Going by how people talk about Adobe (ADBE) lately, you’d think this is a tired old incumbent just waiting to be steamrolled by a wave of AI start-ups. And yet, if you actually follow the company and read through its reports, what you see is a business that keeps posting record revenues, raising guidance, and quietly weaving AI into every corner of its product stack quarter after quarter. The disconnect between narrative and fundamentals is quite striking, which is why I am Bullish on ADBE stock.
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Hopefully, next week’s fiscal fourth-quarter earnings data may be the moment the market finally notices that this was never a “turnaround” story at all, but instead a thriving one that was mispriced from the outset.
AI Panic Meets Adobe’s Reality
The fear is easy to understand because, admittedly, generative AI has taken over. Models like Midjourney, Nano Banana, and OpenAI’s tools, along with design platforms such as Canva, which now bundle one-click “magic” features, sit beside a blizzard of low-cost apps that create logos, social posts, and videos in seconds. Investors can be forgiven for questioning why creatives keep paying serious money for Adobe’s suite if better alternatives are popping up at lower prices.
That anxiety has been visible in the share price. Despite beating expectations and raising full-year guidance, time after time, Adobe’s stock has been a falling knife as investors fret over intensifying AI competition from upstarts and tech giants alike. But inside the business, the story looks very different.
Last quarter, Adobe reported record revenue of almost $6 billion, up about 11% year-on-year, and adjusted EPS of $5.31, up 14%, sustaining its double-digit growth momentum across both its top and bottom lines. That is not what a company on the brink of disruption looks like. Management also disclosed that AI-influenced annualized recurring revenue has surpassed $5 billion, with “AI-first” products like Firefly, Acrobat AI Assistant, and other new tools now meaningful contributors.
On the product side, the trend looks promising. Firefly models now have features like Generative Fill in Photoshop and other Creative Cloud tools, monetized via usage-based “credits” that sit on top of core subscriptions. Last month, at Adobe MAX 2025, the company pushed further, previewing Firefly Image Model 5, custom style training, and new Generate Soundtrack and Generate Speech features so creators can spin up audio and voiceovers directly in the suite.
Therefore, Adobe is not being disrupted. Instead, it is turning its existing distribution of millions of paying creative professionals and enterprises into the default channel through which that wave flows. In fact, virtually all Fortune 100 companies now use Adobe’s AI-powered tools, with large enterprise customers even increasing their spend since early 2023, when the company began rolling out new AI features.
What Q4 Needs To Prove
Adobe reports fiscal Q4 results this week on Wednesday, and Wall Street is looking for about $6.1 billion in revenue and earnings of roughly $5.40 per share, up around 9% and 12% from a year ago. Again, this is not a company limping back to life, and in fact, given Adobe’s history of beating estimates as well as the fact that most analysts are somewhat wary of the name, I believe that Q4 will be another quarter of double-digit growth.
What does the market want to see to finally calm its nerves? Well, a few points would certainly help, in my view. First, I would love to see evidence that AI features are driving incremental demand and higher ARPU, not just being given away. It’s already the case, but we need to know whether this trend solidifies further.
Also, continued double-digit growth in Digital Media ARR and a healthy pipeline in Digital Experience will boost investor confidence. Finally, stable (or better) margins while Adobe invests heavily in new AI models and infrastructure is also something Wall Street will be looking for to dispel profitability fears.
If those boxes are ticked, and if management’s commentary on Firefly, Acrobat AI Assistant, GenStudio, and newer initiatives like “Project Moonlight” paints a picture of rising usage, it becomes tough to keep describing Adobe as a “fixer-upper” story.
A Compounder Priced Like a Laggard
Despite Adobe consistently compounding its revenues and earnings at a double-digit pace, the market continues to price Adobe as if it were a lagging company. The stock now trades at roughly 15x forward earnings. Today, even aged consumer staples like Kimberly-Clark (KMB) and Colgate-Palmolive (CL), that haven’t seen proper earnings growth in years, trade at much higher multiples.
The driver, once again, is the AI fear narrative—concerns that cheaper, commoditized tools could erode Adobe’s moat before its own AI monetization fully shows up in the P&L.
But the actual data points in the opposite direction. Adobe is already generating billions in AI-influenced ARR, Firefly-powered features are now embedded across the product suite, and the company raised its FY25 guidance earlier this year on the strength of AI-driven demand. This is why I expect Adobe to look materially stronger in FY26, which could finally be the catalyst that turns sentiment bullish once more.
Is ADBE a Good Stock to Buy Now?
Adobe now has a Moderate Buy consensus rating on Wall Street, based on 18 Buy and seven Hold ratings. Note that no analyst rates the stock a Sell. Also, at $465.67, the average ADBE stock price forecast implies ~35% upside potential over the next 12 months. This shows that most analysts believe the stock is quite undervalued, even with the somewhat mixed sentiment still in play.
Adobe’s AI Moment
In short, Adobe looks far more like an under-appreciated compounder than a disrupted incumbent. The company continues to innovate at a pace that strengthens its ecosystem rather than weakens it, and the early signs of AI monetization are already showing up across its subscription base.
If Wednesday’s report delivers solid AI-driven growth alongside healthy margins, I expect the prevailing “AI risk” narrative to begin losing credibility. At that point, the current discounted multiple may look increasingly attractive as an entry point for investors willing to look past near-term noise and focus on Adobe’s long-term compounding potential.