---
title: "Adobe Paid $150 Million Over Cancellation Fees. Now They Are the Pitch for Free Clones"
description: "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."
publisher: "The Inference"
section: "Money"
published: 2026-10-10T17:24:38.874Z
modified: 2026-10-10T17:24:38.874Z
canonical: https://theinference.org/article/adobe-paid-150-million-over-cancellation-fees-now-they-are-the-pitch-for-free-clones
language: en
keywords: "Adobe, Anthropic, Claude, Open Source, Subscription Software"
---

# 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.

Brandon Thomas says [Adobe](https://theinference.org/markets/companies/adobe)'s 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](https://theinference.org/markets/companies/anthropic)'s Claude Opus 5.5 and [released under MIT and Apache licenses](https://arstechnica.com/ai/2026/10/software-is-over-bold-ai-developer-takes-aim-at-adobe-with-open-source-clones/) [1][2]. "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](https://www.techspot.com/news/114136-software-over-developer-uses-ai-build-free-adobe.html), while denying wrongdoing [2][3]. The clones turn that record into a launch line. The market has done its own repricing: [the stock is down 33.5% in 2026](https://www.trefis.com/stock/adbe/articles/617685/how-much-downside-is-left-in-adobe-stock/2026-10-06) [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](https://phototradewire.com/articles/adobe-puts-google-s-nano-banana-editing-model-inside-lightroom-66366a7d) [6]. Adobe's enterprise half pushes the other way: [a Heathrow partnership announced on October 8, 2026](https://news.adobe.com/news/2026/10/adobe-and-heathrow-airport-partner), 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%](https://finance.yahoo.com/markets/stocks/articles/adobe-q3-earnings-call-highlights-230309401.html) [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"](https://247wallst.com/investing/2026/09/10/live-will-adobes-q3-earnings-tonight-turn-the-tide-for-software-stocks/) [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].

*Chart: **Adobe's sales growth is accelerating while profit growth stalls** Line chart of Adobe's year-over-year revenue growth and net income growth across six fiscal quarters, revenue accelerating to 12.9% while net income growth stalls near 3%.*

*Year-over-year growth, Adobe fiscal quarters ended May 2025 through August 2026, from its SEC filings. The Q2 FY2026 report introduced the freemium pivot management said would cost short-term ARR. [9]*

Adobe's fiscal 2026 target for ARR growth is 10.2%, below the 11.2% it just printed [4].

*Chart: **Adobe's own targets sit below its fiscal Q3 print** Bars comparing Adobe's fiscal Q3 ARR growth of 11.2%, its fiscal 2026 ARR growth target of 10.2%, and contracted backlog growth of 8%.*

*Year-over-year growth in Adobe's subscription measures. ARR and contracted backlog as of the end of fiscal Q3 2026 (August 28, 2026); the 10.2% figure is management's fiscal 2026 target, left unchanged on September 10, 2026. [4][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,"](https://gizmodo.com/someone-vibe-coded-a-free-knockoff-of-adobe-creative-suite-2000823322) 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.

## Takeaway

Watch the documents, not the clones: backlog growth of 8%, operating margin down to 34.8%, and a fiscal 2026 ARR growth target of 10.2% below the 11.2% just printed. December's fiscal Q4 is the verdict on whether free plans, and free agent-native clones, are repricing the subscription base faster than management budgeted.

## Sources

1. [Ars Technica, "Software is over": Bold AI developer takes aim at Adobe with open source clones, 7 October 2026](https://arstechnica.com/ai/2026/10/software-is-over-bold-ai-developer-takes-aim-at-adobe-with-open-source-clones/)
2. [TechSpot, "Software is over": Developer uses AI to build free Adobe clones after frustration with cancellation fees, 8 October 2026](https://www.techspot.com/news/114136-software-over-developer-uses-ai-build-free-adobe.html)
3. [Martin Cid Magazine, Adobe's Cancellation Fee Is Now the Pitch for Free AI Photoshop Clones, 9 October 2026](https://www.martincid.com/technology-sv/adobe-cancellation-fee-ai-photoshop-clones-artcraft/)
4. [Trefis, How Much Downside Is Left In Adobe Stock?, 6 October 2026](https://www.trefis.com/stock/adbe/articles/617685/how-much-downside-is-left-in-adobe-stock/2026-10-06)
5. [Unite.AI, Anthropic Launches Claude Dashboards and Motion, Takes Docs Out of Beta, 10 October 2026](https://www.unite.ai/anthropic-launches-claude-dashboards-and-motion-takes-docs-out-of-beta/)
6. [Photo Trade Wire, Adobe Integrates Google Nano Banana AI into Lightroom, 8 October 2026](https://phototradewire.com/articles/adobe-puts-google-s-nano-banana-editing-model-inside-lightroom-66366a7d)
7. [Adobe Newsroom, Adobe and Heathrow Airport Partner to Transform the Digital Experience for Millions of Passengers, 8 October 2026](https://news.adobe.com/news/2026/10/adobe-and-heathrow-airport-partner)
8. [MarketBeat via Yahoo Finance, Adobe Q3 Earnings Call Highlights, 10 September 2026](https://finance.yahoo.com/markets/stocks/articles/adobe-q3-earnings-call-highlights-230309401.html)
9. [Adobe quarterly figures from its SEC filings, retrieved 10 October 2026](https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000796343)
10. [24/7 Wall St, Live: Will Adobe's Q3 Earnings Tonight Turn the Tide for Software Stocks?, 10 September 2026](https://247wallst.com/investing/2026/09/10/live-will-adobes-q3-earnings-tonight-turn-the-tide-for-software-stocks/)
11. [Gizmodo, Someone Vibe Coded a Free Knockoff of Adobe Creative Suite, 7 October 2026](https://gizmodo.com/someone-vibe-coded-a-free-knockoff-of-adobe-creative-suite-2000823322)


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Adobe Paid $150 Million Over Cancellation Fees. Now They Are the Pitch for Free Clones — The Inference. Canonical: https://theinference.org/article/adobe-paid-150-million-over-cancellation-fees-now-they-are-the-pitch-for-free-clones