The investment case in brief
None of that has stopped the shares falling 25.6% over the past year and 27.6% year to date.
We rate the shares Buy, with a base-case model value of $560.00, a bear case of $420.00 and a bull case of $740.00 (methodology set out in "What it means for value" below).
How Adobe makes money
The business splits into three reporting segments. Digital Media, which houses Creative Cloud (Photoshop, Illustrator, Premiere) and Acrobat/Document Cloud, generated $17.65bn in fiscal 2025, up 11.3% year over year and 74.3% of total revenue. Digital Experience, the enterprise marketing stack built around Adobe Experience Platform and GenStudio, contributed $5.86bn, up 9.3% and 24.7% of the total. The remainder, $256.0m, came from legacy publishing and advertising products and fell 6.9% year over year.
Adobe reaches two distinct user groups through different funnels. Geographically, the Americas accounted for $14.12bn of fiscal 2025 revenue (59.4% of the total, with the United States contributing $12.53bn), EMEA $6.29bn (26.5%, up 13.2% year over year, the fastest-growing region) and Asia-Pacific $3.36bn (14.1%, up 9.8%).
Source: segment note in the 10-K.
View chart data
| Period | Revenue |
|---|---|
| Digital Media | $17.6B |
| Digital Experience | $5.9B |
| Publishing and Advertising | $256M |
The last four quarters and what guidance says next
GAAP diluted earnings per share for the quarter was $4.62.
Source: SEC filings (XBRL); guidance from the latest results release.
View chart data
| Period | Revenue ($bn) | Guidance FY2026 |
|---|---|---|
| FY2020 | $12.9 | $26.6 |
| FY2021 | $15.8 | $0 |
| FY2022 | $17.6 | $0 |
| FY2023 | $19.4 | $0 |
| FY2024 | $21.5 | $0 |
| FY2025 | $23.8 | $0 |
| LTM | $26 | $0 |
Source: SEC filings (XBRL).
View chart data
| Period | Diluted EPS |
|---|---|
| FY2020 | $10.83 |
| FY2021 | $10.02 |
| FY2022 | $10.10 |
| FY2023 | $11.82 |
| FY2024 | $12.36 |
| FY2025 | $16.70 |
| LTM | $17.92 |
Margins told a more mixed story at the single-quarter level. On a trailing twelve-month basis, which smooths quarter-to-quarter swings, operating margin was 35.7%, net margin was 28.0%, and free cash flow margin was 40.8%, down 0.6 percentage points, even as free cash flow itself rose 10.3% to $10.6bn.
Source: SEC filings (XBRL).
View chart data
| Period | Gross margin | Operating margin | Net margin |
|---|---|---|---|
| FY2020 | 86.6% | 32.9% | 40.9% |
| FY2021 | 88.2% | 36.8% | 30.5% |
| FY2022 | 87.7% | 34.6% | 27.0% |
| FY2023 | 87.9% | 34.3% | 28.0% |
| FY2024 | 89.0% | 31.3% | 25.9% |
| FY2025 | 89.3% | 36.6% | 30.0% |
| LTM | 89.3% | 35.7% | 28.0% |
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | LTM | |
|---|---|---|---|---|---|---|
| Revenue | $15.79bn | $17.61bn | $19.41bn | $21.50bn | $23.77bn | $25.97bn |
| Revenue growth | 22.7% | 11.5% | 10.2% | 10.8% | 10.5% | 12.0% |
| Operating margin | 36.8% | 34.6% | 34.3% | 31.3% | 36.6% | 35.7% |
| Diluted EPS | $10.02 | $10.10 | $11.82 | $12.36 | $16.70 | $17.92 |
| Free cash flow | $6.88bn | $7.40bn | $6.94bn | $7.87bn | $9.85bn | $10.59bn |
| Diluted shares | 481m | 471m | 459m | 450m | 427m | 407m |
Source: SEC filings (XBRL). LTM: last twelve months.
Alongside the results, Adobe raised its full-year guidance. It now targets fiscal 2026 revenue of $26.576bn to $26.626bn, implied fourth-quarter revenue of $6.80bn to $6.85bn, and full-year non-GAAP earnings per share of $24.45 to $24.50 (GAAP: $18.12 to $18.17), against a fourth-quarter non-GAAP range of $6.30 to $6.35 (GAAP: $4.65 to $4.70). Management also guided to full-year ending annual recurring revenue growth of 10.2%, a GAAP operating margin of 35.0% and a non-GAAP operating margin near 45.0% for the year, versus roughly 44.0% for the fourth quarter alone. Adobe reports its fourth quarter on 9 December 2026; the average estimate going into that date is $6.33 in earnings per share on revenue of $6.8bn, both inside management's own guidance range.
Strategy, product bets and the leadership change
Adobe's public strategy since mid-2026 has centred on turning its applications into an agentic layer rather than a set of standalone tools. On the enterprise side, April's Brand Intelligence launch rebuilt Experience Cloud around agentic automation, and Workfront now lets AI agents be assigned project tasks as "permissioned collaborators" alongside human teams.
Adobe's own research underpins the cautious framing of these tools as assistants rather than replacements: in a company survey, 75% of creators said generative AI was integrated or essential to their workflow, but 85% insisted the final creative decision should remain theirs.
Capital allocation has leaned heavily toward buybacks. Over the trailing twelve months Adobe spent $9.3bn on share repurchases, equivalent to 87.8% of free cash flow over the period, and $25.2bn over the past three years. Diluted share count fell 6.2% year over year over the same period.
On leadership, an SEC filing dated 3 September 2026 confirmed that Shantanu Narayen, chief executive since 2007, will move to executive chair, with Anil Chakravarthy, previously head of the customer experience business, becoming president and CEO effective 1 December 2026, eight days before the company's next scheduled results. The board said it had "unanimously determined" Chakravarthy was the right leader for Adobe's next phase of growth; Narayen framed the change around the demands of what he called an AI-driven era.
Competition and the industry backdrop
Adobe's position varies sharply by product line. Commentary on collaborative product design describes Figma as having overtaken Adobe in that category, noting that Adobe XD is no longer being actively developed.
On the numbers, Adobe still compares well with the application-software peers we cover. Its free-cash-flow margin of 40.8% is the highest of the six, ahead of Intuit's 40.4% and Salesforce's 34.5%, and comfortably ahead of Oracle, which posted a negative free-cash-flow margin on the same basis. Among the broader group of application-software companies we cover, Adobe's free-cash-flow margin ranks 5th, its gross margin ranks 5th, and its operating margin ranks 7th.
How the market has priced it
Source: daily closes, split-adjusted, delayed.
View chart data
| Period | ADBE | S&P 500 |
|---|---|---|
| 2021-10 | 100 | 100 |
| 2021-11 | 104.7 | 103.2 |
| 2021-12 | 87.6 | 103.6 |
| 2022-01 | 80.7 | 97.4 |
| 2022-02 | 66.7 | 93.4 |
| 2022-03 | 67.1 | 100.1 |
| 2022-04 | 64.3 | 95.2 |
| 2022-05 | 61.9 | 87.5 |
| 2022-06 | 60.2 | 87 |
| 2022-07 | 58.9 | 87.2 |
| 2022-08 | 63 | 92.3 |
| 2022-09 | 44.2 | 82.4 |
| 2022-10 | 49.1 | 84.9 |
| 2022-11 | 51.4 | 89.6 |
| 2022-12 | 52.3 | 85.7 |
| 2023-01 | 55.7 | 90.1 |
| 2023-02 | 49.8 | 89.2 |
| 2023-03 | 58 | 89.6 |
| 2023-04 | 56.4 | 91.4 |
| 2023-05 | 60.9 | 93.7 |
| 2023-06 | 76 | 98.9 |
| 2023-07 | 79.9 | 102.6 |
| 2023-08 | 81.6 | 99.8 |
| 2023-09 | 78.7 | 96.9 |
| 2023-10 | 81 | 95 |
| 2023-11 | 96.2 | 103.6 |
| 2023-12 | 93 | 108.7 |
| 2024-01 | 95.4 | 111.4 |
| 2024-02 | 85.8 | 115.8 |
| 2024-03 | 78.4 | 119.9 |
| 2024-04 | 74.2 | 116.5 |
| 2024-05 | 74.3 | 121.4 |
| 2024-06 | 85 | 125.6 |
| 2024-07 | 83.4 | 125.3 |
| 2024-08 | 88.2 | 129.1 |
| 2024-09 | 80.1 | 132 |
| 2024-10 | 75.2 | 133.5 |
| 2024-11 | 80.6 | 137.8 |
| 2024-12 | 69.9 | 139.2 |
| 2025-01 | 68.6 | 139.3 |
| 2025-02 | 68.1 | 137.5 |
| 2025-03 | 59.6 | 129.8 |
| 2025-04 | 58.3 | 128.7 |
| 2025-05 | 64.5 | 136.8 |
| 2025-07 | 60.9 | 143.8 |
| 2025-07 | 55.6 | 147.1 |
| 2025-08 | 55.4 | 150.2 |
| 2025-09 | 54.8 | 155.5 |
| 2025-10 | 52.5 | 160.5 |
| 2025-11 | 49.7 | 159.5 |
| 2025-12 | 54.8 | 160.8 |
| 2026-01 | 45.6 | 162 |
| 2026-03 | 42.1 | 159.3 |
| 2026-04 | 37.5 | 153.8 |
| 2026-05 | 39 | 169.2 |
| 2026-06 | 40.7 | 178.3 |
| 2026-07 | 34.1 | 175.3 |
| 2026-08 | 39.1 | 178.3 |
| 2026-09 | 44.5 | 179.3 |
| 2026-10 | 37.5 | 180.3 |
ADBE shares rose 2.1% to $253.33 in the session to 30 October 2026, against a prior close of $248.12, even as the S&P 500 fell 1.2% and the Nasdaq 100 fell 2.8% on the same day; the median move across 148 other application-software companies we cover was −0.4%, putting Adobe's move 2.5 percentage points above that peer median. News coverage of Adobe ran at 23 stories in the preceding seven days, 1.5 times the recent weekly average, consistent with a period of heightened attention around the stock.
That single session sits inside a much weaker run. Shares are down 25.6% over the past year and 27.6% year to date, and sit 29.1% below their 52-week high while standing 31.0% above their 52-week low; as of 30 October they traded 0.4% below their 50-day average and 1.2% above their 200-day average.
Positioning data offer a third, quieter signal. Institutional ownership was little changed: 1,966 holders reported positions as of 30 June 2026, with 144 new positions opened and 335 closed during the quarter, and the aggregate number of shares held by institutions up 0.9% on the prior quarter. Insider activity over the past 90 days ran one-sided: 12 open-market sales worth a combined $31.3m and no purchases, the largest a $8.3m sale by chair and chief executive Shantanu Narayen on 16 September 2026.
Valuation
Our model values Adobe using a two-stage discounted cash flow applied to normalised free cash flow after stock-based compensation, with an 8.5% discount rate to the firm and a Gordon-growth terminal value. The bear case, built on slower five-year growth, values the shares at $420.00; the bull case, built on faster growth, values them at $740.00.
That compares with 12.0% delivered over the trailing twelve months and the 11.6% growth assumption underlying our own base case.
| Case | Revenue growth, first five years | Value per share |
|---|---|---|
| Lower growth | 6.6% a year | $423.25 |
| Base case | 11.6% a year | $560.73 |
| Higher growth | 16.6% a year | $738.90 |
| Share price (2026-10-29) | $246.75 |
Our discounted-cash-flow model of free cash flow after stock-based pay. Model values under stated assumptions, not a forecast of the share price.
What it means for value
Growth, not the recent margin softening, is what moves our model most. A one-percentage-point rise in the discount rate we apply would cut model value by 15.3%. These are model values under stated assumptions, not a comparison with the share price.
Risks
Several risks sit inside Adobe's own 10-K. Cost of revenue rose 8% to $2.55bn in fiscal 2025, with subscription costs up 13%, driven mainly by third-party hosting and the computing needed to run AI features; the filing warns that should AI usage outpace the revenue it brings in, margins would come under further pressure. Compounding that risk, Adobe has signed $6.82bn of non-cancellable purchase commitments, mostly for hosting and data-centre capacity, which it must pay regardless of how demand develops, meaning a slowdown in revenue would not bring a matching fall in these costs.
Adobe's pending $1.9bn cash acquisition of Semrush, agreed in November 2025 and which the company expected to complete during the first half of fiscal 2026 once regulators signed off, carries its own history: the company's abandoned bid for Figma cost it a $1bn termination fee in fiscal 2024. Tax policy is also in motion: the OECD's 15% global minimum tax took effect for Adobe in fiscal 2025, the 2025 U.S. Tax Act adds further uncertainty, and the company carries $693m of unrecognised tax benefits while under examination by tax authorities in multiple jurisdictions.
Litigation risk has broadened beyond the familiar competitive threats. In March 2026 Adobe settled an FTC and Department of Justice lawsuit alleging it made subscriptions deliberately hard to cancel and obscured early-termination fees, paying a $75m penalty to the Department of Justice and providing $75m of free services to affected customers, while stating it continued to "deny any wrongdoing." Separately, Adobe faces class actions alleging its SlimLM AI models were trained on hundreds of thousands of copyrighted books drawn from the RedPajama and Common Crawl datasets without authors' consent; a pension fund has filed a shareholder derivative suit accusing the board of an "ask forgiveness not approval" approach to that data; and in May 2026, a group of seven journalists and narrators sued Adobe, alleging its Firefly voice-AI features were trained on their voiceprints without consent under Illinois' biometric privacy law.
What to watch next
Adobe reports fiscal fourth-quarter results on 9 December 2026, eight days after Anil Chakravarthy formally becomes chief executive. The company's own guidance calls for revenue of $6.80bn to $6.85bn and non-GAAP earnings per share of $6.30 to $6.35 for the quarter; the average analyst estimate going into that date sits at $6.33 in earnings per share on $6.8bn of revenue, essentially inside that range. For the full year, management guides to revenue of $26.576bn to $26.626bn, non-GAAP earnings per share of $24.45 to $24.50, and ending annual recurring revenue growth of 10.2%. The Semrush acquisition's regulatory clearance, and any update on timing, is a second item to track. Short interest, last measured at 5.2% of tradable shares and already down 3.0% on the month, is worth watching for further movement if sentiment shifts.
Bottom line
Adobe's filings describe a company still growing revenue in double digits, generating free cash flow margin in the low 40s, and returning most of that cash to shareholders through buybacks, alongside a 6.2% fall in diluted share count over the past year. Adobe's own fourth-quarter report, and the first results delivered under its new chief executive, will add real data to that question on 9 December 2026.
