IPO. Five of the most hyped IPOs of the last 15 years, and every single one collapsed after listing. - UBER lost 70% of its IPO price. - META crashed 77% from its peak. - Robin Hood fell 92%. - Coinbase fell 93%. - Rivian fell 95%. The hype is always priced in on day one. The people who bought the hype got crushed. But look at where the real money was made. At the bottom, when nobody wanted these stocks. Robinhood went up 22x from its low. Meta went up 45x. Uber 7x. Patience beat hype in every single case and Rivian reminds us that even patience doesn't save every company. SpaceX will be the most hyped IPO of the decade. History tells me I don't need to be there on day one. If it's a great business, there will be a better price later. There almost always is. First they fall. Then they fly.

@TradexWhisperer It happened in 1981-84 in video tape recorder boom in Japan. Components orders like capacitors and magnetic heads were up more than 100% with prices soaring. makers Murata and TDK added lots of capacity. Then it was over and they collapsed. Plus ça change !

Global semiconductor sales just doubled YoY. Find me another time that happened. I will wait. Bears are trading this like it is something they have seen before. It is not. Nothing in the data rhymes with this. AI train keeps moving. It waits for nothing.

A dying business doesn’t reaccelerate revenue growth. $ADBE

POV: Investors watching their SpaceX stock after buying the largest loss-making IPO in history

2. Adobe $ADBE EV/EBIT: 11x 10yr Revenue CAGR: +17% ROIC: 26%

Adobe CEO: "Adobe delivered record revenue of $6.62 billion in Q2 reflecting strong AI-driven demand across our customer groups and we are raising our full-year fiscal 2026 revenue and non-GAAP EPS targets on the strength of that performance" $ADBE: -6% AH

$ADBE Q2 2026 earnings: Record AI Monetization Clouded by Sudden Executive Exodus Adobe delivered a robust Q2, printing 13% YoY revenue growth to a record $6.62 billion and raising full-year targets. AI is undeniably driving the top line, with AI-first ARR tripling YoY to cross $500 million. However, this financial triumph is severely overshadowed by unprecedented leadership instability. CFO Dan Durn announced an abrupt departure effective just days after this release, immediately following CEO Shantanu Narayen's transition announcement last quarter. Beneath the headline growth, profitability is compressing: Non-GAAP operating margin dropped sequentially to 44.5% and is guided lower to 44.0% for Q3. While the Semrush acquisition fortifies the product suite, the C-suite vacuum creates massive execution risk during a pivotal technological platform shift. Full article with charts - link in bio 🐂 𝐁𝐮𝐥𝐥 𝐂𝐚𝐬𝐞 • 𝐀𝐈 𝐌𝐨𝐧𝐞𝐭𝐢𝐳𝐚𝐭𝐢𝐨𝐧 𝐢𝐬 𝐑𝐞𝐚𝐥 𝐚𝐧𝐝 𝐀𝐜𝐜𝐞𝐥𝐞𝐫𝐚𝐭𝐢𝐧𝐠 — The narrative that AI tools will cannibalize software seats is definitively countered by Adobe's AI-first ARR tripling to over $500 million. They are successfully up-charging for AI utility. • 𝐑𝐚𝐢𝐬𝐞𝐝 𝐅𝐮𝐥𝐥-𝐘𝐞𝐚𝐫 𝐓𝐚𝐫𝐠𝐞𝐭𝐬 — Management confidently raised FY26 Revenue and EPS guidance, factoring in both underlying organic momentum and the closing of the highly strategic Semrush acquisition. 🐻 𝐁𝐞𝐚𝐫 𝐂𝐚𝐬𝐞 • 𝐄𝐱𝐭𝐫𝐞𝐦𝐞 𝐋𝐞𝐚𝐝𝐞𝐫𝐬𝐡𝐢𝐩 𝐈𝐧𝐬𝐭𝐚𝐛𝐢𝐥𝐢𝐭𝐲 — Losing a long-tenured CEO and CFO within a single 90-day window is a glaring red flag. Strategic continuity and operational execution are highly vulnerable during this interregnum. • 𝐌𝐚𝐫𝐠𝐢𝐧 𝐂𝐨𝐦𝐩𝐫𝐞𝐬𝐬𝐢𝐨𝐧 — Operating margins are clearly decelerating (47.4% in Q1 → 44.5% in Q2 → 44.0% in Q3 guide), indicating that the cost to scale AI inference, marketing, and the Semrush integration is eating into the bottom line. ⚖️ 𝐕𝐞𝐫𝐝𝐢𝐜𝐭: ⚪ Neutral. The top-line acceleration and AI execution are genuinely excellent, but the simultaneous departure of the CEO and CFO makes this a 'show-me' story on governance and margin protection for the next 12 months. 𝐊𝐞𝐲 𝐓𝐡𝐞𝐦𝐞𝐬 🔴🔴 𝐂-𝐒𝐮𝐢𝐭𝐞 𝐄𝐱𝐨𝐝𝐮𝐬 𝐂𝐫𝐞𝐚𝐭𝐞𝐬 𝐄𝐱𝐞𝐜𝐮𝐭𝐢𝐨𝐧 𝐑𝐢𝐬𝐤 [NEW] CFO Dan Durn is abruptly departing on June 15, just four days after the Q2 earnings release. This comes on the heels of CEO Shantanu Narayen announcing his own transition plan in Q1. Losing the top two executive architects of the company's multi-year AI strategy introduces severe governance and execution risk. Steve Day stepping in as interim CFO provides institutional memory, but the lack of permanent leadership at this critical juncture is highly concerning. 🟢🟢 𝐀𝐈-𝐅𝐢𝐫𝐬𝐭 𝐀𝐑𝐑 𝐂𝐫𝐨𝐬𝐬𝐞𝐬 $𝟓𝟎𝟎𝐌 𝐁𝐞𝐧𝐜𝐡𝐦𝐚𝐫𝐤 Accelerating. Adobe's strategy of infusing generative AI across its suite is yielding tangible financial returns. AI-first ARR has tripled year-over-year, decisively breaking the $500 million threshold (up from the >$250 million noted in Q1). This directly refutes bearish arguments that AI usage cannot be reliably monetized into recurring software subscriptions. 🔴 𝐌𝐚𝐫𝐠𝐢𝐧 𝐂𝐨𝐦𝐩𝐫𝐞𝐬𝐬𝐢𝐨𝐧 𝐖𝐨𝐫𝐬𝐞𝐧𝐬 [NEW] While revenue beats expectations, profitability metrics are decelerating. Non-GAAP operating margin fell from 47.4% in 26Q1 to 44.5% in 26Q2, and guidance implies further compression to ~44.0% in 26Q3. This 340-basis-point drop over two quarters underscores the rising structural costs of GPU compute, AI marketing, and the integration of inorganic assets. 🟢 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐏𝐫𝐨𝐟𝐞𝐬𝐬𝐢𝐨𝐧𝐚𝐥𝐬 & 𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫𝐬 𝐒𝐞𝐠𝐦𝐞𝐧𝐭 𝐂𝐨𝐧𝐭𝐢𝐧𝐮𝐞𝐬 𝐭𝐨 𝐎𝐮𝐭𝐩𝐞𝐫𝐟𝐨𝐫𝐦 Stable and strong. The 'Business Professionals & Consumers' group grew subscription revenue by 16% YoY to $1.85 billion. This segment, powered by the Acrobat ecosystem and Express, consistently outpaces the core 'Creative & Marketing Professionals' segment (which grew 13% YoY), validating the mass-market, freemium top-of-funnel strategy. 🔴 𝐆𝐨𝐨𝐝𝐰𝐢𝐥𝐥 𝐈𝐦𝐩𝐚𝐢𝐫𝐦𝐞𝐧𝐭 𝐂𝐨𝐧𝐭𝐫𝐚𝐝𝐢𝐜𝐭𝐬 𝐔𝐧𝐢𝐯𝐞𝐫𝐬𝐚𝐥 𝐒𝐭𝐫𝐞𝐧𝐠𝐭𝐡 [NEW] Management's narrative focuses entirely on record demand, but the GAAP income statement reveals a $70 million ($0.17 per share) non-cash goodwill impairment charge specifically related to the Publishing & Advertising reporting unit. This isolated data point indicates that legacy segments are deteriorating faster than anticipated. 🟢 𝐒𝐞𝐦𝐫𝐮𝐬𝐡 𝐈𝐧𝐭𝐞𝐠𝐫𝐚𝐭𝐢𝐨𝐧 𝐒𝐞𝐜𝐮𝐫𝐞𝐬 𝐀𝐠𝐞𝐧𝐭𝐢𝐜 𝐖𝐞𝐛 𝐋𝐞𝐚𝐝 [NEW] Adobe successfully closed the Semrush acquisition, instantly adding ~$480 million to Total ARR and ~$40 million to current quarter subscription revenue. Combined with organic innovations like the LLM Optimizer, this formally establishes Adobe's position as the leading platform for marketers managing brand discovery across emerging generative AI search interfaces. ⚪ 𝐌𝐚𝐜𝐫𝐨𝐞𝐜𝐨𝐧𝐨𝐦𝐢𝐜 𝐁𝐚𝐬𝐞-𝐂𝐚𝐬𝐞 𝐀𝐬𝐬𝐮𝐦𝐞𝐝 𝐟𝐨𝐫 𝐆𝐮𝐢𝐝𝐚𝐧𝐜𝐞 [NEW] Management explicitly noted that the newly raised FY26 targets assume 'current macroeconomic conditions.' While not an aggressive macroeconomic bet, maintaining stable macro assumptions while raising the full-year outlook signals high confidence in internal execution pipelines and customer IT budgets remaining resilient through the end of the fiscal year. 𝐎𝐭𝐡𝐞𝐫 𝐊𝐏𝐈𝐬 𝐓𝐨𝐭𝐚𝐥 𝐄𝐧𝐝𝐢𝐧𝐠 𝐀𝐑𝐑 (𝟐𝟔𝐐𝟐): $27.10 billion Accelerating. Up sequentially from $26.06 billion in Q1. Crucially, this figure includes ~$480 million from the Semrush acquisition. Factoring that out, organic ARR still expanded by a very healthy ~$560 million during the quarter, indicating strong core product momentum. 𝐑𝐞𝐦𝐚𝐢𝐧𝐢𝐧𝐠 𝐏𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐎𝐛𝐥𝐢𝐠𝐚𝐭𝐢𝐨𝐧𝐬 (𝐑𝐏𝐎): $22.27 billion Stable sequentially from Q1's $22.22 billion, with 67% representing Current RPO (cRPO) to be recognized over the next 12 months. This provides immense top-line visibility for the transitionary leadership team. 𝐒𝐡𝐚𝐫𝐞 𝐑𝐞𝐩𝐮𝐫𝐜𝐡𝐚𝐬𝐞𝐬: $2.11 billion (8.5M shares) Decelerating slightly from the $2.48 billion (8.1M shares) spent in Q1, but remains a massive capital return program. Adobe continues to aggressively buy back stock even while closing a $1.9 billion all-cash acquisition, signaling ultimate confidence in free cash flow generation. 𝐆𝐮𝐢𝐝𝐚𝐧𝐜𝐞 𝟐𝟔𝐐𝟑 𝐓𝐨𝐭𝐚𝐥 𝐑𝐞𝐯𝐞𝐧𝐮𝐞: $6.67 - $6.72 billion Decelerating slightly. The midpoint ($6.695B) implies 11.8% YoY growth compared to 25Q3, which is a step down from the 13% YoY printed in 26Q2. Sequential growth implied is a modest 1.2%. 𝟐𝟔𝐐𝟑 𝐍𝐨𝐧-𝐆𝐀𝐀𝐏 𝐄𝐏𝐒: $6.05 - $6.10 Stable vs current quarter. A notable sequential stagnation compared to 26Q1 ($6.06) and 26Q2 ($5.96). Implies 14.3% YoY growth versus the $5.31 posted in 25Q3, driven largely by share count reduction rather than operating leverage, given the 44.0% margin target. 𝐅𝐘𝟐𝟔 𝐓𝐨𝐭𝐚𝐥 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 (𝐅𝐮𝐥𝐥 𝐘𝐞𝐚𝐫): $26.50 - $26.60 billion Accelerating trajectory. Management raised this from the previous framework of $25.9 - $26.1 billion. The ~$600 million bump perfectly maps to the inclusion of the Semrush acquisition ($480M ARR) plus continued organic outperformance. 𝐅𝐘𝟐𝟔 𝐍𝐨𝐧-𝐆𝐀𝐀𝐏 𝐄𝐏𝐒 (𝐅𝐮𝐥𝐥 𝐘𝐞𝐚𝐫): $24.35 - $24.45 Accelerating trajectory. Raised significantly from the earlier $23.30 - $23.50 target. This is highly impressive given that management previously stated Semrush would have 'negligible non-GAAP EPS impact in year one,' suggesting the core business is absorbing integration costs and still throwing off excess cash. 𝐊𝐞𝐲 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬 𝐂𝐨𝐧𝐭𝐞𝐱𝐭 𝐨𝐟 𝐂𝐅𝐎 𝐃𝐞𝐩𝐚𝐫𝐭𝐮𝐫𝐞 Dan Durn is departing effectively immediately (June 15). With the CEO also transitioning, what specific dynamic catalyzed the CFO's exit, and how will the Board ensure capital allocation discipline during this dual vacuum? 𝐆𝐨𝐨𝐝𝐰𝐢𝐥𝐥 𝐈𝐦𝐩𝐚𝐢𝐫𝐦𝐞𝐧𝐭 𝐓𝐫𝐚𝐧𝐬𝐩𝐚𝐫𝐞𝐧𝐜𝐲 You recorded a $70M goodwill impairment in the Publishing & Advertising unit. What specifically triggered this test, and does this indicate a terminal structural decline for that legacy product segment? 𝐌𝐚𝐫𝐠𝐢𝐧 𝐅𝐥𝐨𝐨𝐫 𝐄𝐱𝐩𝐞𝐜𝐭𝐚𝐭𝐢𝐨𝐧𝐬 Non-GAAP operating margin was 47.4% in Q1 and is guided to 44.0% in Q3. How much of this 340 bps compression is tied to Semrush integration versus structural AI compute costs, and where is the floor? 𝐎𝐫𝐠𝐚𝐧𝐢𝐜 𝐆𝐫𝐨𝐰𝐭𝐡 𝐃𝐞-𝐜𝐨𝐮𝐩𝐥𝐞𝐝 𝐟𝐫𝐨𝐦 𝐒𝐞𝐦𝐫𝐮𝐬𝐡 Of the 13% constant currency growth printed this quarter, exactly how many points were inorganic contributions from the early closing of the Semrush transaction?

Adobe Q2 Results Revenue +13% (Beat) Adj. EPS +18% (Beat) Raises FY26 Guidance $ADBE -11% today

US producer prices are increasing at the fastest pace since 2022.

Adobe $ADBE. The clearest test of the "AI eats software" narrative on the entire market. Two charts tell the whole story. Over the last five years: – Adobe's forward earnings have more than doubled. A clean, almost straight line up. Over 110%. – Adobe's forward P/E has collapsed from around 50x to about 15x. Read that again. The business doubled its earnings. The market cut what it's willing to pay for those earnings by roughly two-thirds. The result? A stock that has gone nowhere while the company underneath it has never been stronger. The reason is a single narrative. AI eats software. The fear that generative tools will commoditize Photoshop, Illustrator, and the entire creative suite into oblivion. Maybe. It's a real risk, and worth taking seriously. But look at what the numbers and management are actually doing. Earnings keep climbing. Margins remain enormous. And Adobe is buying back its own stock aggressively, the clearest signal a management team can send that they think the market has it wrong. The valuation is now as low as it's been since 2013. What happened in 2013? Adobe was pioneering the subscription model that the entire software industry would later copy, the shift that turned it into one of the great compounders of the following decade. The last time it was this cheap, it was about to begin its greatest run. History doesn't repeat. But here's the question worth sitting with. When a great business doubles its earnings and the market still cuts its multiple by two-thirds, one of two things is true. Either the narrative is right, and the business is about to be destroyed. Or the narrative is wrong, and you're being handed a quality compounder at a price that only shows up once a decade. The market has already voted. The only question is whether it's right.

With unprecedented investor demand for the largest IPO in history (SpaceX), it's worth remembering a simple lesson: A great company doesn't always make for a great investment at any price. The median major IPO lost 31% in its first year & suffered a 53% drawdown along the way.

MARKET OFFICIALLY IN STUPID MODE. Margin debt increased 53% yoy. When this number rolls over, it usually leads market crashes by 3 months. Peak Euphoria incoming.

BREAKING: The European Central Bank officially hikes interest rates by 25 basis points, citing renewed inflation amid the Iran War. This marks the first major central bank interest rate hike since 2023. Rate hikes are officially back.