Investors are Bearish on Adobe Despite Consistent Growth & AI Innovation

/ By / ADBE
Stock (Symbol)

Adobe (ADBE)
Stock Price

$382
Sector
Technology
Data is as of
July 8, 2025
Expected to Report
September 11
Company Description
Adobe Inc. is a software company. It offers a line of products and services used by professionals, communicators, businesses, and consumers for creating, managing, delivering, measuring, optimizing, engaging and transacting with content and experiences across various digital media formats.

Its segments include Digital Media, Digital Experience and Publishing and Advertising.

The Digital Media segment provides products, services and solutions that enable individuals, teams and enterprises to create, publish and promote their content anywhere. Digital Media segment is centered around Adobe Creative Cloud and Adobe Document Cloud.

The Digital Experience segment provides an integrated platform and set of applications and services through Adobe Experience Cloud that enable brands and businesses to create, manage, execute, measure, monetize and optimize customer experiences.

The Publishing and Advertising segment consists of products and services that address diverse market opportunities. Source: Refinitiv
Sharek’s Take
David SharekAdobe’s (ADBE) AI innovation is driving steady growth. Last quarter, the company delivered 13% profit growth on 11% revenue growth. The Firefly app stood out with the introduction of Image Model 4 and the 4 Ultra version for hyper-detailed visuals, as well as the Firefly Video Model, enabling users to generate 4K video from text prompts. Firefly now integrates not only Adobe’s own commercially safe models but also third-party AI models from Google, OpenAI, and Black Forest Labs, offering creators flexibility in their workflows. Firefly app traffic was up over 30% quarter-over-quarter (QoQ), paid subscriptions nearly doubling, and first-time subscribers increasing 30% QoQ. Management said that AI-powered products like Acrobat AI Assistant, Firefly, and GenStudio were already driving billions in annual recurring revenue. The management said these tools were on track to surpass the $250 million ARR goal by the end of fiscal year 2025.

Adobe’s software is making the Internet work from videos, images, movies, ecommerce to marketing. The company has two main segments: Digital Media and Digital Experience:

  • Digital Media: Last qtr, revenue grew 11% year over year, accounted for 74% of total revenue.
    • Adobe’s Digital Media tools help people create, design, and share content easily. Popular apps like Photoshop, Illustrator, and Premier Pro let users make everything from photos to videos. Adobe Express and Acrobat make it simple to work on documents, even on the go. With AI feature like Firefly and Acrobat AI Assistant, creating and managing content is faster and smarter for everyone. This segment includes:
      • Creative Cloud: It is the gold standard for imaging design, video, and illustration abilities to tens of millions of people, including movie makers, content creators, and digital marketers.
      • Document Cloud: It provides editing, sharing, scanning, and collaborating with PDFs across desktops and mobile apps. Document Cloud has a Scan and Sign feature called Adobe Sign, that’s similar to Docusign.
  • Digital Experience: Last qtr, revenue grew 10% year over year, accounted for 25% of total revenue.
    • Adobe’s Digital Experience tools help businesses create personalized customer journeys using data and AI. Products like Adobe Analytics, Experience Manager, and Marketo Engage help brands understand customers, deliver content, and run smart marketing campaigns. With AI tools like the Experience Platform AI Assistant, businesses can automate and improve their workflows. This segment includes:
      • Adobe Experience Cloud: for marketers to craft experiences to differentiate their brands and engage customers. Includes:
        • Marketo: marketing automation software for midium-sized businesses including software for online marketing, lead management, and email marketing.
        • Magento: a cloud eCommerce platform that allows business owners to make their websites easily.
      • Adobe Advertising Cloud: to manage advertising across TV and digital formats.
      • Adobe Analytics: real-time analytics and audience segmentation across all marketing channels.
  • Publishing & Advertising: Last qtr, revenue was 0%, accounted for 1% of total revenue.
    • It is the 3rd division of Adobe and includes older products including eLearning, web conferencing, Adobe PDF printing tech, and the Print & Publishing, which helps magazine, newspaper, and book publishers design layouts, graphics, and illustrations.

I believe ADBE is a tech stock that’s suitable for conservative investors. The stock currently has a Estimated Long-Term Growth Rate of 13% per year, and a reasonable P/E of 19. Although Adobe doesn’t pay a dividend any longer, management does buy back stock. ADBE is part of the Conservative Growth Portfolio. I think profits — and perhaps the stock — could grow 12% to 15% a year long-term. But there’s a “cloud” having over the stocks, and that’s the risk of competition from companies like Canva, offering similar services for a fraction of the cost, and Figma, which allows multiple users to work on the same image/video at the same time.
One Year Chart
ADBE stock chart shows a clear downtrend with lower highs and lower lows, indicating bearish momentum. Investors are shying away from this stock, anticipating slower growth ahead.

But ADBE is growing profits consistently, with 13% growth the past three qtrs.

The good news is the shares are a nice value here. The P/E is just 19. My Fair Value is a 25 P/E, giving this $382 stock a Fair Value of $516.

The Estimated Long Term Growth Rate of 13% a year is on target, in my opinion.
Earnings Table
Last qtr, Adobe delivered 13% profit growth and beat expectations of 11% growth. Revenue increased 11%, year-on-year, and slightly above estimates of 10% growth. Operating Margin was 45.5% compared to 46.0% in the year ago period.

  • Creative Cloud growth was driven by flagship apps like Photoshop, Illustrator, Premiere Pro, After Effects, and Lightroom, especially in emerging markets (Latin America, India, Eastern Europe).
  • Document Cloud growth was driven by Acrobat AI Assistant and Adobe Express MAUs surpassed 700 million, up 25% YoY. Express adoption within Acrobat grew 3x QoQ and 11x YoY. Student demand rose 75% YoY, while record mobile app performance drove 40% YoY ARR growth.
  • Digital Experience growth was driven by Adobe Experience Platform (AEP), GenStudio, and native AI agents. AEP AI Assistant helped businesses interact with their data via natural language, simplifying tasks like audience segmentation and insight generation.

Annual Profit Estimates increased this qtr. Wow, that has not happened in a  while.

Qtrly profit Estimates are 11%, 11%, 11%, and 13% for the next 4 qtrs. Analysts believe Adobe revenue will grow 9% next quarter.
Fair Value
ADBE currently has a P/E of 19. My Fair Value is a P/E of 25.

My Fair Value is $516, giving the stock upside of 35%.

My 2026 Fair Value is $581, giving the stock an upside of 52%.

The stock has good upside.

Note the company has a November 30th Fiscal Year end.
Bottom Line
Adobe (ADBE) has been on a wild ride the past five years. The reason for the fall was the stock had a lofty P/E of 51 in August 2021. That was too high. So the stock digested its gains when it declined in price. In September 2022, the stock’s P/E was just 18 and that was around the bottom.

Adobe’s got the high-end graphics programs. And AI is making them better But competition from the likes of Canva and Figma makes investors question the long-term outlook.

ADBE drops from 5th to 10th in the Conservative Growth Portfolio Power Rankings. There’s nice upside, but I could be wrong about that. Investors are driving the valuation lower due to uncertanty about slowign growth. I sold ADBE from the Growth Portfolio on February 1, 2022 and the stock was $528 that day.
Power Rankings
Growth Stock Portfolio

N/A

Aggressive Growth Portfolio

N/A

Conservative Stock Portfolio

10 of 20

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