Adobe’s subscription costs increased, with hosting and data-center costs the largest listed contributor to the increase over the nine months ended August 28, 2026. Revenue rose, while research and development expenses also increased as the company continued investing in its AI and product pipeline.
The surface read is still straightforward: revenue rose 12.9% to $6.8 billion from the comparable nine-month period, and operating cash flow climbed 11.3% to $7.6 billion. The less tidy part is what happened underneath. Operating income grew only 8.3%, while operating margin slipped from 36.3% to 34.8%.
Adobe’s net income rose just 3.1% to $1.8 billion. Diluted earnings per share rose 10.5% to 4.62, helped by a 6.8% reduction in diluted shares to 395 million. The per-share number therefore carries more momentum than the profit line itself.
Management’s cost breakdown points toward the infrastructure behind that growth:
"Cost of subscription revenue increased during the three and nine months ended August 28, 2026 as compared to the three and nine months ended August 29, 2025 primarily due to the following: Components of % Change 2026-2025 QTD Components of % Change 2026-2025 YTD Hosting services and data center costs 22 % 17 % Compensation costs 5 4 Amortization of intangibles (5) (6) Various individually insignificant items 2 Total change 24 % 17 %."
Adobe, Form 10-Q, Sept. 22, 2026
In plain English, hosting and data-center costs accounted for 17 percentage points of the year-to-date increase in subscription cost, with compensation adding another 4. Research and development expenses also rose, driven mainly by compensation and, to a lesser extent, hosting and data-center costs.
The investment bill is visible in cash. Capital expenditures rose 24.1% to $180 million, and free-cash-flow margin fell 0.5 percentage points to 37.8%. Cash declined from $5.0 billion to $4.4 billion, even though operating cash generation increased.
Adobe attributed $1.91 billion of investing cash use during the nine months primarily to its acquisition of Semrush, ongoing capital expenditures, and purchases of short-term investments:
"Cash Flows from Investing Activities Net cash used for investing activities of $1.91 billion for the nine months ended August 28, 2026 was primarily due to our acquisition of Semrush in the second quarter of fiscal 2026, ongoing capital expenditures and purchases of short-term investments, net of proceeds from maturities of short-term investments."
Adobe, Form 10-Q, Sept. 22, 2026
The cash balance therefore reflects investing activity as well as earnings. Adobe also agreed in June to acquire Topaz Labs for approximately $340 million, primarily in cash, subject to customary adjustments. The company is adding assets and capacity while the core business keeps growing, while operating margin declined.
Adobe’s shares closed at $249.49 on September 21, down 32.1% over 12 months, while the latest annual valuation shows a 14.9x P/E and a 9.4% cash-flow yield. Those figures put the debate more on the earnings price tag than on whether sales are still moving higher.
Adobe’s next quarterly report will put the next operating-margin figure beside the hosting and data-center cost trend, which is the cleanest disclosure for separating a temporary investment push from a continuing cost pattern. For now, Adobe is selling more software and spending more to make it run.
Adobe’s growth is generating cash, but its infrastructure bill is growing too.