Adobe Inc. (ADBE): 3QFY: Top-of-funnel momentum builds; path to monetization still in question

This report reviews Adobe's 3QFY26 results: revenue came in slightly above the Street, total ARR and EBITDA margin were in line, and FCF margin beat expectations. Adobe entered 2H26 with a deliberate shift toward expanding its freemium funnel at the expense of near-term monetization, deferring pricing actions and prioritizing user acquisition and engagement. Top-of-funnel metrics were strong, including total MAUs, creative freemium MAUs and AI-first ARR, but the key question remains whether this engagement ultimately translates into sustainable monetization and durable ARR growth, with clarity sought on next-fiscal-year conversion rates and monetization. RPO deceleration appears partly tied to the freemium strategy and greater adoption of month-to-month, more flexible contracts. The CEO transition, alongside a senior departure, introduces an additional execution variable. Goldman Sachs maintains its Sell rating and raises its 12-month price target while revising up its revenue forecast