Will Adobe's AI-first standalone ARR exceed $500M by Q2 FY2026 earnings?

AI-first standalone ARR went from ~$125M (Q1 FY2025) to >$250M (Q3 FY2025) -- a doubling in ~2 quarters. Now needs to double again from ~$250M to $500M in ~2 quarters. Firefly ARR doubled YoY, credits 3x QoQ, first-time subs 2x QoQ -- acceleration signals are strong. However, the $250M target was 'exceeded one quarter early,' implying Q4 FY2025 could be $275-300M range. Even at $300M, reaching $500M requires ~29% QoQ growth sustained for 2 quarters. Foundry deals ($7M on $10M base) suggest enterprise pipeline, but the absolute dollar gap for doubling is much larger than the prior doubling from $125M. Resolution also requires specific metric disclosure, adding a small penalty.

The doubling math is aggressive but not impossible given acceleration signals. The larger risk is the resolution criteria: market resolves NO if management only reports the broader 'AI-influenced ARR' without standalone breakdown. Committee downgraded AI-influenced ARR (>$5B) to E1 evidence because it is management-coined with undefined scope. Management HAS been reporting AI-first standalone ARR each quarter ($125M, $250M), establishing a disclosure pattern. Two-part analysis: P(reaching $500M) ~35% given trajectory but larger base; P(disclosing if achieved) ~90%. Combined: ~31.5%. The disclosure risk is a meaningful penalty -- if the number disappoints, management could pivot to the broader metric.

Base rate extrapolation: Q1 FY2025 $125M to Q3 FY2025 >$250M was 2x in 2 quarters. If exact same growth rate continues, Q1 FY2026 would be ~$500M, meaning Q2 FY2026 (resolution date) would exceed it. But base effect matters -- doubling from $250M requires $250M of incremental ARR vs only $125M previously. Foundry consumption +32% QoQ and custom models +68% QoQ suggest enterprise adoption still accelerating. 25K+ new businesses per quarter in Express/Studio provides expanding base. Data is 89 days stale -- Q1 FY2026 earnings (mid-March) will reveal interim progress. The staleness cuts both ways: growth could have accelerated further or plateaued. Slightly higher probability than pure doubling math suggests because of the early target beat pattern.

They doubled from $125M to $250M+ in 2 quarters. Acceleration metrics say momentum is INCREASING: credits 3x QoQ, subs 2x QoQ, Firefly ARR doubled YoY, and 25K new businesses per quarter provide a real expanding funnel. The Foundry enterprise deal math ($7M upsell on $10M base) shows massive enterprise upsell potential. Management has consistently disclosed this specific metric and beat targets early. AI-first ARR could already be $350M+ given 89-day staleness. Q1 FY2026 earnings in March will provide critical interim data. The trajectory is genuinely strong -- the main risk is the absolute dollar gap being harder to close than percentage growth suggests.

$250M to $500M is a doubling from what is still 1% of total ARR -- a tiny product line. Credit consumption 3x QoQ from a small base is impressive in percentage terms but the absolute dollar contribution remains limited. The resolution criteria specifically requires 'AI-first standalone ARR' disclosure, and management is already pushing the fuzzier $5B 'AI-influenced' metric. The committee downgraded AI-influenced ARR to E1 for good reason -- it's a marketing metric, not a financial one. If the standalone number can't reach $500M, management will bury it in the broader metric. The Gravy Gauge assessment is correct: 'unproven at scale.' Two quarters is simply not enough time to double absolute ARR at this stage.

Growth trajectory extrapolation would get them there IF the rate holds. But doubling periods tend to lengthen as the base grows -- the first doubling ($125M to $250M) benefited from low-base effects and initial product launch momentum. The early target beat ($250M one quarter early) is encouraging but doesn't guarantee the next doubling at the same pace. The critical question is what Q1 FY2026 earnings (March 2026) reveal: if AI-first ARR is $350M+, $500M by Q2 is plausible. If $300M, the math doesn't work. 89-day data staleness is the biggest uncertainty source. Disclosure risk adds an additional penalty -- if the number is between $400-500M, management may report progress but not frame it as having crossed $500M.

Doubled once in 2 quarters ($125M to $250M). Needs to double again in same timeframe. Prior doubling was from smaller base making absolute dollar growth easier. Acceleration metrics are strong (credits 3x QoQ, subs 2x QoQ, Firefly ARR doubled YoY). Management has disclosed consistently. But absolute dollar gap ($250M incremental) is twice what was needed before ($125M incremental). Slightly below 30% accounting for both growth uncertainty and disclosure risk.

Even if AI-first ARR grows strongly, resolution requires specific metric disclosure at >= $500M. Management may shift to the broader 'AI-influenced' metric which is already >$5B. Committee flagged this disclosure risk and downgraded the broader metric to E1. Growth probability might be 30-35%, but disclosure-adjusted probability is lower. If the number is in the $350-450M range, management will likely emphasize percentage growth rather than absolute figure vs $500M threshold.

$250M target was exceeded one quarter early, demonstrating strong execution. Firefly Foundry consumption +32% QoQ and custom models +68% QoQ show enterprise adoption scaling. If Q4 FY2025 AI-first ARR is already $325M+ (data is 89 days stale), only ~25% QoQ growth for 2 quarters reaches $500M. Given credits 3x QoQ and subs 2x QoQ, 25% quarterly growth is plausible. Management has reported this metric every quarter, suggesting continued disclosure. This is the most optimistic heuristic read but still below one-third probability.