Adobe Paid $150 Million Over Cancellation Fees. Now They Are the Pitch for Free Clones
A lone developer shipped seven free Claude-built clones of Adobe's apps weeks after Adobe settled a federal cancellation-fee case for $150 million. The documents, not the clones, carry the trade: backlog up 8%, margins down, and a fiscal 2026 ARR growth target of 10.2% below the 11.2% Adobe just printed.
Vincent Jiang · 3 min read
Brandon Thomas says Adobe's+0.46% — Adobe, up 0.46 percent today cancellation fee bit him "one too many times." Over one weekend he shipped Artcraft: seven free, open-source apps that clone the interfaces of Photoshop, Illustrator, Premiere, Lightroom, After Effects, InDesign and Acrobat Pro, written in Rust with Anthropic's$350B — Anthropic, private, latest valuation $350B Claude Opus 5.5 and released under MIT and Apache licenses 12. "Software is over," he declared. His opening pledge of 100% parity within a month lasted days, becoming 99% parity "measured in months and not years" 1.
The grievance has a $150 million price tag
The anger is documented in federal court. The Justice Department sued Adobe in June 2024 for hiding early-termination fees in annual plans; in March 2026 Adobe settled for $150 million, half civil penalties and half free customer services, while denying wrongdoing 23. The clones turn that record into a launch line. The market has done its own repricing: the stock is down 33.5% in 2026 4.
The model labs are arming both sides
Claude built the clones, and Claude also runs inside Adobe, which was an April launch partner for Anthropic's Claude for Creative Work connector driving more than 50 tools across Photoshop, Illustrator and Premiere 3. Anthropic's new Motion tool exports animations that open in Adobe 5, and Google's Nano Banana now generates images inside Lightroom 6. Adobe's enterprise half pushes the other way: a Heathrow partnership announced on October 8, 2026, sells Brand Visibility to an airport serving 84.5 million passengers a year who increasingly plan travel through ChatGPT and Gemini 7.
Adobe's defense is already in its numbers
Fiscal Q3, reported on September 10, printed revenue of $6.76 billion, up 13%, and $27.5 billion of annual recurring revenue, up 11.2% 8. Underneath, contracted backlog grew 8%, and management told analysts the drop to single digits reflects its push for free-plan users, with pricing actions held back 4. The freemium pivot, unveiled in June, was an explicit trade: management said it "will come at the cost of short-term ARR" 10. The cost is now visible, with operating margin at 34.8% against 36.3% a year earlier and net income up 3.1% while revenue grew 12.9% 9.
Adobe's sales growth is accelerating while profit growth stalls
- Revenue growth
- Net income growth
Data
| Revenue growth | Net income growth | |
|---|---|---|
| Q2 '25 | 10.6% | 7.5% |
| Q3 '25 | 10.7% | 5.2% |
| Q4 '25 | 10.5% | 10.3% |
| Q1 '26 | 12% | 4.3% |
| Q2 '26 | 12.7% | 1.2% |
| Q3 '26 | 12.9% | 3.1% |
Adobe's fiscal 2026 target for ARR growth is 10.2%, below the 11.2% it just printed 4.
Adobe's own targets sit below its fiscal Q3 print
- Estimate
Data
| Value | |
|---|---|
| ARR growth, end of fiscal Q3 | 11.2% |
| Fiscal 2026 ARR growth target (estimate) | 10.2% |
| Backlog growth, end of fiscal Q3 | 8% |
The quarter still beat
Guidance went up, not down: Adobe raised its fiscal 2026 revenue target to between $26.576 billion and $26.626 billion, AI-first ARR passed $650 million, up more than 150%, and creative freemium users passed 100 million, up more than 70% 8, all at under ten times forward earnings 10. The clones, meanwhile, are alpha software. One reviewer called Photocraft "glitchy, but real, Photoshop," then watched Free Transform break 11. No studio billing by the hour moves a pipeline to that.
December reads the verdict
Fiscal Q4 lands in December, with Anil Chakravarthy taking over as chief executive on December 1 8. Nothing yet ties any of this to Artcraft itself. The deciding number is recurring revenue growth against the 10.2% plan 4: print below it, and free plans plus free, agent-native clones are repricing the subscription base faster than management budgeted. Print above it, and Adobe is paying, in margin, to give away the very subscriptions a $150 million settlement forced it to make easier to leave.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
