Adobe Earnings: Adobe Express Drawing in New Users, Contributing to Net New ARR Strength

We are raising our fair estimate to $635 per share from $610 after wide-moat Adobe reported good second-quarter results and raised its outlook for the full year on all headline numbers. After last quarter’s big selloff, which we think was driven by disappointing net new annual recurring revenue, management also raised its full-year outlook for this metric. We were steadfast in our belief in our Adobe thesis after the past quarter and are encouraged by financial progress through the second quarter. We think recent price increases, recent and pending important product launches, and rapid generative artificial intelligence adoption should help drive growth over the next several quarters. Changes to our model were short-term fine-tuning, while our longer-term estimates are unchanged, and we continue to see shares as undervalued.